-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AEuVF6v0aywquFa81cCXAj6SFgOU2wJ28qfLGF2Ieti2hn9Hua9He2fTBdJ/eHtJ ve8Pej+acLN9QORP2IF/9w== 0000023675-04-000011.txt : 20040507 0000023675-04-000011.hdr.sgml : 20040507 20040506181802 ACCESSION NUMBER: 0000023675-04-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 33 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040507 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CNF INC CENTRAL INDEX KEY: 0000023675 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 941444798 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05046 FILM NUMBER: 04786395 BUSINESS ADDRESS: STREET 1: 3240 HILLVIEW AVE CITY: PALO ALTO STATE: CA ZIP: 94304 BUSINESS PHONE: 6504942900 MAIL ADDRESS: STREET 1: 1717 NW 21ST AVE CITY: PORTLAND STATE: OR ZIP: 97209 FORMER COMPANY: FORMER CONFORMED NAME: CNF TRANSPORTATION INC DATE OF NAME CHANGE: 19970509 FORMER COMPANY: FORMER CONFORMED NAME: CONSOLIDATED FREIGHTWAYS INC DATE OF NAME CHANGE: 19920703 10-Q 1 cnf10qq1.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE --- SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2004 OR ___TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from N/A to N/A ----- ----- COMMISSION FILE NUMBER 1-5046 CNF Inc. Incorporated in the State of Delaware I.R.S. Employer Identification No. 94-1444798 3240 Hillview Avenue, Palo Alto, California 94304 Telephone Number (650) 494-2900 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes X No --- ---- Number of shares of Common Stock, $.625 par value, outstanding as of April 30, 2004: 50,458,891 CNF INC. FORM 10-Q Quarter Ended March 31, 2004 _______________________________________________________________________ INDEX PART I. FINANCIAL INFORMATION Page Item 1. Financial Statements Consolidated Balance Sheets - March 31, 2004 and December 31, 2003 3 Statements of Consolidated Income - Three Months Ended March 31, 2004 and 2003 5 Statements of Consolidated Cash Flows - Three Months Ended March 31, 2004 and 2003 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 17 Item 3. Quantitative and Qualitative Disclosures about Market Risk 30 Item 4. Controls and Procedures 31 PART II. OTHER INFORMATION Item 1. Legal Proceedings 32 Item 4. Submission of Matters to a Vote of Security Holders 33 Item 6. Exhibits and Reports on Form 8-K 34 Signatures 36 PAGE 3 PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements CNF INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands) March 31, 2004 December 31, ASSETS (Unaudited) 2003 - ------ ----------- ------------ Current Assets Cash and cash equivalents $399,104 $321,460 Trade accounts receivable, net 781,118 769,707 Other accounts receivable 41,877 68,611 Operating supplies, at lower of average cost or market 15,510 14,333 Prepaid expenses 66,655 53,144 Deferred income taxes 99,929 89,440 ----------- ------------ Total Current Assets 1,404,193 1,316,695 ----------- ------------ Property, Plant and Equipment, at Cost Land 157,930 159,645 Buildings and leasehold improvements 794,501 792,289 Revenue equipment 652,159 652,818 Other equipment 373,297 373,034 ----------- ------------ 1,977,887 1,977,786 Accumulated depreciation and amortization (1,002,301) (980,331) ----------- ------------ 975,586 997,455 ----------- ------------ Other Assets Deferred charges and other assets (Note 3) 126,613 130,324 Capitalized software, net 67,858 68,589 Goodwill, net 240,685 240,671 ----------- ------------ 435,156 439,584 ----------- ------------ Total Assets $2,814,935 $2,753,734 =========== ============ The accompanying notes are an integral part of these statements. PAGE 4 CNF INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands except per share amounts) March 31, 2004 December 31, LIABILITIES AND SHAREHOLDERS' EQUITY (Unaudited) 2003 ----------- ------------ Current Liabilities Accounts payable $378,916 $354,401 Accrued liabilities (Note 8) 338,227 320,250 Accrued claims costs 114,757 120,730 Current maturities of long-term debt and capital leases 12,902 14,230 ----------- ------------ Total Current Liabilities 844,802 809,611 Long-Term Liabilities Long-term debt and guarantees (Note 6) 541,116 554,981 Long-term obligations under capital leases 110,156 110,199 Accrued claims costs 109,418 114,793 Employee benefits (Note 4) 291,363 269,318 Other liabilities and deferred credits 36,900 38,149 Deferred income taxes 29,697 37,875 ----------- ------------ Total Liabilities 1,963,452 1,934,926 =========== ============ Commitments and Contingencies (Note 10) Shareholders' Equity Preferred stock, no par value; authorized 5,000,000 shares: Series B, 8.5% cumulative, convertible, $.01 stated value; designated 1,100,000 shares; issued 756,774 and 763,674 shares, respectively 8 8 Additional paid-in capital, preferred stock 115,098 116,147 Deferred compensation, Thrift and Stock Plan (55,562) (57,687) Total Preferred ----------- ------------ Shareholders' Equity 59,544 58,468 ----------- ------------ Common stock, $.625 par value; authorized 100,000,000 shares; issued 56,469,708 and 56,436,981 shares, respectively 35,294 35,273 Additional paid-in capital, common stock 357,842 356,700 Retained earnings 590,157 570,751 Deferred compensation, restricted stock (5,611) (6,188) Cost of repurchased common stock (6,427,077 and 6,459,732 shares, respectively) (158,468) (159,273) ----------- ------------ 819,214 797,263 Accumulated Other ComprehensivE Loss (Note 5) (27,275) (36,923) ----------- ------------ Total Common Shareholders' Equity 791,939 760,340 ----------- ------------ Total Shareholders' Equity 851,483 818,808 ----------- ------------ Total Liabilities and Shareholders' Equity $2,814,935 $2,753,734 =========== ============ The accompanying notes are an integral part of these statements. PAGE 5 CNF INC. STATEMENTS OF CONSOLIDATED INCOME (Unaudited) (Dollars in thousands except per share amounts) Three Months Ended March 31, 2004 2003 ----------- ------------ REVENUES $1,348,405 $1,206,241 Costs and Expenses Operating expenses (Note 3) 1,138,504 1,013,671 Selling, general and administrative expenses 125,074 118,290 Depreciation 32,085 33,232 ----------- ------------ 1,295,663 1,165,193 ----------- ------------ OPERATING INCOME 52,742 41,048 ----------- ------------ Other Income (Expense) Investment income 727 586 Interest expense (Note 6) (9,040) (9,272) Miscellaneous, net (1,103) (2,927) ----------- ------------ (9,416) (11,613) ----------- ------------ Income Before Taxes 43,326 29,435 Income Tax Provision 16,897 11,480 ----------- ------------ Net Income 26,429 17,955 Preferred Stock Dividends 2,022 2,026 ----------- ------------ NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $24,407 $15,929 =========== ============ Weighted-Average Common Shares Outstanding (Note 1) Basic 49,835,663 49,396,071 Diluted 57,125,185 53,652,665 Earnings per Common Share (Note 1) Basic $0.49 $0.32 =========== ============ Diluted $0.45 $0.30 =========== ============ The accompanying notes are an integral part of these statements. PAGE 6 CNF INC. STATEMENTS OF CONSOLIDATED CASH FLOWS (Unaudited) (Dollars in thousands) Three Months Ended March 31, 2004 2003 ----------- ------------ Cash and Cash Equivalents, Beginning of Period $321,460 $270,404 ----------- ------------ Operating Activities Net income 26,429 17,955 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization, net of accretion 36,488 37,434 Increase (Decrease) in deferred income taxes (9,116) 6,453 Amortization of deferred compensation 3,187 2,471 Provision for uncollectible accounts 3,004 2,835 Equity in earnings of joint venture (2,392) (2,976) Loss on sales of property and equipment, net 253 873 Loss from equity ventures -- 1,370 Changes in assets and liabilities: Receivables (11,062) 17,190 Prepaid expenses (13,511) (12,708) Accounts payable 31,615 (6,307) Accrued liabilities, excluding accrued incentive compensation 18,978 38,787 Accrued incentive compensation (538) (50,694) Accrued claims costs (11,348) (8,094) Income taxes 20,078 (577) Employee benefits 17,096 7,352 Accrued aircraft lease return provision (14) (23,656) Deferred charges and credits 6,893 6,467 Other 388 (635) ----------- ------------ Net Cash Provided by Operating Activities 116,428 33,540 ----------- ------------ Investing Activities Capital expenditures (12,895) (44,866) Software expenditures (4,478) (3,797) Proceeds from sales of property and equipment, net 2,706 458 ----------- ------------ Net Cash Used in Investing Activities (14,667) (48,205) ----------- ------------ Financing Activities Net repayment of long-term debt, guarantees and capital leases (14,096) (10,024) Proceeds from exercise of stock options 433 1,327 Payments of common dividends (5,001) (4,951) Payments of preferred dividends (5,004) (5,124) ----------- ------------ Net Cash Used in Financing Activities (23,668) (18,772) ----------- ------------ Net Cash Provided by (Used in) Continuing Operations 78,093 (33,437) ----------- ------------ Net Cash Provided by (Used in) Discontinued Operations (449) 930 ----------- ------------ Increase (Decrease) in Cash and Cash Equivalents 77,644 (32,507) ----------- ------------ Cash and Cash Equivalents, End of Period $399,104 $237,897 =========== ============ The accompanying notes are an integral part of these statements. PAGE 7 CNF INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Principal Accounting Policies Basis of Presentation Pursuant to the rules and regulations of the Securities and Exchange Commission, the accompanying consolidated financial statements of CNF Inc. and its wholly owned subsidiaries ("CNF") have been prepared by CNF, without audit by independent public accountants. In the opinion of management, the consolidated financial statements include all normal recurring adjustments necessary to present fairly the information required to be set forth therein. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, should be read in conjunction with the consolidated financial statements included in CNF's 2003 Annual Report on Form 10-K. As a result of adopting the revised FASB Interpretation No. 46, "Consolidation of Variable Interest Entities: an Interpretation of ARB No. 51," CNF was required to deconsolidate a wholly owned subsidiary trust effective in the quarter ended March 31, 2004, as more fully discussed below under " - New Accounting Standards," and Note 6, "Company-Obligated Mandatorily Redeemable Convertible Securities of CNF Trust 1." Earnings per Share ("EPS") Basic EPS is computed by dividing reported net income available to common shareholders by the weighted-average common shares outstanding. The calculation of diluted EPS is calculated as follows: (Dollars in thousands except per Three Months Ended share data) March 31, ------------------------- 2004 2003 ------------ ----------- Earnings: Net income available to common shareholders $ 24,407 $ 15,929 Add-backs: Dividends on preferred stock, net of replacement funding 308 324 Interest expense on convertible subordinated debentures, net of trust dividend income (Note 6) $ 954 $ -- ------------ ----------- $ 25,669 $ 16,253 Shares: ============ =========== Weighted-average common shares outstanding 49,835,663 49,396,071 Stock options 601,625 487,615 Series B preferred stock 3,562,897 3,768,979 Convertible subordinated debentures (Note 6) 3,125,000 -- ------------ ----------- 57,125,185 53,652,665 ============ =========== Diluted earnings per share $ 0.45 $ 0.30 ============ =========== For the three months ended March 31, 2003, the convertible subordinated debentures were anti-dilutive. As a result, the assumed shares and related add-back to net income available to common shareholders under the if-converted method have been excluded from the calculation of diluted EPS. If the securities had been dilutive, the assumed shares from the convertible subordinated debentures under the if-converted method would have been 3,125,000 shares for the three months ended March 31, 2003. PAGE 8 Stock-Based Compensation Officers and non-employee directors have been granted options under CNF's stock option plans to purchase common stock of CNF at prices equal to the market value of the stock on the date of grant. CNF accounts for stock-based compensation utilizing the intrinsic value method in accordance with the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." Accordingly, no compensation expense is recognized for fixed option plans because the exercise prices of employee stock options equal or exceed the market prices of the underlying stock on the dates of grant. The following table sets forth the effect on net income and earnings per share if CNF had applied the fair-value based method and recognition provisions of SFAS 123, " Accounting for Stock-Based Compensation," to stock-based compensation: (Dollars in thousands, except per share data) Three months ended March 31, ------------------------- 2004 2003 ------------ ----------- Net income available to common shareholders, as reported $ 24,407 $ 15,929 Additional compensation cost, net of tax, that would have been included in net income if the fair-value method had been applied (2,610) (2,215) ------------ ----------- Adjusted net income available to common shareholders as if the fair-value method had been applied $ 21,797 $ 13,714 ============ =========== Earnings per share: Basic: As reported $ 0.49 $ 0.32 ============ =========== Adjusted $ 0.44 $ 0.28 ============ =========== Diluted: As reported $ 0.45 $ 0.30 ============ =========== Adjusted $ 0.40 $ 0.26 ============ =========== These effects of applying SFAS 123 may not be indicative of future amounts. Foreign Currency CNF recognizes deferred taxes to reflect the effect of temporary differences between tax and book accounting on the translation of foreign subsidiary financial statements. Based on expectations in certain tax jurisdictions, CNF re-evaluated its assumptions regarding the repatriation of foreign earnings in the first quarter of 2004. CNF will no longer assume that past and future earnings of foreign subsidiaries are indefinitely reinvested. Accordingly, CNF in the first quarter of 2004 recorded a deferred tax asset of $9.4 million to recognize the associated tax effect of the accumulated foreign currency translation adjustment. New Accounting Standards In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities: an Interpretation of ARB No. 51" ("FIN 46"). FIN 46 requires that all special-purpose entities be designated as either a voting-interest entity or a variable-interest entity ("VIE"). A VIE is an entity for which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the VIE to finance its activities without additional subordinated financial support from other parties. A VIE is required to be consolidated by its primary beneficiary if it does not effectively disperse risks among parties involved. The primary beneficiary of a VIE is the party that absorbs a majority of the VIE's expected losses or receives a majority of its expected residual returns. The implementation of FIN 46 was required for periods beginning after June 15, 2003. However, in October 2003, the FASB deferred the effective date for applying FIN 46 to VIEs created before February 1, 2003 until the end of the first interim period ending after December 15, 2003. In December 2003, the FASB revised FIN 46 ("FIN 46R") to incorporate certain revisions, including the requirement to disregard certain rights in determining whether an entity is the primary beneficiary in a VIE. Under FIN 46R, CNF is not the primary beneficiary of CNF Trust 1 (the "Trust"), a wholly owned subsidiary, and CNF was therefore required to deconsolidate the Trust effective in PAGE 9 the quarter ended March 31, 2004. Accordingly, CNF's 5% convertible subordinated debentures held by the Trust have been included in long- term debt, as more fully discussed in Note 6, "Company-Obligated Mandatorily Redeemable Convertible Securities of CNF Trust 1." Reclassification Certain amounts in the prior-period financial statements have been reclassified to conform to the current-period presentation. 2. Reporting Segments CNF discloses segment information in the manner in which the components are organized for making operating decisions, assessing performance and allocating resources. CNF's principal businesses consist of Con-Way Transportation Services ("Con-Way") and Menlo Worldwide. For financial reporting purposes, CNF is divided into five reporting segments. The operating results of Con-Way are reported as one reporting segment while Menlo Worldwide is divided into three reporting segments: Menlo Worldwide Forwarding, Menlo Worldwide Logistics ("Logistics"), and Menlo Worldwide Other. Also, certain corporate activities and the results of Road Systems, a trailer manufacturer, are reported in the CNF Other reporting segment. In an effort to bring services offered by the Menlo Worldwide group of businesses under a single brand identity, Menlo Worldwide announced in February 2003 a plan to change the name of its forwarding segment from Emery Forwarding to Menlo Worldwide Forwarding ("Forwarding"). The Forwarding segment consists of the combined operating results of Menlo Worldwide Forwarding, Inc. (formerly Emery Air Freight Corporation) and its subsidiaries, Menlo Worldwide Expedite!, Inc. and a portion of the operations of Emery Worldwide Airlines, Inc. ("EWA"), which ceased air carrier operations in December 2001. PAGE 10 Financial Data Management evaluates segment performance primarily based on revenue and operating income (loss); therefore, other non-operating items, consisting primarily of interest income or expense, are not reported in segment results. Corporate expenses are generally allocated based on measurable services provided to each segment or, for general corporate expenses, based on segment revenue or capital employed. Inter-segment revenue and related operating income have been eliminated to reconcile to consolidated revenue and operating income. (Dollars in thousands) Three months ended March 31, -------------------------- 2004 2003 Revenues ------------ ------------ Con-Way Transportation Services $ 593,844 $ 519,108 Menlo Worldwide Forwarding 501,517 445,622 Logistics 252,790 241,502 ------------ ------------ 754,307 687,124 CNF Other 254 9 ------------ ------------ $ 1,348,405 $ 1,206,241 ============ ============ Inter-segment Revenue Eliminations by Segment Con-Way Transportation Services $ 1,294 $ 110 Menlo Worldwide Forwarding 2,547 72 Logistics -- 1,675 ------------ ------------ 2,547 1,747 CNF Other 6,100 5,141 ------------ ------------ $ 9,941 $ 6,998 ============ ============ Revenues before Inter-segment Eliminations Con-Way Transportation Services $ 595,138 $ 519,218 Menlo Worldwide Forwarding 504,064 445,694 Logistics 252,790 243,177 ------------ ------------ 756,854 688,871 CNF Other 6,354 5,150 Inter-segment Revenue Eliminations (9,941) (6,998) ------------ ------------ $ 1,348,405 $ 1,206,241 ============ ============ Operating Income (Loss) Con-Way Transportation Services $ 51,105 $ 37,192 Menlo Worldwide Forwarding (6,409) (5,431) Logistics 6,506 6,036 Other 2,392 2,976 ------------ ------------ 2,489 3,581 CNF Other (852) 275 ------------ ------------ $ 52,742 $ 41,048 ============ ============ PAGE 11 Terrorist Attacks In response to the September 11, 2001 terrorist attacks, the U.S. Congress passed the Air Transportation Safety and System Stabilization Act (the "Act"), a $15 billion emergency economic assistance package intended to mitigate financial losses in the air carrier industry. The legislation provided for $5 billion in direct loss reimbursement and other financial assistance. In March 2002, Forwarding received an initial $11.9 million payment under the Act, resulting in a $9.9 million first-quarter net gain in 2002. In March 2003, Forwarding received a final payment of $7.5 million, resulting in a $7.2 million first-quarter net gain in 2003. 3. Investment in Unconsolidated Joint Venture Vector SCM ("Vector") is a joint venture formed with General Motors ("GM") in December 2000 for the purpose of providing logistics management services on a global basis for GM, and ultimately for customers in addition to GM. Although Menlo Worldwide, LLC ("MW") owns a majority interest in Vector, MW's portion of Vector's operating results are reported in the Menlo Worldwide Other reporting segment as an equity-method investment based on GM's ability to control certain operating decisions. Vector is organized as a limited liability company that has elected to be taxed as a partnership. Therefore, the joint venture partners are responsible for income taxes applicable to their share of Vector's taxable income. MW's portion of Vector's net income, which is reported as a reduction of operating expenses in the accompanying Statements of Consolidated Income, does not include any provision for income taxes that will be incurred by CNF. MW's undistributed earnings from Vector at March 31, 2004 and December 31, 2003, before provision for CNF's related parent income taxes, was $25.0 million and $22.6 million, respectively. Vector participates in CNF's centralized cash management system, and, consequently, Vector's domestic trade accounts payable are paid by CNF and settled through Vector's affiliate accounts with CNF. In addition, excess cash balances in Vector's bank accounts, if any, are invested by CNF and settled through affiliate accounts, which earn interest income based on a rate earned by CNF's cash-equivalent investments. As a result of Vector's excess cash invested by CNF, Vector's affiliate receivable from CNF as of March 31, 2004 and December 31, 2003 was $18.0 million and $16.0 million, respectively. As required by the Vector Agreements, CNF provides Vector with a $20 million line of credit for Vector's working capital and capital expenditure requirements. Under the credit facility, which matures on December 13, 2005, Vector may obtain loans with an annual interest rate based on the rate CNF pays under its $385 million revolving credit facility. CNF provides a portion of its $20 million credit commitment to Vector through CNF's guarantee of $7.5 million of uncommitted local currency overdraft facilities available to Vector by international banks. At March 31, 2004, there was no balance outstanding under Vector's uncommitted local currency overdraft facilities and no borrowings were directly payable to CNF. At December 31, 2003, Vector owed $5.8 million under the uncommitted local currency overdraft facilities and no borrowings were directly payable to CNF. CNF's capital transactions with Vector, including cash advances to and from Vector under CNF's centralized cash management system and credit facility described above, are reported as adjustments to MW's investment in Vector in Deferred Charges and Other Assets in CNF's Consolidated Balance Sheets. 4. Employee Benefit Plans During the first quarter of fiscal 2004, CNF adopted the interim disclosure provisions of SFAS No. 132R, "Employers' Disclosure about Pensions and Other Postretirement Benefits, an Amendment of FASB Statements No. 87, 88 and 106 and a Revision of FASB Statement No. 132." This statement revises employers' disclosures about pension plans and other postretirement benefits. PAGE 12 The following table summarizes the components of net periodic benefit expense for CNF for the three months ended March 31: Pension Plans Postretirement Plan -------------------- -------------------- (Dollars in thousands) 2004 2003 2004 2003 --------- --------- --------- --------- Service cost - benefits earned during the quarter $ 15,391 $ 10,965 $ 488 $ 457 Interest cost on benefit obligation 15,852 12,495 1,477 1,384 Expected return on plan assets (15,575) (10,391) -- -- Net amortization and deferral 2,137 2,269 69 65 --------- --------- --------- --------- Net benefit expense $ 17,805 $ 15,338 $ 2,034 $ 1,906 ========= ========= ========= ========= During the first quarter, CNF revised its forecasted contribution to its defined benefit pension plans. At this time, CNF plans to contribute $90 million to the plans during 2004. 5. Comprehensive Income Comprehensive income, which is a measure of all changes in equity except those resulting from investments by owners and distributions to owners, was as follows: Three months ended March 31, -------------------------- 2004 2003 (Dollars in thousands) ------------ ------------ Net income $ 26,429 $ 17,955 Other comprehensive income (loss), net of tax: Unrealized loss on marketable securities (211) -- Change in fair value of cash flow hedge (Note 9) -- 93 Foreign currency translation adjustment (Note 1) 9,859 18 ------------ ------------ 9,648 111 ------------ ------------ Comprehensive income $ 36,077 $ 18,066 ============ ============ The following is a summary of the components of Accumulated Other Comprehensive Loss, net of tax: March 31, December 31, (Dollars in thousands) 2004 2003 ------------ ------------ Unrealized gain on marketable securities $ 1,833 $ 2,044 Accumulated foreign currency translation adjustments (Note 1) (9,480) (19,339) Minimum pension liability adjustment (19,628) (19,628) ------------ ------------ Accumulated other comprehensive loss $ (27,275) $ (36,923) ============ ============ 6. Company-Obligated Mandatorily Redeemable Securities of CNF Trust 1 On June 11, 1997, CNF Trust I (the "Trust"), a Delaware business trust wholly owned by CNF, issued 2,500,000 of its $2.50 Term Convertible Securities, Series A ("TECONS") to the public for gross proceeds of $125 million. The combined proceeds from the issuance of the TECONS and the issuance to CNF of the common securities of the Trust were invested by the Trust in $128.9 million aggregate principal amount of 5% convertible subordinated debentures due June 1, 2012 (the "Debentures") issued by CNF. The Debentures are the sole assets of the Trust. The Trust pays interest on the TECONS and receives interest on the Debentures due from CNF. Excess interest income is paid to CNF as the common stockholder of the Trust. PAGE 13 Holders of the TECONS are entitled to receive cumulative cash distributions at an annual rate of $2.50 per TECONS (equivalent to a rate of 5% per annum of the stated liquidation amount of $50 per TECONS). Each TECONS is convertible at any time prior to the close of business on June 1, 2012 at the option of the holder into shares of CNF's common stock at a conversion rate of 1.25 shares of CNF's common stock for each TECONS, subject to adjustment in certain circumstances. The TECONS do not have a stated maturity date, although they are subject to mandatory redemption upon maturity of the Debentures on June 1, 2012, or upon earlier redemption. CNF has guaranteed, on a subordinated basis, distributions and other payments due on the TECONS, to the extent the Trust has funds available therefore and subject to certain other limitations (the "Guarantee"), as more fully discussed in Note 9, "Preferred Securities of Subsidiary Trust," of Item 8, "Financial Statements and Supplementary Data," in CNF's 2003 Annual Report on Form 10-K. The Debentures are redeemable for cash, at the option of CNF, in whole or in part, on or after June 1, 2000 at a price equal to 103.125% of the principal amount, declining annually to par if redeemed on or after June 1, 2005, plus accrued and unpaid interest. Upon any redemption of the Debentures, a like aggregate liquidation amount of TECONS will be redeemed. On conversion of a TECONS by the holder, a like amount of Debentures would be converted on behalf of the TECONS holder, and CNF would then deliver the fixed number of shares of CNF common stock into which the Debentures are convertible. On April 30, 2004, CNF announced that it intends to redeem the Debentures on June 1, 2004, as more fully discussed below in Note 7, "Debt." The proceeds from the redemption of the Debentures will be applied by the Trust to simultaneously redeem all of the outstanding TECONS and all of the outstanding common securities. Prior to the required deconsolidation of the Trust under FIN 46R, as described in Note 1 "Principal Accounting Policies - New Accounting Standards," CNF reported the TECONS as a mezzanine security ("Company- Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trust Holding Solely Convertible Debentures of the Company") with cash distributions reported as a non-operating expense. Under FIN 46R, CNF's consolidated financial statements, for all periods presented, reflect the deconsolidation of the Trust. Accordingly, long-term debt and interest expense reflect the obligation and interest cost, respectively, of the Debentures described above. CNF's $3.9 million interest in the common securities of the Trust is reported as an investment in Deferred Charges and Other Assets while dividend income on the common securities are reported by CNF as non-operating income. Adoption of FIN 46R did not have a material effect on results of operations in the periods presented, as dividends paid to holders of the TECONS are equal to the amount by which CNF's interest expense on the Debentures exceeds dividend income earned by CNF on the common securities of the Trust. 7. Debt Senior Debentures due 2034 On April 27, 2004, CNF issued $300 million of 6.70% Senior Debentures due 2034 ("Senior Debentures") in a private placement for proceeds of $290.0 million, net of a $7.4 million discount and $2.6 million of underwriting costs. CNF intends to use the net proceeds to redeem $128.9 million of Convertible Subordinated Debentures on June 1, 2004, to repurchase from time to time or pay at maturity, $100 million of 7.35% Notes due 2005, and for working capital and general corporate purposes. CNF's Convertible Subordinated Debentures, which are held by a wholly owned subsidiary trust, are more fully discussed above in Note 6, "Company-Obligated Mandatorily Redeemable Securities of CNF Trust 1." The Senior Debentures bear interest at the rate of 6.70% per year, payable semi-annually on May 1 and November 1 of each year, beginning on November 1, 2004. CNF may redeem the Senior Debentures, in whole or in part, on not less than 30 nor more than 60 days' notice, at a redemption price equal to the greater of (1) the principal amount being redeemed, or (2) the sum of the present values of the remaining scheduled payments of principal and interest on the Senior Debentures being redeemed, discounted at the redemption date on a semiannual basis at the Treasury rate payable on an equivalent debenture plus 35 basis points. The Senior Debentures were issued under an indenture that restricts CNF's ability, with certain exceptions, to incur debt secured by liens. The Senior Debentures were sold only to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933, as amended. The Senior Debentures have not been registered under the Securities Act or any applicable state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from such registration requirements. CNF has entered into a registration rights agreement in which CNF has agreed to file within 90 days of April 27, 2004 a registration statement with the Securities and Exchange Commission to register resales of the notes within 90 days of the closing date. CNF will be required to pay additional interest if the registration statement is not filed within the required period, it is not effective on or before the 180th day after April 27, 2004 or under certain other circumstances. PAGE 14 Thrift and Stock Plan Notes CNF guarantees the notes issued by CNF's Thrift and Stock Plan ("TASP"), as more fully discussed in Note 6, "Debt and Other Financing Arrangements," of Item 8, "Financial Statements and Supplementary Data," included in CNF's 2003 Annual Report on Form 10-K. As of March 31, 2004, there was $27.7 million aggregate principal amount of Series A TASP notes outstanding and $62.0 million of Series B TASP notes outstanding. Holders of the Series B notes issued by CNF's TASP have the right to require CNF to repurchase those notes if, among other things, both Moody's and Standard & Poor's have publicly rated CNF's long-term senior debt at less than investment grade unless, within 45 days, CNF shall have obtained, through a guarantee, letter of credit or other permitted credit enhancement or otherwise, a credit rating for such notes of at least "A" from Moody's or Standard & Poor's (or another nationally recognized rating agency selected by the holders of such notes) and shall maintain a rating on such notes of "A" or better thereafter. Following CNF's private placement of debentures in April 2004, as described above, Moody's and Standard & Poors affirmed their investment- grade ratings on CNF's senior unsecured debt. Also, Moody's upgraded its outlook to "stable" from "negative." 8. Restructuring Plans 2001 Restructuring Plan In June 2001, Forwarding began an operational restructuring to align it with management's estimates of future business prospects for domestic heavy air freight and address changes in market conditions. CNF announced in December 2001 that Forwarding would utilize aircraft operated by other air carriers instead of EWA operating its own fleet of aircraft, and that EWA would permanently cease air carrier operations. As a result, EWA terminated the employment of all of its pilots and crew members. Those pilots and crew members are represented by the Air Line Pilots Association ("ALPA") union under a collective bargaining agreement. Subsequently, ALPA filed a grievance on behalf of the pilots and crew members protesting the cessation of EWA's air carrier operations and Forwarding's use of other air carriers. The ALPA matters are the subject of litigation in U.S. District Court and, depending on the outcome of that litigation, may be subject to binding arbitration. Based on CNF's current evaluation, management believes that it has provided for its estimated exposure related to the ALPA matters. However, there can be no assurance in this regard as CNF cannot predict with certainty the ultimate outcome of these matters. Forwarding's restructuring reserves for aircraft and other costs increased to $35.5 million at March 31, 2004 from $34.8 million at December 31, 2003, primarily due to proceeds from sales of aircraft and equipment, partially offset by payments of restructuring-related obligations. None of the 37 aircraft that were grounded in connection with Forwarding's restructuring plan remained under lease as of March 31, 2004. Restructuring reserves at March 31, 2004 consisted primarily of CNF's estimated exposure related to the labor matters described above, as well as other estimated remaining restructuring-related obligations. Refer to Note 3, "Restructuring Plans," of Item 8, "Financial Statements and Supplementary Data," included in CNF's 2003 Annual Report on Form 10-K for a more detailed discussion of Forwarding's 2001 restructuring plan. 2003 Restructuring Plan In response to continued declines in North American air freight revenue, Forwarding continued restructuring its operations in the fourth quarter of 2003, primarily to reduce the costs of its North American freight service center network. Under the restructuring plan, nine service centers were closed in markets for which Forwarding believes it can utilize cartage agents to transport customer shipments more cost effectively. In connection with the restructuring plan, Forwarding recognized a $7.8 million charge in the fourth quarter of 2003, primarily for the accrual of future lease payments on closed facilities and employee termination costs. Forwarding's reserves related to the 2003 restructuring plan declined to $3.7 million at March 31, 2004, from $6.6 million at December 31, 2003, due to cash payments related to employee terminations and lease payments on closed PAGE 15 facilities. These payments are reflected in Forwarding's cash flows when paid but will not be included in Forwarding's future operating expenses as these costs were accrued in connection with the restructuring charge. In addition to actions taken in connection with the restructuring charge, Forwarding's restructuring plan also included the renegotiation of contracts with third-party cartage agents and other service providers. 9. Derivative Instruments and Hedging Activities Under SFAS 133, "Accounting for Derivative Instruments and Hedging Activities," as amended, CNF records derivative instruments on the balance sheet as either an asset or liability measured at fair value with changes in fair value recognized currently in earnings unless specific hedge accounting criteria are met. Qualifying hedges allow a derivative's gain or loss to offset related results on the hedged item in the income statement or be deferred in Other Comprehensive Income (Loss) until the hedged item is recognized in earnings. CNF is exposed to a variety of market risks, including the effects of interest rates, commodity prices, foreign currency exchange rates and credit risk. CNF enters into derivative financial instruments only in circumstances that warrant the hedge of an underlying asset, liability or future cash flow against exposure to the related risk. Additionally, the designated hedges should have high correlation to the underlying exposure such that fluctuations in the value of the derivatives offset reciprocal changes in the underlying exposure. CNF formally documents its hedge relationships, including identifying the hedge instruments and hedged items, as well as its risk management objectives and strategies for entering into the hedge transaction. At hedge inception and at least quarterly thereafter, CNF assesses whether the derivatives are effective in offsetting changes in either the cash flows or fair value of the hedged item. If a derivative ceases to be a highly effective hedge, CNF will discontinue hedge accounting, and any gains or losses on the derivative instrument would be recognized in earnings during the period it no longer qualifies for hedge accounting. For derivatives designated as cash flow hedges, changes in the derivative's fair value are recognized in Other Comprehensive Income (Loss) until the hedged item is recognized in earnings. Any change in fair value resulting from ineffectiveness is recognized immediately in earnings. For derivatives designated as fair value hedges, changes in the derivative's fair value are recognized in earnings and offset by changes in the fair value of the hedged item, which are recognized in earnings to the extent that the derivative is effective. At March 31, 2004, CNF held two interest rate swap derivatives that were initially entered into as cash flow hedges to mitigate the effects of interest rate volatility on floating-rate operating lease payments. In connection with Forwarding's 2001 restructuring plan, hedge accounting was discontinued for these interest rate swap derivatives when EWA settled floating-rate operating leases hedged with the interest rate swaps. In the first quarter of 2004, decreases in the estimated fair value of these freestanding interest rate swap derivatives were reported as decreases in Other Assets in the Consolidated Balance Sheets and as a non-operating loss of $0.3 million. 10. Commitments and Contingencies Spin-Off of CFC On December 2, 1996, CNF completed the spin-off of Consolidated Freightways Corporation ("CFC") to CNF's shareholders. CFC was, at the time of the spin-off, and remains a party to certain multiemployer pension plans covering some of its current and former employees. The cessation of its U.S. operations will result in CFC's "complete withdrawal" (within the meaning of applicable federal law) from these multiemployer plans, at which point it will become obligated, under federal law, to pay its share of any unfunded vested benefits under those plans. It is possible that the trustees of CFC's multiemployer pension plans may assert claims that CNF is liable for amounts owing to the plans as a result of CFC's withdrawal from those plans and, if so, there can be no assurance that those claims would not be material. CNF has received requests for information regarding the spin-off of CFC from representatives from some of the pension funds, and, in accordance with federal law, CNF has responded to those requests. Under federal law, representatives of CFC's multiemployer plans are entitled to request such information to assist them in determining whether they believe any basis exists for asserting a claim against CNF. PAGE 16 Based on advice of legal counsel and its knowledge of the facts, CNF believes that it would ultimately prevail if any such claims were made, although there can be no assurance in this regard. CNF believes that the amount of those claims, if asserted, could be material, and a judgment against CNF for all or a significant part of these claims could have a material adverse effect on CNF's financial condition, cash flow and results of operations. Prior to the enactment in April 2004 of the Pension Funding Equity Act of 2004, if the multiemployer funds had asserted such claims against CNF, CNF would have had a statutory obligation to make cash payments to the funds prior to any arbitral or judicial decisions on the funds' determinations. Under the facts related to the CFC withdrawals and the law in effect after enactment of the Pension Funding Equity Act of 2004, CNF would no longer be required to make such payments to the multiemployer funds unless and until final decisions in arbitration proceedings, or in court, upheld the funds' determinations. As a result of the matters discussed above, CNF can provide no assurance that matters relating to the spin-off of CFC and CFC's bankruptcy will not have a material adverse effect on CNF's financial condition, cash flows or results of operations. Other CNF is a defendant in various lawsuits incidental to its businesses. It is the opinion of management that the ultimate outcome of these actions will not have a material impact on CNF's financial condition, cash flows, or results of operations. PAGE 17 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's Discussion and Analysis of Financial Condition and Results of Operations (referred to as "Management's Discussion and Analysis") is intended to assist in the understanding and assessment of the principal factors affecting the results of operations, liquidity and capital resources, as well as the critical accounting policies of CNF and its subsidiaries. This discussion and analysis should be read in conjunction with the information included in CNF's 2003 Annual Report on Form 10-K. CNF provides supply chain management services for commercial and industrial shipments by land, air and sea throughout the world. CNF's principal businesses consist of Con-Way and the Menlo Worldwide group of businesses. However, for financial reporting purposes, CNF is divided into five reporting segments. The operating results of Con- Way, primarily a provider of regional less-than-truckload ("LTL") freight services, are reported as one reporting segment while Menlo Worldwide is divided into three reporting segments: Forwarding, primarily a global provider of air freight and ocean forwarding services; Logistics, a provider of integrated contract logistics solutions; and Menlo Worldwide Other, which consists of Vector, a joint venture with General Motors ("GM") that serves as the lead logistics manager for GM. Also, certain corporate activities and the results of Road Systems, a trailer manufacturer, are reported in the separate CNF Other reporting segment. CNF's operating results are generally expected to depend on the number and weight of shipments transported, the prices received on those shipments, and the mix of services provided to customers, as well as the fixed and variable costs incurred by CNF in providing the services and the ability to manage those costs under changing shipment levels. Con-Way and Forwarding primarily transport shipments through freight service center networks while Logistics and Vector manage the logistics functions of their customers and primarily utilize third-party transportation providers for the movement of customer shipments. RESULTS OF OPERATIONS CONSOLIDATED RESULTS CNF's net income available to common shareholders in the first quarter of 2004 was $24.4 million ($0.45 per diluted share), a 53.2% increase from $15.9 million ($0.30 per diluted share) in the first quarter of 2003, which included a $7.2 million pre-tax net gain ($4.4 million after-tax or $0.08 per diluted share) from a payment under the Air Transportation Safety and System Stabilization Act (the "Stabilization Act"). The following table compares operating results (dollars in thousands, except per share amounts) for the three months ended March 31: 2004 2003 ------------ ------------ Revenues $ 1,348,405 $ 1,206,241 Operating Income 52,742 41,048 Net Income Available to Common Shareholders 24,407 15,929 Diluted Earnings per Share 0.45 0.30 CNF's revenue in the first quarter of 2004 increased to $1.3 billion, an 11.8% increase over the same period last year, as both Con-Way and the Menlo Worldwide group of businesses achieved continued revenue growth amid improved global economic conditions. Consolidated operating income rose to $52.7 million, a 28.5% increase over the first quarter of 2003, due principally to significantly higher operating income from Con-Way. The collective first-quarter operating income of the Menlo Worldwide companies fell to $2.5 million in 2004 from $3.6 million in 2003; however, the prior-year first quarter benefited from Forwarding's $7.2 million net gain from the Stabilization Act payment. Con-Way's operating income grew 37.4% in the first quarter of 2004 to $51.1 million, due principally to operating leverage and a 14.4% increase in revenue. Operating results at Menlo Worldwide also benefited from revenue growth. In the first quarter of 2004, Forwarding reported a 12.5% increase in revenue and a $6.4 million operating loss. Although Forwarding's first-quarter revenue was still insufficient to cover its costs, the first-quarter operating loss increased by only $1.0 million from the same quarter last year despite the prior-year benefit from the $7.2 million net gain described above. PAGE 18 Excluding the Stabilization Act payment in last year's first quarter, Forwarding reduced its first-quarter operating loss in 2004. Logistics first-quarter revenue in 2004 rose 4.7% from the prior year while operating income rose 7.8%. Vector's first-quarter 2004 operating income of $2.4 million, which declined from $3.0 million in the first quarter of 2003, reflects compensation earned under amended agreements with GM, its joint venture partner and customer. Other net expense of $9.4 million in the first quarter of 2004 declined 18.9% from the same period last year due in part to a $1.3 million favorable impact from changes in the cash-surrender value of corporate-owned life insurance policies. Also, the prior-year first quarter was adversely affected by equity venture losses of $1.4 million. CON-WAY TRANSPORTATION SERVICES The following table compares operating results (dollars in thousands), operating margins, and the percentage increase in selected operating statistics of the Con-Way reporting segment for the three months ended March 31: 2004 2003 ------------ ------------ Summary of Operating Results Revenues $ 593,844 $ 519,108 Operating Income 51,105 37,192 Operating Margin 8.6% 7.2% 2004 vs.2003 ------------ Selected Regional-Carrier Operating Statistics Revenue per day +11.3% Yield +0.5 Weight per day: Less-than-truckload +10.0 Total +10.7 Con-Way's revenue in the first quarter of 2004 rose 14.4% due to higher revenue from Con-Way's regional carriers and continued growth from Con- Way's asset-light businesses, which include Con-Way NOW, Con-Way Logistics, and Con-Way Air Express. Revenue per day from the regional carriers rose 11.3% from the first quarter of 2003 on a 10.7% increase in weight per day ("weight"), which was due primarily to comparatively better economic conditions in the U.S. First-quarter revenue per hundredweight ("yield") in 2004 was positively affected by continued growth in interregional joint services, which typically command higher rates on longer lengths of haul, but was adversely affected by a 2.8% increase in weight per shipment. Rates typically decline when weight per shipment increases, as freight with a higher weight per shipment typically has a lower transportation cost per unit of weight. In the first quarter of 2004, Con-Way's asset-light businesses increased revenue by 95.9% over the first quarter of 2003. Con-Way defines "asset-light" businesses as those that require a comparatively smaller capital investment than its LTL operations. Con-Way's first-quarter operating income in 2004 increased 37.4%, due primarily to higher revenue from the regional carriers, as well as revenue growth from Con-Way's asset-light businesses, which reduced their collective net operating loss in the first quarter of 2004 by 62.6% over the prior-year period. The improvement in Con-Way's operating margin in the first quarter of 2004 reflects operating leverage, as Con-Way's regional carrier service center network accommodated additional shipments with proportionally smaller cost increases. First-quarter operating income in 2004 was adversely affected by employee costs, which rose 13.4% from the prior year. MENLO WORLDWIDE For financial reporting purposes, the Menlo Worldwide group is divided into three reporting segments: Forwarding, Logistics, and Menlo Worldwide Other. Vector SCM, a joint venture with GM, is reported in the Menlo Worldwide Other segment as an equity-method investment. In the first quarter of 2004, the Menlo Worldwide group of businesses reported revenue of $754.3 million and operating income of $2.5 million. PAGE 19 FORWARDING The following table compares operating results (dollars in thousands), operating margins, and the percentage increase (decrease) in selected operating statistics of the Forwarding reporting segment for the three months ended March 31: 2004 2003 ------------ ------------ Summary of Operating Results Revenues $ 501,517 $ 445,622 Operating Loss (6,409) (5,431) Operating Margin -1.3% -1.2% Item affecting comparability of operating loss: Net gain from a payment under the Air Transportation Safety and -- $ 7,230 System Stabilization Act 2004 vs.2003 ------------ Selected Air Freight Operating Statistics International Revenue per day +14.5% Weight per day +20.4 Yield -4.8 North America Revenue per day +0.8 Weight per day +7.2 Yield -6.0 Forwarding's revenue in the first quarter of 2004 grew 12.5% over the first quarter of 2003, primarily due to a significant increase in international air freight revenue and a slight increase in North American air freight revenue. Forwarding's first quarter in 2004 included one more working day than the same quarter of last year. International air freight revenue per day increased 14.5% over the first quarter of 2003 as a 20.4% increase in international average pounds per day ("weight") was partially offset by a 4.8% decline in international air freight revenue per pound ("yield"). Weight in the first quarter of 2004 benefited from improved global economic conditions, which contributed to improved business levels in the Asian, European, and Latin American markets. The decline in international yield was due in part to reduced volumes of higher-yield military supply business, which benefited the first quarter of 2003, and to a greater percentage of lower-yield delivery services in the first quarter of 2004. Excluding the positive effect of higher fuel surcharges, first-quarter international yield fell 5.7% from the same quarter last year. North American air freight revenue per day in the first quarter of 2004 increased 0.8% over the same period last year as a 7.2% increase in weight was mostly offset by a 6.0% decline in yield. Growth in North American weight in the first quarter of 2004 was largely due to improved economic conditions in the U. S., while the decline in North American yield was primarily due to a greater percentage of lower-yield deferred delivery services. Forwarding's efforts to increase second-day and deferred delivery services contributed to a higher percentage of lower-yield delivery services in the first quarter of 2004. Excluding the yield-enhancing effect of higher fuel surcharges, North American yield in the first quarter of 2004 declined 7.7% from the first quarter of 2003. Forwarding's first-quarter operating loss increased to $6.4 million in 2004 from $5.4 million in 2003, largely due to a first-quarter prior- year net gain of $7.2 million from the Stabilization Act payment, as more fully discussed below under " - Terrorist Attacks." Excluding last year's net gain from the Stabilization Act payment, Forwarding reduced its first-quarter operating loss in 2004 principally from growth in air freight revenue and cost reductions to the North American service center network. Forwarding's international gross margin as a percentage of international air freight revenue in the first quarter of 2004 fell from the same period last year, primarily due to reduced volumes of higher-yield military supply business, which benefited gross margins in the first quarter of 2003. The decline in the international gross margin as a percentage of revenue was partially offset by cost reductions to the North American service center network in the fourth quarter of 2003, as more fully discussed below under "-Restructuring Plans-2003 Restructuring Plan." Forwarding's first-quarter operating loss in the prior year reflects costs for reducing and reconfiguring elements of the North American service center network. Management will continue to focus on increasing the revenue and operating margins of its variable-cost-based international operations and, in North America, will continue its efforts to align its costs with revenues. Restructuring Plans 2001 Restructuring Plan In June 2001, Forwarding began an operational restructuring to align it with management's estimates of future business prospects for domestic heavy air freight and address changes in market conditions. CNF announced in December 2001 that Forwarding would utilize aircraft operated by other air carriers instead of EWA operating its own fleet of aircraft, and that EWA would permanently cease air carrier operations. As a result, EWA terminated the employment of all of its pilots and crew members. Those pilots and crew members are represented by the Air Line Pilots Association ("ALPA") union under a collective bargaining agreement. Subsequently, ALPA filed a grievance on behalf of the pilots and crew members protesting the cessation of EWA's air carrier operations and Forwarding's use of other air carriers. The ALPA matters are the subject of litigation in U.S. District Court and, depending on the outcome of that litigation, may be subject to binding arbitration. Based on CNF's current evaluation, management believes that it has provided for its estimated exposure related to the ALPA matters. However, there can be no assurance in this regard as CNF cannot predict with certainty the ultimate outcome of these matters. Forwarding's restructuring reserves for aircraft and other costs increased to $35.5 million at March 31, 2004 from $34.8 million at December 31, 2003, primarily due to proceeds from sales of aircraft and equipment, partially offset by payments of restructuring-related obligations. None of the 37 aircraft that were grounded in connection with Forwarding's restructuring plan remained under lease as of March 31, 2004. Restructuring reserves at March 31, 2004 consisted primarily of CNF's estimated exposure related to the labor matters described above, as well as other estimated remaining restructuring-related obligations. Refer to Note 3, "Restructuring Plans," of Item 8, "Financial Statements and Supplementary Data," included in CNF's 2003 Annual Report on Form 10-K for a more detailed discussion of Forwarding's 2001 restructuring plan. 2003 Restructuring Plan In response to continued declines in North American air freight revenue, Forwarding continued restructuring its operations in the fourth quarter of 2003, primarily to reduce the costs of its North American freight service center network. Under the restructuring plan, nine service centers were closed in markets for which Forwarding believes it can utilize cartage agents to transport customer shipments more cost effectively. In connection with the restructuring plan, Forwarding recognized a $7.8 million charge in the fourth quarter of 2003, primarily for the accrual of future lease payments on closed facilities and employee termination costs. Forwarding's reserves related to the 2003 restructuring plan declined to $3.7 million at March 31, 2004, from $6.6 million at December 31, 2003, due to cash payments related to employee terminations and lease payments on closed facilities. These payments are reflected in Forwarding's cash flows when paid but will not be included in Forwarding's future operating expenses as these costs were accrued in connection with the restructuring charge. In addition to actions taken in connection with the restructuring charge, Forwarding's restructuring plan also included the renegotiation of contracts with third-party cartage agents and other service providers. Management estimates that all actions taken under the restructuring plan will reduce annual operating expenses in 2004 by $20 million with no adverse effect on revenue levels or the quality and coverage of delivery service. Forwarding's restructuring charges recognized during 2001 and 2003 reflect CNF's estimate of the costs of the related restructuring activities. CNF believes that these estimates are adequate to cover these costs based on information currently available and assumptions management believes are reasonable under the circumstances. However, there can be no assurance that actual costs will not differ from this estimate, and that difference would be recognized as additional expense or income in the period when and if that determination can be made. Terrorist Attacks In response to the September 11, 2001 terrorist attacks, the U.S. Congress passed the Air Transportation Safety and System Stabilization Act (the "Act"), a $15 billion emergency economic assistance package intended to mitigate financial losses in the air carrier industry. The legislation provided for $5 billion in direct loss reimbursement and other financial assistance. In March 2002, Forwarding received an $11.9 million payment under the Act, resulting in a $9.9 million first- quarter net gain in 2002. In March 2003, Forwarding received a final payment of $7.5 million, resulting in a $7.2 million first-quarter net gain in 2003. PAGE 21 Forwarding is not able to accurately quantify how the events of September 11, or any subsequent terrorist activities, will affect the global economy, governmental regulation, the air transportation industry, Forwarding's costs of providing air freight services and the demand for Forwarding's air freight services. However, Forwarding believes that any additional security measures that may be required by future regulations could result in additional costs and could have an adverse effect on its operations and service. LOGISTICS The following table compares operating results (dollars in thousands) and operating margins of the Logistics reporting segment for the three months ended March 31: 2004 2003 ------------ ------------ Summary of Operating Results Revenues $ 252,790 $ 241,502 Operating Income 6,506 6,036 Operating Margin 2.6% 2.5% Logistics' revenue in the first quarter of 2004 increased 4.7% from the first quarter of 2003, principally due to an increase in warehouse management services. Revenue from carrier management services in the first quarter of 2004 was essentially unchanged despite the loss of a significant customer in the fourth quarter of 2003, a division of a large company that terminated the logistics outsourcing arrangements at many of its divisions. The customer accounted for 4.2% of Logistics' revenue in the first quarter of 2003 but was among Logistics' lowest- margin accounts. Logistic's operating income in the first quarter of 2004 grew 7.8%, due largely to higher revenue. A portion of Logistics' revenue is attributable to contracts for which Logistics manages the transportation of freight but subcontracts the actual transportation and delivery of products to third parties. Logistics refers to this as purchased transportation. Logistics' net revenue (revenue less purchased transportation) in the first quarter of 2004 was $76.3 million, an increase from $74.0 million in the first quarter of 2003. MENLO WORLDWIDE OTHER The Menlo Worldwide Other reporting segment consists of the results of Vector, a joint venture formed with GM in December 2000 for the purpose of providing logistics management services on a global basis for GM, and ultimately for customers in addition to GM. Prior to the amendments described below, agreements pertaining to Vector (collectively, "Vector Agreements") provided that Vector would be compensated by sharing in efficiency gains and cost savings achieved through the implementation of Approved Business Cases ("ABCs") and other special projects in GM's North America region and GM's three international regions. An ABC is a project, developed with and approved by GM, aimed at reducing costs, assuming operational responsibilities, and/or achieving operational changes. In August 2003, the Vector Agreements were amended, primarily to expedite the transition of logistics management services in the North America region from GM to Vector. The amendments changed the compensation principles for GM's North American logistics operations, revised the allocation of Vector's profit between GM and MW, and modified the formula for the valuation of Vector in the event that MW exercises its Put Right, as described below. The amendments to the Vector Agreements provide for Vector to be compensated for its management of logistics for all of GM's North America operations rather than through its sharing in efficiency gains and cost savings under individual and separately approved ABCs in North America. In each year of a five-year period retroactive to January 1, 2003, Vector will be compensated with a management fee based on shipment volumes and can earn additional compensation if certain performance criteria are achieved. In accordance with GAAP, compensation under the volume-based management fee will be recognized as vehicles are shipped while performance-based compensation will not be recognized until specified levels of cost savings are achieved, which will generally not be determinable until the fourth quarter of each contract year. Vector will also be compensated by GM for its direct and administrative costs in North America, subject to certain limitations. PAGE 22 The amended Vector Agreements also increase MW's allocation of profit and loss from 80% to 85%. Although MW owns a majority equity interest, the operating results of Vector are reported as an equity-method investment based on GM's ability to control certain operating decisions. Under the Vector Agreements, GM has the right to purchase MW's membership interest in Vector ("Call Right") and MW has the right to require GM to purchase MW's membership interest in Vector ("Put Right"). The Call Right and Put Right are exercisable at the sole discretion of GM and MW, respectively. Prior to amendment of the Vector Agreements, exercise of the Call Right or Put Right required GM to pay MW for the fair value of MW's membership interest in Vector, as determined by approved appraisers using a predetermined valuation formula. Under the amended Vector Agreements, the amount payable by GM to MW under the Put Right is based on a mutually agreed-upon estimated value for MW's membership interest as of the contract amendment date and will decline on a straight-line basis over an 8-year period beginning January 1, 2004. Exercise of MW's Put Right or GM's Call Right would result in MW retaining commercialization contracts involving customers other than GM. Reported operating income of the Menlo Worldwide Other segment in the first quarter of 2004 was $2.4 million, a decline from $3.0 million in the same quarter of last year. Vector began recognizing compensation in accordance with the amended Vector Agreements in the third quarter of 2003. As a result, operating income in the first quarter of 2004 reflects the recognition of Vector's compensation in accordance with the amended Vector Agreements while operating income in the prior-year first quarter was determined under the compensation principles under the original Vector Agreements, as described above. In each successive year covered by the amended Vector agreements, management anticipates that performance-based compensation will represent a growing percentage of compensation earned in GM's North America region. Management also intends to increase the percentage of compensation earned from commercialization activities and from GM's international regions and aftermarket parts supply operations, which are unaffected by the amended Vector Agreements. CNF OTHER The CNF Other segment consists of the results of Road Systems and certain corporate activities. A majority of the revenue from Road Systems was from sales to other CNF subsidiaries. The $0.9 million operating loss in the first quarter of 2004 primarily reflects a $0.7 million net loss from the sale of a corporate property, partially offset by the collective results of RSI and various corporate activities. In the first quarter of last year, the CNF Other segment reported operating income of $0.3 million. PAGE 23 LIQUIDITY AND CAPITAL RESOURCES In the first quarter of 2004, cash provided by operating activities was $116.4 million, which was sufficient to fund investing activities that used $14.7 million and financing activities that used $23.7 million. The excess cash flow from operations increased cash and cash equivalents from $321.5 million at December 31, 2003 to $399.1 million at March 31, 2004. The following table summarizes CNF's cash flows for the first quarter ended March 31: 2004 2003 Operating Activities ------------ ------------ Net income $ 26,429 $ 17,955 Non-cash adjustments (1) 31,424 48,460 ------------ ------------ 57,853 66,415 Changes in assets and liabilities Receivables (11,062) 17,190 Accounts payable and accrued liabilities, excluding accrued incentive compensation 50,593 32,480 Accrued incentive compensation (538) (50,694) Accrued aircraft leases and return provision (14) (23,656) Income taxes 20,078 (577) Other (482) (7,618) ------------ ------------ 58,575 (32,875) Net Cash Provided by Operating Activities 116,428 33,540 ------------ ------------ Net Cash Used in Investing Activities (14,667) (48,205) ------------ ------------ Net Cash Used in Financing Activities (23,668) (18,772) ------------ ------------ Net Cash Provided by (Used in) Continuing Operations 78,093 (33,437) Net Cash Provided by (Used in) Discontinued Operations (449) 930 Increase (Decrease) in Cash and ------------ ------------ Cash Equivalents $ 77,644 $ (32,507) ============ ============ (1) "Non-cash adjustments" refer to depreciation, amortization, deferred income taxes, provision for uncollectible accounts, equity in earnings of joint venture, and non-cash gains and losses. CONTINUING OPERATIONS First-quarter cash flow from operations in 2004 was $116.4 million compared to $33.5 million in 2003. In the first quarter of 2004, accrued incentive compensation declined by only $0.5 million while the same quarter of the prior year reflects a $50.7 million reduction. In the first quarter of 2004, changes in receivables consumed $11.1 million while the collective increase in accounts payable and accrued liabilities (excluding accrued incentive compensation) provided $50.6 million. Changes in accrued incentive compensation reflect CNF's payment schedule for its employee incentive plans, under which total incentive compensation earned in an award year is paid to employees with a partial payment in December of the award year and a final payment in February of the next award year. Cash flow from operations in the first quarter of 2004 also reflects an insignificant amount of payments for restructuring-related aircraft lease payments and return costs while the first quarter of 2003 includes $23.7 million for that same purpose. Accrued income taxes increased in the first quarter of 2004 based on taxable income. As a result, CNF's receivable for income tax refunds, as reported in Other Receivables in CNF's Consolidated Balance Sheets, declined to $3.9 million at March 31, 2004 from $24.0 million at December 31, 2003. Accrued income taxes in the first quarter of last year in part reflect the restructuring-related payments, which were tax-deductible when paid. Investing activities in the first quarter of 2004 used $14.7 million, a decline from $48.2 million used in the same quarter of last year, due substantially to a $27.4 million reduction in capital expenditures at Con-Way. In the first quarter of last year, Con-Way invested in $38.4 million of capital acquisitions, primarily for revenue equipment. CNF's planned capital expenditures in 2004 are more fully discussed PAGE 24 below under "- Other." In the first quarter of 2004 and 2003, net cash used in financing activities consisted primarily of dividend payments and scheduled principal payments for the Thrift and Stock Plan notes guaranteed by CNF. CNF has a $385 million revolving credit facility that matures on July 3, 2006. The revolving credit facility is available for cash borrowings and for the issuance of letters of credit up to $385 million. At March 31, 2004, no borrowings were outstanding under the facility and $249.0 million of letters of credit were outstanding, leaving $136.0 million of available capacity for additional letters of credit or cash borrowings, subject to compliance with financial covenants and other customary conditions to borrowing. CNF had other uncommitted unsecured credit facilities totaling $146.5 million at March 31, 2004, which are available to support letters of credit, bank guarantees, and overdraft facilities; at that date, a total of $110.8 million was outstanding under these facilities. Of the total letters of credit outstanding at March 31, 2004, $277.6 million provided collateral for CNF workers' compensation and vehicular self-insurance programs. See "Other Matters - Forward-Looking Statements" below, and Note 6, "Debt and Other Financing Arrangements," in Item 8, "Financial Statements and Supplementary Data," of CNF's 2003 Annual Report on Form 10-K for additional information concerning CNF's $385 million credit facility and some of its other debt instruments. Defined Benefit Pension Plan CNF periodically reviews the funding status of its defined benefit pension plans for non-contractual employees, and makes contributions from time to time as necessary in order to comply with the funding requirements of the Employee Retirement Income Security Act ("ERISA"). Funding of CNF's defined benefit pensions is based on ERISA-defined measurements rather than the recognition and measurement criteria prescribed by accounting principles generally accepted in the United States ("GAAP"). CNF currently estimates it will contribute $90 million to its defined benefit pension plans in 2004, composed of a $30 million payment in the second quarter and $60 million of payments in the third quarter. CNF also made defined benefit pension plan contributions of $75.0 million in 2003, $76.2 million in 2002 and $13.1 million in 2001, but made no contributions from 1996 through 2000, due in part to the high rate of return realized on plan assets during that period. There can be no assurance that CNF will not be required to make further cash contributions, which could be substantial, to its defined benefit pension plan in the future. Contractual Cash Obligations CNF's contractual cash obligations as of December 31, 2003 are summarized in CNF's 2003 Annual Report on Form 10-K under Item 7, "Management's Discussion and Analysis - Liquidity and Capital Resources - - Contractual Cash Obligations." In the first quarter of 2004, there have been no material changes in CNF's contractual cash obligations outside the ordinary course of business, except as described below. For financial reporting purposes, CNF was required to deconsolidate a wholly owned subsidiary trust effective in the first quarter of 2004 upon adoption of FIN 46R. Accordingly, CNF's 5% convertible subordinated debentures held by the Trust have been included in long- term debt, as more fully discussed in Note 6, "Company-Obligated Mandatorily Redeemable Convertible Securities of CNF Trust 1," of Item 1, "Financial Statements." On April 27, 2004, CNF issued $300 million of 6.70% Senior Debentures due 2034 in a private placement for net proceeds of $290.0 million. As more fully discussed in Note 7, "Debt" of Item 1, "Financial Statements," CNF intends to use the net proceeds to redeem $128.9 million of Convertible Subordinated Debentures on June 1, 2004, to repurchase from time to time or pay at maturity, $100 million of 7.35% Notes due 2005, and for working capital and general corporate purposes. Other In 2004, CNF anticipates capital expenditures of between $170 to $180 million, primarily for the acquisition of additional tractor and trailer equipment, which reflects an increase in business levels. CNF's debt-to-capital ratio decreased to 43.8% at March 31, 2004 from 45.3% at December 31, 2003 due primarily to net income. PAGE 25 DISCONTINUED OPERATIONS On December 2, 1996, CNF completed the spin-off of Consolidated Freightways Corporation ("CFC") to CNF's shareholders. CFC withdrew in 2002 from certain multiemployer pension funds, thereby incurring withdrawal liabilities to such funds. Prior to enactment in April 2004 of the Pension Funding Equity Act of 2004, if the multiemployer funds had asserted claims against CNF for such liabilities, CNF would have had a statutory obligation to make cash payments to the funds prior to any arbitral or judicial decisions on the funds' determinations. Under the facts relating to the CFC withdrawals and the law in effect after enactment of the Pension Funding Equity Act of 2004, CNF would no longer be required to make such payments to the multiemployer funds unless and until final decisions in arbitration proceedings, or in court, upheld the funds' determination. Refer to Note 10, "Commitments and Contingencies," of Item 1, "Financial Statements." PAGE 26 OTHER MATTERS ESTIMATES AND CRITICAL ACCOUNTING POLICIES CNF makes estimates and assumptions when preparing its financial statements in conformity with accounting principles generally accepted in the United States. These estimates and assumptions affect the amounts reported in the accompanying financial statements and notes thereto. Actual results could differ from those estimates. CNF's most critical accounting policies upon which management bases estimates are described below. Self-Insurance Reserves CNF uses a combination of insurance and self-insurance mechanisms to provide for the potential liabilities for medical, casualty, liability, vehicular, cargo and workers' compensation claims. Liabilities associated with the risks that are retained by CNF are estimated, in part, by considering historical claims experience, medical costs, demographic factors, severity factors and other assumptions. The undiscounted estimated accruals for these liabilities could be significantly affected if actual costs differ from these assumptions and historical trends. Income Taxes In establishing its deferred income tax assets and liabilities, CNF makes judgments and interpretations based on the enacted tax laws and published tax guidance that are applicable to its operations. CNF records deferred tax assets and liabilities and periodically evaluates the need for a valuation allowance to reduce deferred tax assets to realizable amounts. The likelihood of a material change in CNF's expected realization of these assets is dependent on future taxable income, its ability to use foreign tax credit carry forwards and carry backs, final U.S. and foreign tax settlements, and the effectiveness of its tax planning strategies in the various relevant jurisdictions. CNF is also subject to examination of its income tax returns for multiple years by the IRS and other tax authorities. CNF periodically assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision and related accruals for income taxes. Restructuring Reserves The restructuring charges recognized in 2003 and 2001 were based on significant estimates and assumptions made by management. Refer to the "Menlo Worldwide - Forwarding - Restructuring Plans" section under "Results of Operations" above for a description of the significant assumptions used. Uncollectible Accounts Receivable CNF and its subsidiaries report accounts receivable at net realizable value and provide an allowance for uncollectible accounts when collection is considered doubtful. Con-Way and Forwarding provide for uncollectible accounts based on various judgments and assumptions, including revenue levels, historical loss experience, and composition of outstanding accounts receivable. Logistics, based on the size and nature of its client base, performs a frequent and periodic evaluation of its customers' creditworthiness and accounts receivable portfolio and recognizes expense from uncollectible accounts when losses are both probable and estimable. Defined Benefit Pension Plan CNF has a defined benefit pension plan that covers non-contractual employees in the United States. The amount recognized as pension expense and the accrued pension liability depend upon a number of assumptions and factors, the most significant being the discount rate used to measure the present value of pension obligations, the assumed rate of return on plan assets, which are both affected by economic conditions, market fluctuations, and rate of compensation increase. CNF adjusts its discount rate periodically by taking into account a number of factors, including changes in high-quality corporate bond yields and the advice of its outside actuaries. CNF adjusts its assumed rate of return on plan assets based on historic returns of the plan assets and current market expectations. CNF used a 6.75% discount rate for purposes of calculating its 2003 pension expense, but used a 6.25% discount rate for calculating its 2003 year-end pension liability and its 2004 pension expense, due primarily to declines in high-quality corporate bond yields in 2003. PAGE 27 By way of example, if all other factors were held constant, a 0.5% decline in the discount rate would have an estimated $6 million increase in 2004 annual pension expense. CNF used an assumed rate of return on plan assets of 9.0% in 2003 and will assume the same rate for 2004. Using year-end plan asset values, a 0.5% decline in the assumed rate of return on plan assets would have an estimated $3 million increase in 2004 annual pension expense. The determination of CNF's accrued pension benefit cost includes an unrecognized actuarial loss that results from the cumulative difference between estimated and actual values for the year-end projected pension benefit obligation and the fair value of plan assets. Under GAAP, any portion of the unrecognized actuarial loss or gain that exceeds ten percent of the greater of the projected benefit obligation or fair value of plan assets must be amortized as an expense over the average service period for employees, approximately thirteen years for CNF. Amortization of the unrecognized actuarial loss decreases the annual pension expense in 2004 by approximately $1 million from annual pension expense in 2003. Goodwill and Other Long-Lived Assets SFAS 142, "Goodwill and Other Intangible Assets" specifies that goodwill and indefinite-lived intangible assets will not be amortized but instead will be subject to an annual impairment test. On an annual basis in the fourth quarter and between annual tests in certain circumstances, CNF utilizes a third-party independent valuation consultant to perform an impairment test of goodwill associated with the Forwarding reporting segment. Based on an impairment test as of December 31, 2003, CNF was not required to record a charge for goodwill impairment. Consistent with SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," CNF performs an impairment analysis of long-lived assets (other than goodwill or intangible assets) whenever circumstances indicate that the carrying amount may not be recoverable. In assessing the recoverability of goodwill and other long-lived assets, CNF must make various assumptions regarding estimated future cash flows and other factors in determining the fair values of the respective assets. If these estimates or their related assumptions change in the future, CNF may be required to record impairment charges for goodwill or other long-lived assets in future periods. Any such resulting impairment charges could have a material adverse effect on CNF's financial condition or results of operations, including potentially triggering downgrades of debt instruments. See "- Forward- Looking Statements" below, and Note 6, "Debt and Other Financing Arrangements," in Item 8, "Financial Statements and Supplementary Data" of CNF's 2003 Annual Report on Form 10-K." CYCLICALITY AND SEASONALITY CNF's businesses operate in industries that are affected directly by general economic conditions and seasonal fluctuations, both of which affect demand for transportation services. In the trucking and air freight industries, for a typical year, the months of September and October usually have the highest business levels while the months of December, January and February usually have the lowest business levels. BUSINESS INTERRUPTION Although the operations of CNF's subsidiaries are largely decentralized, Forwarding maintains a major hub operation at the Dayton International Airport in Dayton, Ohio. While CNF currently maintains property and business interruption insurance covering Forwarding's operations at the Dayton hub, its insurance policies contain limits for certain causes of loss, including but not limited to earthquake and flood. Such policies do not insure against property loss or business interruption resulting from a terrorist act. Accordingly, there can be no assurance that this insurance coverage will be sufficient. As a result, a major property loss or sustained interruption in the business operations at the Dayton hub, whether due to terrorist activities or otherwise, could have a material adverse effect on CNF's financial condition, cash flows, and results of operations. In addition, CNF and its subsidiaries rely on CNF Service Company for the performance of shared administrative and technology services in the conduct of their businesses. CNF's centralized computer facilities and its administrative and technology employees are located at the Administrative and Technology ("AdTech") Center in Portland, Oregon. Although CNF maintains backup systems and has disaster recovery processes and procedures in place, a sustained interruption in the operation of these facilities, whether due to terrorist activities, PAGE 28 earthquakes, floods or otherwise, could have a material adverse effect on CNF's financial condition, cash flows, and results of operations. HOMELAND SECURITY CNF is subject to compliance with cargo security and transportation regulations issued by the Transportation Security Administration and by the Department of Homeland Security. CNF is not able to accurately predict how new governmental regulation will affect the transportation industry. However, CNF believes that any additional security measures that may be required by future regulations could result in additional costs and could have an adverse effect on its ability to serve customers and on its financial condition, cash flows and results of operations. EMPLOYEES Most of the workforce of CNF and its subsidiaries is not affiliated with labor unions. Consequently, CNF believes that the operations of its subsidiaries have significant advantages over comparable unionized competitors (particularly in the trucking industry) in providing reliable and cost-competitive customer services, including greater efficiency and flexibility. There can be no assurance that CNF's subsidiaries will be able to maintain their current advantages over certain of their competitors. NEW ACCOUNTING STANDARDS In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities: an Interpretation of ARB No. 51" ("FIN 46"). FIN 46 requires that all special-purpose entities be designated as either a voting-interest entity or a variable-interest entity ("VIE"). A VIE is an entity for which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the VIE to finance its activities without additional subordinated financial support from other parties. A VIE is required to be consolidated by its primary beneficiary if it does not effectively disperse risks among parties involved. The primary beneficiary of a VIE is the party that absorbs a majority of the VIE's expected losses or receives a majority of its expected residual returns. The implementation of FIN 46 was required for periods beginning after June 15, 2003. However, in October 2003, the FASB deferred the effective date for applying FIN 46 to VIEs created before February 1, 2003 until the end of the first interim period ending after December 15, 2003. In December 2003, the FASB revised FIN 46 ("FIN 46R") to incorporate certain revisions, including the requirement to disregard certain rights in determining whether an entity is the primary beneficiary in a VIE. Under FIN 46R, CNF is not the primary beneficiary of CNF Trust 1 (the "Trust"), a wholly owned subsidiary, and CNF was therefore required to deconsolidate the Trust effective in the quarter ended March 31, 2004. Accordingly, CNF's 5% convertible subordinated debentures held by the Trust have been included in long- term debt, as more fully discussed in Note 6, "Company-Obligated Mandatorily Redeemable Convertible Securities of CNF Trust 1," of Item 1, "Financial Statements." FORWARD-LOOKING STATEMENTS Certain statements included herein constitute "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to a number of risks and uncertainties, and should not be relied upon as predictions of future events. All statements other than statements of historical fact are forward-looking statements, including any projections of earnings, revenues, weight, yield, volumes, income or other financial or operating items, any statements of the plans, strategies, expectations or objectives of CNF or its management for future operations or other future items, any statements concerning proposed new products or services, any statements regarding CNF's estimated future contributions to pension plans, any statements as to the adequacy of reserves, any statements regarding the outcome of any claims that may be brought against CNF by CFC's multi-employer pension plans or regarding the amount of any periodic cash payments that CNF may be required to make while those claims are pending or CNF's ability to make those periodic payments, any statements regarding future economic conditions or performance, any statements regarding the outcome of legal and other claims and proceedings against CNF; any statements of estimates or belief and any statements or assumptions underlying the foregoing. Certain such forward-looking statements can be identified by the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," "seeks," "approximately," "intends," "plans," "estimates" or "anticipates" or the negative of those terms or other variations of those terms or comparable terminology or by discussions of strategy, plans or intentions. Such forward-looking statements are necessarily dependent on assumptions, data and methods that may be incorrect or imprecise and there can be no assurance that they will be realized. In that regard, the following factors, among others and in PAGE 29 addition to the matters discussed elsewhere in this document and other reports and documents filed by CNF with the Securities and Exchange Commission, could cause actual results and other matters to differ materially from those discussed in such forward-looking statements: - changes in general business and economic conditions, including the global economy; - the creditworthiness of CNF's customers and their ability to pay for services rendered; - increasing competition and pricing pressure; - changes in fuel prices; - the effects of the cessation of EWA's air carrier operations; the possibility of additional unusual charges and other costs and expenses relating to Forwarding's operations; - the possibility that CNF may, from time to time, be required to record impairment charges for goodwill and other long-lived assets; - the possibility of defaults under CNF's $385 million credit agreement and other debt instruments, including defaults resulting from additional unusual charges or from any costs or expenses that CNF may incur, and the possibility that CNF may be required to repay certain indebtedness in the event that the ratings assigned to its long-term senior debt by credit rating agencies are reduced; - labor matters, including the grievance by furloughed pilots and crew members, renegotiations of labor contracts, labor organizing activities, work stoppages or strikes; enforcement of and changes in governmental regulations, including the effects of new regulations issued by the Department of Homeland Security; - environmental and tax matters; - the February 2000 crash of an EWA aircraft and related litigation; - and matters relating to CNF's 1996 spin-off of CFC, including the possibility that CFC's multi-employer pension plans may assert claims against CNF, that CNF may not prevail in those proceedings and may not have the financial resources necessary to satisfy amounts payable to those plans, and matters relating to CNF's defined benefit pension plans. As a result of the foregoing, no assurance can be given as to future financial condition, cash flows, or results of operations. See Note 10, "Commitments and Contingencies" in Item 1, "Financial Statements." PAGE 30 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK CNF is exposed to a variety of market risks, including the effects of interest rates, commodity prices, foreign currency exchange rates and credit risk. CNF enters into derivative financial instruments only in circumstances that warrant the hedge of an underlying asset, liability or future cash flow against exposure to some form of interest rate, commodity or currency-related risk. Additionally, the designated hedges should have high correlation to the underlying exposure such that fluctuations in the value of the derivatives offset reciprocal changes in the underlying exposure. CNF is subject to the effect of interest rate fluctuations in the fair value of its long-term debt and capital lease obligations, as summarized in Item 8, "Financial Statements and Supplementary Data," under Note 6, "Debt and Other Financing Arrangements," and Note 7, "Leases" of CNF's 2003 Annual Report on Form 10-K. As more fully discussed in Note 9, "Derivative Instruments and Hedging Activities," in Item 1, "Financial Statements," CNF held two freestanding interest rate swap derivatives at March 31, 2004 that were initially entered into as cash flow hedges to mitigate the effects of interest rate volatility on floating-rate lease payments. In connection with Forwarding's 2001 restructuring plan, hedge accounting was discontinued for these interest rate swaps when EWA settled floating-rate operating leases hedged with the interest rate swaps. At March 31, 2004, CNF had not entered into any material derivative contracts to hedge exposure to commodity prices or foreign currency. PAGE 31 ITEM 4. CONTROLS AND PROCEDURES (a) Disclosure Controls and Procedures. CNF's management, with the participation of CNF's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of CNF's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d- 15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, CNF's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, CNF's disclosure controls and procedures are effective. (b) Internal Control Over Financial Reporting. There have not been any changes in CNF's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, CNF's internal control over financial reporting. PAGE 32 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings In 2001, EWA received subpoenas issued by federal grand juries in Massachusetts and the District of Columbia and the USPS Inspector General for documents relating to the Priority Mail contract. EWA cooperated fully and provided the documents requested in those subpoenas. In September 2003, CNF received notice from the United States Attorney's Office for the District of Columbia that EWA is being considered for possible civil action under the False Claims Act for allegedly submitting false invoices to the USPS for payment under the Priority Mail contract. EWA has entered into a tolling agreement with the government in order to give the parties more time to investigate the allegations. EWA is in the early stages of conducting its own investigation of the allegations and as a result CNF is currently unable to predict the outcome of this matter. Under the False Claims Act, the government would be entitled to recover treble damages, plus penalties, if a court was to ultimately conclude that EWA knowingly submitted false invoices to the USPS. On February 16, 2000, a DC-8 cargo aircraft operated by EWA personnel crashed shortly after take-off from Mather Field, near Sacramento, California. The crew of three was killed. The National Transportation Safety Board subsequently determined that the probable cause of the crash was the disconnection of the right elevator control tab due to improper maintenance, but was not able to determine whether the maintenance errors occurred during the most recent heavy maintenance "D" check by an outside vendor or during subsequent maintenance of the aircraft. MWF, EWA and CNF Inc. have been named as defendants in wrongful death lawsuits brought by the families of the three deceased crew members, seeking compensatory and punitive damages. MWF, EWA and CNF Inc. also may be subject to other claims and proceedings relating to the crash, which could include other private lawsuits seeking monetary damages and governmental proceedings. Although MWF, EWA and CNF Inc. maintain insurance that is intended to cover claims that may arise in connection with an airplane crash, there can be no assurance that the insurance will in fact be adequate to cover all possible types of claims. In particular, any claims for punitive damages or any sanctions resulting from possible governmental proceedings would not be covered by insurance. On December 5, 2001, EWA announced that it would cease operating as an air carrier, and in connection therewith terminated the employment of all pilots and crew members, bringing the total number of terminated employees in 2001 to 800. Those pilots and crew members are represented by the Air Line Pilots Association ("ALPA") under a collective bargaining agreement. Subsequently, ALPA filed a grievance on behalf of the pilots and crew members protesting the cessation of EWA's air carrier operations and Forwarding's use of other air carriers. The ALPA matters are the subject of litigation in U.S. District Court and, depending on the outcome of that litigation, may be subject to binding arbitration. Based on CNF's current evaluation, management believes that it has provided for its estimated exposure related to the ALPA matters. However, CNF cannot predict with certainty the ultimate outcome of these matters. EWA, MWF, Menlo Worldwide, LLC and CNF Inc. are named as defendants in a lawsuit filed in state court in California by approximately 140 former EWA pilots and crew members. The lawsuit alleges wrongful termination in connection with the termination of EWA's air carrier operations, and seeks $500 million and certain other unspecified damages. CNF believes that the lawsuit's claims are without merit, and intends to vigorously defend the lawsuit. CNF has become aware of information that Emery Transnational, a Philippines-based joint venture in which MWF may be deemed to be a controlling partner, may be in violation of the Foreign Corrupt Practices Act. CNF is conducting an internal investigation and has notified the Department of Justice and the Securities and Exchange Commission of this matter. CNF will share the results of its internal investigation, when completed, with the appropriate regulatory agencies, and will fully cooperate with any investigations that may be conducted by such regulatory agencies. Certain current and former officers of CNF, EWA and Forwarding and certain current and former directors of CNF have been named as defendants in a purported shareholder derivative suit filed in September 2003 in California Superior Court for the County of San Mateo. The complaint alleges breach of fiduciary duty, gross mismanagement, waste and abuse of control relating to the management, control and operation of EWA and Forwarding. CNF is named only as a nominal defendant and no relief is sought against it. CNF maintains insurance for the benefit of its officers and directors, and the applicable insurance carriers have been notified of the claims asserted in the lawsuit. PAGE 33 ITEM 4. Submission of Matters to a Vote of Security Holders At the Annual Shareholders Meeting held April 20, 2004, the following proposals were presented with the indicated voting results: For the purpose of electing members of the Board of Directors, the votes representing shares of common and preferred stock were cast as follows: Nominee For Against -------------------- ---------- --------- W. Keith Kennedy, Jr. 49,681,549 1,234,408 John C. Pope 48,422,404 2,493,553 Gregory L. Quesnel 49,497,073 1,418,884 Peter W. Stott 49,908,433 1,007,524 The following directors did not stand for election and continued in office as directors after the Annual Shareholders Meeting: Robert Alpert, Margaret G. Gill, Robert Jaunich II, Michael J. Murray, Robert D. Rogers, William J. Schroeder, Robert P. Wayman, and Chelsea C. White III. On April 26, 2004, Robert Alpert retired from CNF's Board of Directors. The appointment of KPMG LLP as independent public accountants for the year 2004 was approved by the following vote: For 48,883,195; Against 1,754,468; Abstain 278,294. PAGE 34 ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits 10.1 Amended and Restated Severance Agreement By and Between CNF Inc. and Gregory L. Quesnel dated December 4, 2001. # 10.2 Amendment No. 1 to Amended and Restated Severance Agreement By and Between CNF Inc. and Gregory L. Quesnel dated January 1, 2003. # 10.3 Amended and Restated Severance Agreement By and Between CNF Inc. and Sanchayan C. Ratnathicam dated December 4, 2001. # 10.4 Amendment No. 1 to Amended and Restated Severance Agreement By and Between CNF Inc. and Sanchayan C. Ratnathicam dated January 1, 2003. # 10.5 Amended and Restated Severance Agreement By and Between CNF Inc. and Eberhard G.H. Schmoller dated December 4, 2001. # 10.6 Amendment No. 1 to Amended and Restated Severance Agreement By and Between CNF Inc. and Eberhard G.H. Schmoller dated January 1, 2003. # 10.7 Amended and Restated Severance Agreement By and Between CNF Inc. and Gerald L. Detter dated July 31, 2000. # 10.8 Amendment No. 1 to Amended and Restated Severance Agreement By and Between CNF Inc. and Gerald L. Detter dated January 1, 2003. # 10.9 Severance Agreement By and Between Con-Way Transportation Services, Inc. and Gerald L. Detter dated July 31, 2000. # 10.10 Amendment No. 1 to Amended and Restated Severance Agreement By and Between Con-Way Transportation Services, Inc. and Gerald L. Detter dated January 1, 2003. # 10.11 Amended and Restated Severance Agreement By and Between CNF Inc. and John H. Williford dated July 31, 2000. # 10.12 Amendment No. 1 to Amended and Restated Severance Agreement By and Between CNF Inc. and John H. Williford dated January 1, 2003. # 10.13 Amendment No. 2 to Amended and Restated Severance Agreement By and Between CNF Inc. and John H. Williford dated January 1, 2003. # 10.14 Severance Agreement By and Between Menlo Worldwide, LLC and John H. Williford dated August 25, 2003. # 10.15 Amendment No. 1 to Severance Agreement By and Between Menlo Worldwide, LLC and John H. Williford dated January 22, 2004. # 10.16 Form of CNF Inc. 2001 Amended and Restated Executive Severance Agreement , with attached schedule. # 10.17 Form of CNF Inc. Executive Severance Agreement , with attached schedule. # PAGE 35 10.18 Form of Con-Way Transportation Services, Inc., Executive Severance Agreement, with attached schedule. # 10.19 Form of Menlo Worldwide Forwarding, Inc. (formerly Emery Air Freight Corporation) Executive Severance Agreement, with attached schedule. # 10.20 Form of Menlo Logistics, Inc., Executive Severance Agreement, with attached schedule. # 10.21 Form of Menlo Worldwide, LLC Executive Severance Agreement, with attached schedule. # 10.22 Con-Way Transportation Services, Inc. Executive Severance Plan. # 10.23 Menlo Worldwide Forwarding (formerly Emery Air Freight Corporation) Executive Severance Plan. # 10.24 Menlo Logistics, Inc. Executive Severance Plan. # 10.25 Menlo Worldwide, LLC Executive Severance Plan. # 10.26 Menlo Worldwide Services, LLC Executive Severance Plan. # 10.27 Menlo Worldwide Technologies, LLC Executive Severance Plan. # 10.28 CNF Transportation Inc. Executive Severance Plan for Eligible Executives of Vector SCM, LLC. # 10.29 Menlo Worldwide, LLC Executive Severance Plan for Eligible Executives of Vector SCM, LLC. # 10.30 CNF Inc. Value Management Plan 2004 Amendment and Restatement. # 31 Certification of Officers pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32 Certification of Officers pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K On January 26, 2004, CNF filed a current report on Form 8-K to furnish under Item 12 CNF's press release presenting CNF's fourth-quarter results. On January 27, 2004, CNF filed a current report on Form 8-K to file under Item 5 CNF's press release announcing the retirement of Donald Moffitt, chairman of the CNF Board of Directors, effective January 31, 2004. CNF also introduced Dr. W. Keith Kennedy, Jr. as the new chairman. On February 18, 2004, CNF filed a current report on Form 8-K to file under Item 5 CNF's press release announcing the retirement of CNF Chief Executive Officer and President Gregory L. Quesnel, effective July 6, 2004. # Designates a contract or compensation plan for Management or Directors. PAGE 36 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company (Registrant) has duly caused this Form 10-Q Quarterly Report to be signed on its behalf by the undersigned, thereunto duly authorized. CNF Inc. (Registrant) May 6, 2004 /s/Chutta Ratnathicam -------------------------- Chutta Ratnathicam Senior Vice President and Chief Financial Officer EX-10 2 ex101.txt 2 AMENDED AND RESTATED SEVERANCE AGREEMENT THIS AGREEMENT, originally dated December 9, 1998, as amended and restated as of August 21, 2000, and as subsequently amended, is hereby amended and restated in its entirety as of December 4, 2001. This Agreement is made by and between CNF Inc., a Delaware corporation (the "Company"), and Gregory L. Quesnel (the "Executive"). WHEREAS, the Company considers it essential to the best interests of its stockholders to foster the continued employment of key management personnel; and WHEREAS, the Board recognizes that, as is the case with many publicly held corporations, the possibility of a Change in Control exists and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders; and WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's management, including the Executive, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change in Control; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Company and the Executive hereby agree as follows: 1. Defined Terms. The definitions of capitalized terms used in this Agreement are provided in the last Section hereof. 2. Term of Agreement. The Term of this Agreement shall commence on December 9, 1998 (the "Effective Date") and shall continue in effect through December 31, 2002; provided, however, that commencing on January 1, 2003, and each January 1 thereafter, the Term shall automatically be extended for one additional year unless, not later than September 30 of the preceding year, the Company or the Executive shall have given notice not to extend the Term; and further provided, however, that if a Change in Control shall have occurred during the Term, the Term shall expire no earlier than twenty_four (24) months beyond the month in which such Change in Control occurred. 3. Company's Covenants Summarized. In order to induce the Executive to remain in the employ of the Company and in consideration of the Executive's covenants set forth in Section 4 hereof, the Company agrees, under the conditions described herein, to pay the Executive the Severance Payments and the other payments and benefits described herein. Except as provided in Section 9.1 hereof, no Severance Payments shall be payable under this Agreement unless there shall have been (or, under the terms of the second paragraph of Section 6.1 hereof, there shall be deemed to have been) a termination of the Executive's employment with the Company following a Change in Control and during the Term. This Agreement shall not be construed as creating an express or implied contract of employment and, except as otherwise agreed in writing between the Executive and the Company, the Executive (i) shall not have any right to be retained in the employ of the Company, and (ii) shall remain subject to discharge to the same extent as if this Agreement had not been entered into by the Company and the Executive. 4. Executive's Covenants. The Executive agrees that, subject to the terms and conditions of this Agreement, in the event of a Potential Change in Control during the Term, the Executive will remain in the employ of the Company until the earliest of (i) a date which is six (6) months from the date of such Potential Change in Control, (ii) the date of a Change in Control, (iii) the date of termination by the Executive of the Executive's employment for Good Reason or by reason of death, Disability or Retirement or (iv) the termination by the Company of the Executive's employment for any reason. 5. Compensation Other Than Severance Payments. 5.1 Following a Change in Control and during the Term, during any period that the Executive fails to perform the Executive's full-time duties with the Company as a result of incapacity due to disability, including physical or mental illness, the Company shall pay the Executive's full salary to the Executive at the rate in effect at the commencement of any such period, together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period (other than any disability plan), until the Executive's employment is terminated by the Company for Disability. 5.2 If the Executive's employment shall be terminated for any reason following a Change in Control and during the Term, the Company shall pay the Executive's full salary to the Executive through the Date of Termination at the rate in effect immediately prior to the Date of Termination or, if higher, the rate in effect immediately prior to the Change in Control, together with all compensation and benefits payable to the Executive through the Date of Termination under the terms of the Company's compensation and benefit plans, programs or arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the Change in Control. 5.3 If the Executive's employment shall be terminated for any reason following a Change in Control and during the Term, the Company shall pay to the Executive the Executive's normal post_termination compensation and benefits as such payments become due (other than severance payments under any severance plan as in effect immediately prior to the Date of Termination). Such post_termination compensation and benefits shall be determined under, and paid in accordance with, the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the Change in Control. 6. Severance Payments. 6.1 If the Executive's employment is terminated following a Change in Control and during the Term, other than (A) by the Company for Cause, (B) by reason of death or Disability, or (C) by the Executive without Good Reason, then the Company shall pay the Executive the amounts, and provide the Executive the benefits, described in this Section 6.1 ("Severance Payments") and Section 6.2, in addition to any payments and benefits to which the Executive is entitled under Section 5 hereof; provided, however, that the Executive shall not be entitled to the Severance Payments unless and until the Executive (or, in the event of the Executive's death, the executor, personal representative or administrator of the Executive's estate) has signed a written waiver and release substantially in the form set forth on Exhibit A hereto. For purposes of this Agreement, the Executive's employment shall be deemed to have been terminated following a Change in Control by the Company without Cause or by the Executive with Good Reason, if (i) during the Term the Executive's employment is terminated by the Company without Cause following a Potential Change in Control but prior to a Change in Control (whether or not a Change in Control ever occurs) and such termination was at the request or direction of a Person who has entered into an agreement with the Company the consummation of which would constitute a Change in Control, (ii) during the Term the Executive terminates his employment for Good Reason following a Potential Change in Control but prior to a Change in Control (whether or not a Change in Control ever occurs) and the circumstance or event which constitutes Good Reason occurs at the request or direction of such Person or (iii) during the Term the Executive's employment is terminated by the Company without Cause or by the Executive for Good Reason and such termination or the circumstance or event which constitutes Good Reason is otherwise in connection with or in anticipation of a Change in Control (whether or not a Change in Control ever occurs). An Executive will not be considered to have been terminated by reason of the divestiture of a facility, sale or other disposition of a business or business unit, or the outsourcing of a business activity with which the Executive is affiliated, notwithstanding the fact that such divestiture, sale or outsourcing takes place within two years following a Change in Control, if the Executive is offered comparable employment by the successor company and such successor company agrees to assume the Company's obligations to the Executive under this Agreement. (A) In lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination and in lieu of any severance benefit otherwise payable to the Executive, the Company shall pay to the Executive a lump sum severance payment, in cash, equal to three times the sum of (i) the Executive's annual base salary as in effect immediately prior to the Date of Termination or, if higher, in effect immediately prior to the Change in Control and (ii) the highest of (1) the average annual bonus earned by the Executive pursuant to any annual bonus or incentive plan maintained by the Company in respect of the three fiscal years ending immediately prior to the fiscal year in which occurs the Date of Termination, (2) the average annual bonus earned by the Executive pursuant to any such plan in respect of the three fiscal years ending immediately prior to the fiscal year in which occurs the Change in Control or (3) the target annual bonus in effect for the Executive for the fiscal year in which occurs the Date of Termination. (B) For the thirty-six (36) month period immediately following the Date of Termination, the Company shall arrange to provide the Executive and his dependents life, disability and accident benefits substantially similar to those provided to the Executive and his dependents immediately prior to the Date of Termination or, if more favorable to the Executive, those provided to the Executive and his dependents immediately prior to the Change in Control, at no greater cost to the Executive than the cost to the Executive immediately prior to such Date of Termination or Change in Control; provided, however, that any across the board changes to life, disability or accident benefits similarly affecting all or substantially all employees of the Company and any entity in control of the Company shall not be deemed a breach of this Section 6.1(B). Benefits otherwise receivable by the Executive pursuant to this Section 6.1(B) shall be reduced to the extent benefits of the same type are received by or made available to the Executive during the thirty-six (36) month period following the Executive's termination of employment (and any such benefits received by or made available to the Executive shall be reported to the Company by the Executive); provided, however, that the Company shall reimburse the Executive for the excess, if any, of the cost of such benefits to the Executive over such cost immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control. If the Executive dies during the thirty- six (36) month period following the Date of Termination, life, disability and accident benefit coverage of the Executive's dependents shall continue for the remainder of the thirty-six (36) month period. (C) Notwithstanding any provision of any health or dental insurance plan or health or dental benefit plan to the contrary, the Company shall provide health and dental benefits to the Executive and his dependents as if the Executive, as of the Date of Termination, has retired (i) under the terms of such plan as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control and (ii) with age plus years of service totaling 85 or more. Benefits otherwise receivable by the Executive pursuant to this Section 6.1(C) shall be reduced to the extent benefits of the same type are received by or made available to the Executive following the Executive's termination of employment (and any such benefits received by or made available to the Executive shall be reported to the Company by the Executive); provided, however, that the Company shall reimburse the Executive for the excess, if any, of the cost of such benefits to the Executive over such cost immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control. If the Executive dies at a time when health and dental benefits are being provided under this Section 6.1(C) to the Executive's dependents, the Company shall continue to provide the dependents with health and dental benefits for as long as, and on the same basis as, such benefits are provided to dependents of retired employees who have retired with age plus years of service totaling 85 or more. (D) In addition to the retirement benefits to which the Executive is entitled under each Pension Plan or any successor plan thereto, the Company shall pay the Executive a lump sum amount, in cash, equal to the excess of (i) the actuarial equivalent of the aggregate retirement pension which the Executive would have accrued under the terms of all Pension Plans (without regard to any amendment to any Pension Plan made subsequent to a Change in Control and on or prior to the Date of Termination, which amendment adversely affects in any manner the computation of retirement benefits thereunder), determined as if the Executive (A) were fully vested thereunder, (B) had accumulated (after the Date of Termination) thirty-six (36) additional months of service credit thereunder, (C) had attained an age which is three years older than the age the Executive had attained as of the Date of Termination, (D) had been credited under each Pension Plan during such period with compensation equal to the Executive's annual amount taken into account under Section 6.1(A) hereof, (E) qualified for a benefit that is not reduced on account of commencement before normal retirement date, and (F) commenced receiving such pension on the first of the month following the Date of Termination, over (ii) the actuarial equivalent of the aggregate retirement pension (taking into account any early retirement subsidies associated therewith) which the Executive had accrued pursuant to the provisions of the Pension Plans as of the Date of Termination. For purposes of this Section 6.1(D), "actuarial equivalent" shall be determined using the same assumptions utilized under the applicable Pension Plan immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control. 6.2 (A) Whether or not the Executive becomes entitled to the Severance Payments, if any of the payments or benefits received or to be received by the Executive in connection with a Change in Control or the Executive's termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any Person whose actions result in a Change in Control or any Person affiliated with the Company or such Person) (such payments or benefits, excluding the Gross-Up Payment, being hereinafter referred to as the "Total Payments") will be subject to the Excise Tax, the Company shall pay to the Executive an additional amount (the "Gross_Up Payment") such that the net amount retained by the Executive, after deduction of any Excise Tax on the Total Payments and any federal, state and local income and employment taxes and Excise Tax upon the Gross- Up Payment, shall be equal to the Total Payments. (B) For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) all of the Total Payments shall be treated as "parachute payments" (within the meaning of Section 280G(b)(2) of the Code) unless, in the opinion of tax counsel ("Tax Counsel") reasonably acceptable to the Executive and selected by the accounting firm which was, immediately prior to the Change in Control, the Company's independent auditor (the "Auditor"), such payments or benefits (in whole or in part) should not constitute parachute payments, including by reason of Section 280G(b)(4)(A) of the Code, (ii) all "excess parachute payments" within the meaning of Section 280G(b)(l) of the Code shall be treated as subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered (within the meaning of Section 280G(b)(4)(B) of the Code) in excess of the Base Amount allocable to such reasonable compensation, or should otherwise not be subject to the Excise Tax and (iii) the value of any noncash benefits or any deferred payment or benefit shall be determined by the Auditor in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross_Up Payment, the Executive shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation in the calendar year in which the Gross_Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the Date of Termination (or if there is no Date of Termination, then the date on which the Gross-Up Payment is calculated for purposes of this Section 6.2), net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. (C) In the event that the Excise Tax is finally determined to be less than the amount taken into account hereunder in calculating the Gross-Up Payment, the Executive shall repay to the Company, within five (5) business days following the time that the amount of such reduction in the Excise Tax is finally determined, the portion of the Gross_Up Payment attributable to such reduction (plus that portion of the Gross_Up Payment attributable to the Excise Tax and federal, state and local income and employment taxes imposed on the Gross_Up Payment being repaid by the Executive, to the extent that such repayment results in a reduction in the Excise Tax and a dollar-for-dollar reduction in the Executive's taxable income and wages for purposes of federal, state and local income and employment taxes), plus interest on the amount of such repayment at 120% of the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder in calculating the Gross-Up Payment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross_Up Payment), the Company shall make an additional Gross_Up Payment in respect of such excess (plus any interest, penalties or additions payable by the Executive with respect to such excess) within five (5) business days following the time that the amount of such excess is finally determined. The Executive and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Total Payments. 6.3 The payments provided in subsections (A), (C) and (D) of Section 6.1 hereof and in subsections (A) and (B) of Section 6.2 hereof shall be made not later than the fifth day following the Date of Termination; provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Company shall pay to the Executive on such day an estimate, as determined in good faith by the Company or, in the case of payments under Section 6.2 hereof, in accordance with Section 6.2 hereof, of the minimum amount of such payments to which the Executive is clearly entitled and shall pay the remainder of such payments (together with interest on the unpaid remainder (or on all such payments to the extent the Company fails to make such payments when due) at 120% of the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth (30th) day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Executive, payable on the fifth (5th) business day after demand by the Company (together with interest at 120% of the rate provided in Section 1274(b)(2)(B) of the Code). At the time that payments are made under this Agreement, the Company shall provide the Executive with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations including, without limitation, any opinions or other advice the Company has received from Tax Counsel, the Auditor or other advisors or consultants (and any such opinions or advice which are in writing shall be attached to the statement). 6.4 The Company also shall pay to the Executive all legal fees and expenses incurred by the Executive in seeking in good faith to obtain or enforce any benefit or right provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Code to any payment or benefit provided hereunder. Such payments shall be made within five (5) business days after delivery of the Executive's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 7. Termination Procedures and Compensation During Dispute. 7.1 Notice of Termination. After a Change in Control and during the Term, any purported termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three_quarters (3/4) of the entire membership of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in detail. 7.2 Date of Termination. "Date of Termination," with respect to any purported termination of the Executive's employment after a Change in Control and during the Term, shall mean (i) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such thirty (30) day period), and (ii) if the Executive's employment is terminated for any other reason, the date specified in the Notice of Termination (which, in the case of a termination by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days, respectively, from the date such Notice of Termination is given). 8. No Mitigation. The Company agrees that, if the Executive's employment with the Company terminates during the Term, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 hereof. Further, the amount of any payment or benefit provided for in this Agreement (other than to the extent provided in Section 6.1(B) and 6.1(C) hereof) shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise. 9. Successors; Binding Agreement. 9.1 In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive's employment for Good Reason after a Change in Control, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. 9.2 This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate. 10. Notices. All notices and other communications provided for in this Agreement (i) shall be in writing, (ii) shall be hand delivered, sent by overnight courier or by United States registered mail, return receipt requested and postage prepaid, addressed, in the case of the Executive, to the address inserted below the Executive's signature on the final page hereof and, if to the Company, to the address set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, and (iii) shall be effective only upon actual receipt. To the Company: CNF Inc. 3240 Hillview Avenue Palo Alto, CA 94304 Attention: General Counsel 11. Miscellaneous. Except as otherwise expressly provided herein, no provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or of any lack of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement supersedes any other agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof which have been made by either party; provided, however, that this Agreement shall supersede any written agreement setting forth the terms and conditions of the Executive's employment with the Company only in the event that the Executive's employment with the Company is terminated on or following a Change in Control, by the Company other than for Cause or by the Executive for Good Reason. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and the Executive under this Agreement which by their nature may require either partial or total performance after the expiration of the Term (including, without limitation, those under Sections 6 and 7 hereof) shall survive such expiration. 12. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 13. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 14. Settlement of Disputes; Arbitration. 14.1 All claims by the Executive for benefits under this Agreement shall be directed to and determined by the Board and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive's claim has been denied. 14.2 Any further dispute or controversy arising under or in connection with this Agreement shall be finally settled exclusively by arbitration in Palo Alto, California, in accordance with the rules of the American Arbitration Association then in effect; provided, however, that the evidentiary standards set forth in this Agreement shall apply. Judgment may be entered on the arbitrator's award in any court having jurisdiction. 15. Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated below: (A) "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act. (B) "Auditor" shall have the meaning set forth in Section 6.2 hereof. (C) "Base Amount" shall have the meaning set forth in Section 280G(b)(3) of the Code. (D) "Beneficial Owner" shall have the meaning set forth in Rule 13d_3 under the Exchange Act. (E) "Board" shall mean the Board of Directors of the Company. (F) "Cause" for termination by the Company of the Executive's employment shall mean (i) the willful and continued failure by the Executive to substantially perform the Executive's duties with the Company (other than any such failure resulting from the Executive's incapacity due to disability, including physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination for Good Reason by the Executive pursuant to Section 7.1 hereof) after a written demand for substantial performance is delivered to the Executive by the Board, which demand specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive's duties, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of this definition, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's act, or failure to act, was in the best interest of the Company. In the event of a dispute concerning the application of this provision, no claim by the Company that Cause exists shall be given effect unless the Company establishes to the Board and, in the event of an arbitration as contemplated by Section 14.2, to the arbitrator, by clear and convincing evidence that Cause exists. (G) "Change in Control" means the occurrence of an event described in any one of the following clauses (1) through (5): (1) any "person," as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (A) the Company or its Affiliates, (B) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or its Affiliates, and (C) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the Common Stock), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its Affiliates) representing 25% or more of the combined voting power of the Company's then outstanding voting securities; (2) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the Effective Date, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company's stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the Effective Date or whose appointment, election or nomination for election was previously so approved or recommended; (3) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or parent entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving or parent entity outstanding immediately afer such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as hereinabove defined), directly or indirectly, acquired 25% or more of the combined voting power of the Company's then outstanding securities (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its Affiliates); (4) the stockholders of the Company approve a plan of complete liquidation of the Company or there is consummated an agreement for the sale or disposition by the Company of assets having an aggregate book value at the time of such sale or disposition of more than 75% of the total book value of the Company's assets on a consolidated basis (or any transaction having a similar effect), other than any such sale or disposition by the Company (including by way of spin-off or other distribution) to an entity, at least 50% of the combined voting power of the voting securities of which are owned immediately following such sale or disposition by stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale or disposition; provided, however, that a Change in Control shall be deemed not to have occurred under this clause (4) if, immediately prior to the consummation of any sale or disposition of a business unit that is taken into account in determining whether a Change in Control has occurred, the Executive is employed by, and is party to a severance agreement with, such business unit; or (5) there is consummated the sale or other disposition by the Company, however effected, of at least two of the three primary business units of the Company, whether in a single transaction or in a series of transactions occurring within an 18- month period, and whether or not one or both of such business units constitute part of a larger enterprise at the time of the sale or other disposition; provided, however, that the Board of Directors of the Company may, upon notice to the Executive given at any time, terminate this clause (5) without the consent of the Executive, except that any such notice shall not be effective to terminate this clause (5) if a Change in Control occurs pursuant to this clause (5) within ninety (90) days after such notice is given. As used in clause (5) above: (A) "primary business units" means Con-Way Transportation Services, Inc., Emery Air Freight Corporation and Menlo Logistics, Inc., and (B) a "sale" or other disposition of a business unit includes: (i) a sale by the Company of the then outstanding shares of capital stock of the business unit having more than 50% of the then existing voting power of all outstanding securities of the business unit, whether by merger, consolidation or otherwise; (ii) the sale of all or substantially all of the assets of the business unit; and (iii) any other transaction or course of action (including, without limitation, a spin-off or other distribution) engaged in, directly or indirectly, by the Company or the business unit that has a substantially similar effect as the transactions of the type referred to in clause (i) or (ii) above; it being the intent that a sale or other disposition of a business unit occurs even if (x) such business unit constitutes part of a larger enterprise at the time of the relevant sale or disposition transaction and (y) such sale or disposition transaction involves such larger enterprise (such as, by way of example and without limitation, when one or more business units are subsidiaries of a common parent and either (I) the common parent is spun-off or (II) there is consummated a sale of the stock or other equity interests in the common parent having more than 50% of the then existing voting power of all outstanding securities of the common parent). The foregoing notwithstanding, a sale or other disposition of a business unit shall not be deemed to have occurred for purposes of clause (5) above (x) except in the case of a transaction described in clause (ii) above, so long as the Company or any of its Affiliates (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended), individually or collectively, own the then outstanding shares of capital stock of the business unit having 50% or more of the then existing voting power of all outstanding securities of the business unit, or (y) in the event of the sale of shares of capital stock of the business unit (or the sale of shares or other equity interests in any parent company of such business unit) to any trustee or other fiduciary holding securities under an employee benefit plan of the Company, the business unit or any other Affiliate of the Company. (H) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (I) "Company" shall mean CNF Inc. and, except in determining under Section 15(G) hereof whether or not any Change in Control of the Company has occurred, shall include any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise. In addition, when used in the context of the Executive's employment, "Company" shall mean the Company or any of its subsidiaries. (J) "Common Stock" shall mean the common stock, par value $0.625 per share, of the Company. (K) "Date of Termination" shall have the meaning set forth in Section 7.2 hereof. (L) "Disability" shall be deemed the reason for the termination by the Company of the Executive's employment, if, as a result of the Executive's incapacity due to disability, including physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with the Company for a period of six (6) consecutive months, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties. (M) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. (N) "Excise Tax" shall mean any excise tax imposed under Section 4999 of the Code. (O) "Executive" shall mean the individual named in the first paragraph of this Agreement. (P) "Good Reason" for termination by the Executive of the Executive's employment shall mean the occurrence (without the Executive's express written consent) after any Change in Control and during the Term of any one of the following acts by the Company, or failures by the Company to act, unless such act or failure to act is corrected within 30 days of receipt by the Company of notice of the Executive's intent to terminate for Good Reason hereunder: (I) the failure of the successor company, following the Change in Control, to assume this Agreement and all obligations hereunder, as of the date of such Change in Control; (II) the assignment to the Executive of any duties inconsistent with the Executive's status as an executive of the Company or a substantial adverse alteration in the nature or status of the Executive's responsibilities from those in effect immediately prior to the Change in Control; (III) a reduction by the Company in the Executive's annual base salary (except for across- the-board salary reductions similarly affecting all executives of the Company and all executives of any Person in control of the Company) or incentive compensation opportunity (both short- term and long-term, valued in a manner consistent with the valuation methodology used by the Company prior to the Change in Control), each as in effect immediately prior to the Change in Control or as the same may thereafter be increased from time to time; (IV) the relocation of the Executive's principal place of employment to a location that results in an increase in the Executive's one way commute of at least 50 miles more than the Executive's one way commute immediately prior to the Change in Control, except for required travel on the Company's business to an extent substantially consistent with the Executive's business travel obligations immediately prior to the Change in Control; (V) the failure by the Company to pay to the Executive when due any portion of the Executive's current compensation; (VI) the failure by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of the Company's pension, savings, life insurance, medical, health and accident, or disability plans in which the Executive was participating immediately prior to the Change in Control (except for across the board changes similarly affecting all or substantially all employees of the Company and any entity in control of the Company), the taking of any other action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive immediately prior to the Change in Control, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled. The Executive's right to terminate the Executive's employment for Good Reason shall not be affected by the Executive's incapacity due to disability, including physical or mental illness. The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. Notwithstanding anything in this Agreement to the contrary, if the Executive's employment is terminated by the Executive for any reason during the one-month period commencing on the first anniversary of a Change in Control, such termination shall be deemed a termination of the Executive's employment for Good Reason. (Q) "Gross_Up Payment" shall have the meaning set forth in Section 6.2 hereof. (R) "Notice of Termination" shall have the meaning set forth in Section 7.1 hereof. (S) "Pension Plan" shall mean any tax-qualified, supplemental or excess benefit pension plan maintained by the Company and any other plan or agreement entered into between the Executive and the Company which is designed to provide the Executive with supplemental retirement benefits. (T) "Person" shall mean any person, as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (A) the Company or its Affiliates, (B) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or its Affiliates, and (C) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the Common Stock) (U) "Potential Change in Control" shall be deemed to have occurred if: (I) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control; (II) the Company or any Person publicly announces an intention to take or to consider taking actions, including but not limited to proxy contests or consent solicitations, which, if consummated, would constitute a Change in Control; (III) any Person becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 15% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company's then outstanding securities (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its affiliates); or (IV) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred. (V) "Retirement" shall be deemed the reason for the termination by the Executive of the Executive's employment if such employment is terminated in accordance with the Company's retirement policy, including early retirement, generally applicable to its salaried employees. (W) "Severance Payments" shall have the meaning set forth in Section 6.1 hereof. (X) "Tax Counsel" shall have the meaning set forth in Section 6.2 hereof. (Y) "Term" shall mean the period of time described in Section 2 hereof (including any extension, continuation or termination described therein). (Z) "Total Payments" shall mean those payments so described in Section 6.2 hereof. CNF INC. By: /s/ Eberhard G.H. Schmoller ---------------------------- Name: Eberhard G.H. Schmoller Title: Senior Vice President, General Counsel and Secretary EXECUTIVE Name: Gregory L. Quesnel Address: PO Box 555 Saratoga, CA 95071 16chw2931 EXHIBIT A WAIVER AND RELEASE OF CLAIMS In consideration of, and subject to, the payment to be made to me by CNF Inc. (the "Company") of the "Severance Payments" (as defined in the Amended and Restated Severance Agreement, dated as of December 4, 2001, entered into between me and the Company (the "Agreement")), I hereby waive any claims I may have for employment or re-employment by the Company or any subsidiary of the Company after the date hereof, and I further agree to and do release and forever discharge the Company or any subsidiary of the Company, and their respective past and present officers, directors, shareholders, insurers, employees and agents from any and all claims and causes of action, known or unknown, arising out of or relating to my employment with the Company or any subsidiary of the Company, or the termination thereof, including, but not limited to, wrongful discharge, breach of contract, tort, fraud, the Civil Rights Acts, Age Discrimination in Employment Act, Employee Retirement Income Security Act of 1974, Americans with Disabilities Act, or any other federal, state or local legislation or common law relating to employment or discrimination in employment or otherwise. Notwithstanding the foregoing or any other provision hereof, nothing in this Waiver and Release of Claims shall adversely affect (i) my rights under the Agreement; (ii) my rights to benefits other than severance benefits under plans, programs and arrangements of the Company or any subsidiary or parent of the Company which are accrued but unpaid as of the date of my termination; or (iii) my rights to indemnification under any indemnification agreement, applicable law and the certificates ofincorporation and bylaws of the Company and any subsidiary or parent of the Company, and my rights under any director's and officers' liability insurance policy covering me. I acknowledge that I have signed this Waiver and Release of Claims voluntarily, knowingly, of my own free will and without reservation or duress, and that no promises or representations have been made to me by any person to induce me to do so other than the promise of payment set forth in the first paragraph above and the Company's acknowledgment of my rights reserved under the second paragraph above. I understand that this release will be deemed to be an application for benefits under the Agreement and that my entitlement thereto shall be governed by the terms and conditions of the Agreement and any applicable plan. I expressly hereby consent to such terms and conditions. I acknowledge that I have been given not less than forty-five (45) days to review and consider this Waiver and Release of Claims (unless I have signed a written waiver of such review and consideration period), and that I have had the opportunity to consult with an attorney or other advisor of my choice and have been advised by the Company to do so if I choose. I may revoke this Waiver and Release of Claims seven days or less after its execution by providing written notice to the Company. I acknowledge that it is my intention and the intention of the Company in executing this Waiver and Release of Claims that the same shall be effective as a bar to each and every claim, demand and cause of action hereinabove specified. In furtherance of this intention, I hereby expressly waive any and all rights and benefits conferred upon me by the provisions of SECTION 1542 OF THE CALIFORNIA CIVIL CODE, to the extent applicable to me, and expressly I consent that this Waiver and Release of Claims shall be given full force and effect according to each and all of its express terms and provisions, including as well those related to unknown and unsuspected claims, demands and causes of action, if any, as well as those relating to any other claims, demands and causes of action hereinabove specified. SECTION 1542 provides: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR." I acknowledge that I may hereafter discover claims or facts in addition to or different from those which I now know or believe to exist with respect to the subject matter of this Waiver and Release of Claims and which, if known or suspected at the time of executing this Waiver and Release of Claims, may have materially affected this settlement. Finally, I acknowledge that I have read this Waiver and Release of Claims and understand all of its terms. /s/ Gregory L. Quesnel ------------------------------- Signature of Executive Print Name Date Signed EX-10 3 ex102.txt Execution Copy 1 AMENDMENT NO.1 TO AMENDED AND RESTATED SEVERANCE AGREEMENT BY AND BETWEEN CNF INC. AND GREGORY L. QUESNEL Effective January 1, 2003 This Amendment No. 1 (this "Amendment") is made to the Amended and Restated Severance Agreement as of December 4, 2001 by and between CNF Inc., a Delaware corporation (the "Company"), and Gregory L. Quesnel (the "Executive") (the "Severance Agreement"). WHEREAS, on December 4, 2001, the Company and the Executive entered into this Severance Agreement; WHEREAS, the Board of Directors of the Company has determined that it is in the best interests of the Company and of its stockholders to amend the Severance Agreement; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained in this Amendment, the Company and the Executive agree as follows (capitalized terms used without definition have the meanings given to those terms in the Severance Agreement): 1. Amendment to Severance Payment. The severance payment set forth in Section 6.1(A) of the Severance Agreement shall be amended in its entirety to read as follows: (A) In lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination and in lieu of any severance benefit otherwise payable to the Executive, the Company shall pay to the Executive a lump sum severance payment, in cash, equal to three times the sum of (i) the Executive's annual base salary as in effect immediately prior to the Date of Termination or, if higher, in effect immediately prior to the Change in Control and (ii) the average annual bonus earned by the Executive pursuant to any annual bonus or incentive plan maintained by the Company in respect of the three fiscal years ending immediately prior to the fiscal year in which occurs the Change in Control. 2. Amendment to Additional Retirement Benefits. The additional retirement benefits set forth in Section 6.1(D) of the Severance Agreement shall be amended in its entirety to read as follows: (D) In addition to the retirement benefits to which the Executive is entitled under each Pension Plan or any successor plan thereto, the Company shall pay the Executive a lump sum amount, in cash, equal to the excess, if any, of (i) the actuarial equivalent of the aggregate retirement pension which the Executive would have accrued under the terms of all Pension Plans (without regard to any amendment to any Pension Plan made subsequent to a Change in Control and on or prior to the Date of Termination, which amendment adversely affects in any manner the computation of retirement benefits thereunder), determined only for the purposes of meeting the Rule of 85 (as defined in the Company Retirement Plan) as if the Executive (A) had accumulated (after the Date of Termination) thirty-six (36) additional months of service credit thereunder and (B) had attained an age which is three years older than the age the Executive had attained as of the Date of Termination, over (ii) the actuarial equivalent of the aggregate retirement pension (taking into account any early retirement subsidies associated therewith) which the Executive had accrued pursuant to the provisions of the Pension Plans as of the Date of Termination; provided, however, if the Rule of 85 applies to the Executive on the Date of Termination, then no payment shall be due under this Section 6.1(D). For purposes of this Section 6.1(D), "actuarial equivalent" shall be determined using the same assumptions utilized under the applicable Pension Plan immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control. 3. Amendment to Definition of the Term "Good Reason". Section 15(P) of the Severance Agreement (definition of the term "Good Reason") shall be amended by deleting the following paragraph at the end of Section 15(P): "Notwithstanding anything in this Agreement to the contrary, if the Executive's employment is terminated by the Executive for any reason during the one-month period commencing on the first anniversary of a Change in Control, such termination shall be deemed a termination of the Executive's employment for Good Reason." 4. Effective Date. The effective date of this Amendment shall be January 1, 2003. Except as expressly amended, the Severance Agreement remains unchanged and in full force and effect. CNF INC. By: /s/ Eberhard G.H. Schmoller ------------------------------ Name: Eberhard G.H. Schmoller Title: Senior Vice President, General Counsel and Secretary EXECUTIVE By: /s/ Gregory L. Quesnel ------------------------------ Name: Gregory L. Quesnel Address: PO Box 555 Saratoga, CA 95071 EX-10 4 ex103.txt AMENDED AND RESTATED SEVERANCE AGREEMENT THIS AGREEMENT, originally dated December 9, 1998, as amended and restated as of August 21, 2000, and as subsequently amended, is hereby amended and restated in its entirety as of December 4, 2001. This Agreement is made by and between CNF Inc., a Delaware corporation (the "Company"), and Sanchayan C. Ratnathicam (the "Executive"). WHEREAS, the Company considers it essential to the best interests of its stockholders to foster the continued employment of key management personnel; and WHEREAS, the Board recognizes that, as is the case with many publicly held corporations, the possibility of a Change in Control exists and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders; and WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's management, including the Executive, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change in Control; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Company and the Executive hereby agree as follows: 1. Defined Terms. The definitions of capitalized terms used in this Agreement are provided in the last Section hereof. 2. Term of Agreement. The Term of this Agreement shall commence on December 9, 1998 (the Effective Date) and shall continue in effect through December 31, 2002; provided, however, that commencing on January 1, 2003, and each January 1 thereafter, the Term shall automatically be extended for one additional year unless, not later than September 30 of the preceding year, the Company or the Executive shall have given notice not to extend the Term; and further provided, however, that if a Change in Control shall have occurred during the Term, the Term shall expire no earlier than twenty-four (24) months beyond the month in which such Change in Control occurred. 3. Company's Covenants Summarized. In order to induce the Executive to remain in the employ of the Company and in consideration of the Executive's covenants set forth in Section 4 hereof, the Company agrees, under the conditions described herein, to pay the Executive the Severance Payments and the other payments and benefits described herein. Except as provided in Section 9.1 hereof, no Severance Payments shall be payable under this Agreement unless there shall have been (or, under the terms of the second paragraph of Section 6.1 hereof, there shall be deemed to have been) a termination of the Executive's employment with the Company following a Change in Control and during the Term. This Agreement shall not be construed as creating an express or implied contract of employment and, except as otherwise agreed in writing between the Executive and the Company, the Executive (i) shall not have any right to be retained in the employ of the Company, and (ii) shall remain subject to discharge to the same extent as if this Agreement had not been entered into by the Company and the Executive. 4. Executive's Covenants. The Executive agrees that, subject to the terms and conditions of this Agreement, in the event of a Potential Change in Control during the Term, the Executive will remain in the employ of the Company until the earliest of (i) a date which is six (6) months from the date of such Potential Change in Control, (ii) the date of a Change in Control, (iii) the date of termination by the Executive of the Executive's employment for Good Reason or by reason of death, Disability or Retirement or (iv) the termination by the Company of the Executive's employment for any reason. 5. Compensation Other Than Severance Payments. 5.1 Following a Change in Control and during the Term, during any period that the Executive fails to perform the Executive's full-time duties with the Company as a result of incapacity due to disability, including physical or mental illness, the Company shall pay the Executive's full salary to the Executive at the rate in effect at the commencement of any such period, together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period (other than any disability plan), until the Executive's employment is terminated by the Company for Disability. 5.2 If the Executive's employment shall be terminated for any reason following a Change in Control and during the Term, the Company shall pay the Executive's full salary to the Executive through the Date of Termination at the rate in effect immediately prior to the Date of Termination or, if higher, the rate in effect immediately prior to the Change in Control, together with all compensation and benefits payable to the Executive through the Date of Termination under the terms of the Company's compensation and benefit plans, programs or arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the Change in Control. 5.3 If the Executive's employment shall be terminated for any reason following a Change in Control and during the Term, the Company shall pay to the Executive the Executive's normal post-termination compensation and benefits as such payments become due (other than severance payments under any severance plan as in effect immediately prior to the Date of Termination). Such post-termination compensation and benefits shall be determined under, and paid in accordance with, the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the Change in Control. 6. Severance Payments. 6.1 If the Executive's employment is terminated following a Change in Control and during the Term, other than (A) by the Company for Cause, (B) by reason of death or Disability, or (C) by the Executive without Good Reason, then the Company shall pay the Executive the amounts, and provide the Executive the benefits, described in this Section 6.1 ("Severance Payments") and Section 6.2, in addition to any payments and benefits to which the Executive is entitled under Section 5 hereof; provided, however, that the Executive shall not be entitled to the Severance Payments unless and until the Executive (or, in the event of the Executive's death, the executor, personal representative or administrator of the Executive's estate) has signed a written waiver and release substantially in the form set forth on Exhibit A hereto. For purposes of this Agreement, the Executive's employment shall be deemed to have been terminated following a Change in Control by the Company without Cause or by the Executive with Good Reason, if (i) during the Term the Executive's employment is terminated by the Company without Cause following a Potential Change in Control but prior to a Change in Control (whether or not a Change in Control ever occurs) and such termination was at the request or direction of a Person who has entered into an agreement with the Company the consummation of which would constitute a Change in Control, (ii) during the Term the Executive terminates his employment for Good Reason following a Potential Change in Control but prior to a Change in Control (whether or not a Change in Control ever occurs) and the circumstance or event which constitutes Good Reason occurs at the request or direction of such Person or (iii) during the Term the Executive's employment is terminated by the Company without Cause or by the Executive for Good Reason and such termination or the circumstance or event which constitutes Good Reason is otherwise in connection with or in anticipation of a Change in Control (whether or not a Change in Control ever occurs). An Executive will not be considered to have been terminated by reason of the divestiture of a facility, sale or other disposition of a business or business unit, or the outsourcing of a business activity with which the Executive is affiliated, notwithstanding the fact that such divestiture, sale or outsourcing takes place within two years following a Change in Control, if the Executive is offered comparable employment by the successor company and such successor company agrees to assume the Company's obligations to the Executive under this Agreement. (A) In lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination and in lieu of any severance benefit otherwise payable to the Executive, the Company shall pay to the Executive a lump sum severance payment, in cash, equal to three times the sum of (i) the Executive's annual base salary as in effect immediately prior to the Date of Termination or, if higher, in effect immediately prior to the Change in Control and (ii) the highest of (1) the average annual bonus earned by the Executive pursuant to any annual bonus or incentive plan maintained by the Company in respect of the three fiscal years ending immediately prior to the fiscal year in which occurs the Date of Termination, (2) the average annual bonus earned by the Executive pursuant to any such plan in respect of the three fiscal years ending immediately prior to the fiscal year in which occurs the Change in Control or (3) the target annual bonus in effect for the Executive for the fiscal year in which occurs the Date of Termination. (B) For the thirty-six (36) month period immediately following the Date of Termination, the Company shall arrange to provide the Executive and his dependents life, disability and accident benefits substantially similar to those provided to the Executive and his dependents immediately prior to the Date of Termination or, if more favorable to the Executive, those provided to the Executive and his dependents immediately prior to the Change in Control, at no greater cost to the Executive than the cost to the Executive immediately prior to such Date of Termination or Change in Control; provided, however, that any across the board changes to life, disability or accident benefits similarly affecting all or substantially all employees of the Company and any entity in control of the Company shall not be deemed a breach of this Section 6.1(B). Benefits otherwise receivable by the Executive pursuant to this Section 6.1(B) shall be reduced to the extent benefits of the same type are received by or made available to the Executive during the thirty-six (36) month period following the Executive's termination of employment (and any such benefits received by or made available to the Executive shall be reported to the Company by the Executive); provided, however, that the Company shall reimburse the Executive for the excess, if any, of the cost of such benefits to the Executive over such cost immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control. If the Executive dies during the thirty- six (36) month period following the Date of Termination, life, disability and accident benefit coverage of the Executive's dependents shall continue for the remainder of the thirty-six (36) month period. (C) Notwithstanding any provision of any health or dental insurance plan or health or dental benefit plan to the contrary, the Company shall provide health and dental benefits to the Executive and his dependents as if the Executive, as of the Date of Termination, has retired (i) under the terms of such plan as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control and (ii) with age plus years of service totaling 85 or more. Benefits otherwise receivable by the Executive pursuant to this Section 6.1(C) shall be reduced to the extent benefits of the same type are received by or made available to the Executive following the Executive's termination of employment (and any such benefits received by or made available to the Executive shall be reported to the Company by the Executive); provided, however, that the Company shall reimburse the Executive for the excess, if any, of the cost of such benefits to the Executive over such cost immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control. If the Executive dies at a time when health and dental benefits are being provided under this Section 6.1(C) to the Executive's dependents, the Company shall continue to provide the dependents with health and dental benefits for as long as, and on the same basis as, such benefits are provided to dependents of retired employees who have retired with age plus years of service totaling 85 or more. (D) In addition to the retirement benefits to which the Executive is entitled under each Pension Plan or any successor plan thereto, the Company shall pay the Executive a lump sum amount, in cash, equal to the excess of (i) the actuarial equivalent of the aggregate retirement pension which the Executive would have accrued under the terms of all Pension Plans (without regard to any amendment to any Pension Plan made subsequent to a Change in Control and on or prior to the Date of Termination, which amendment adversely affects in any manner the computation of retirement benefits thereunder), determined as if the Executive (A) were fully vested thereunder, (B) had accumulated (after the Date of Termination) thirty-six (36) additional months of service credit thereunder, (C) had attained an age which is three years older than the age the Executive had attained as of the Date of Termination, (D) had been credited under each Pension Plan during such period with compensation equal to the Executive's annual amount taken into account under Section 6.1(A) hereof, (E) qualified for a benefit that is not reduced on account of commencement before normal retirement date, and (F) commenced receiving such pension on the first of the month following the Date of Termination, over (ii) the actuarial equivalent of the aggregate retirement pension (taking into account any early retirement subsidies associated therewith) which the Executive had accrued pursuant to the provisions of the Pension Plans as of the Date of Termination. For purposes of this Section 6.1(D), "actuarial equivalent" shall be determined using the same assumptions utilized under the applicable Pension Plan immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control. 6.2 (A) Whether or not the Executive becomes entitled to the Severance Payments, if any of the payments or benefits received or to be received by the Executive in connection with a Change in Control or the Executive's termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any Person whose actions result in a Change in Control or any Person affiliated with the Company or such Person) (such payments or benefits, excluding the Gross-Up Payment, being hereinafter referred to as the "Total Payments") will be subject to the Excise Tax, the Company shall pay to the Executive an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive, after deduction of any Excise Tax on the Total Payments and any federal, state and local income and employment taxes and Excise Tax upon the Gross-Up Payment, shall be equal to the Total Payments. (B) For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) all of the Total Payments shall be treated as "parachute payments" (within the meaning of Section 280G(b)(2) of the Code) unless, in the opinion of tax counsel ("Tax Counsel") reasonably acceptable to the Executive and selected by the accounting firm which was, immediately prior to the Change in Control, the Company's independent auditor (the "Auditor"), such payments or benefits (in whole or in part) should not constitute parachute payments, including by reason of Section 280G(b)(4)(A) of the Code, (ii) all "excess parachute payments" within the meaning of Section 280G(b)(l) of the Code shall be treated as subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered (within the meaning of Section 280G(b)(4)(B) of the Code) in excess of the Base Amount allocable to such reasonable compensation, or should otherwise not be subject to the Excise Tax and (iii) the value of any noncash benefits or any deferred payment or benefit shall be determined by the Auditor in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the Date of Termination (or if there is no Date of Termination, then the date on which the Gross-Up Payment is calculated for purposes of this Section 6.2), net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. (C) In the event that the Excise Tax is finally determined to be less than the amount taken into account hereunder in calculating the Gross-Up Payment, the Executive shall repay to the Company, within five (5) business days following the time that the amount of such reduction in the Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income and employment taxes imposed on the Gross-Up Payment being repaid by the Executive, to the extent that such repayment results in a reduction in the Excise Tax and a dollar-for-dollar reduction in the Executive's taxable income and wages for purposes of federal, state and local income and employment taxes), plus interest on the amount of such repayment at 120% of the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder in calculating the Gross-Up Payment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest, penalties or additions payable by the Executive with respect to such excess) within five (5) business days following the time that the amount of such excess is finally determined. The Executive and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Total Payments. 6.3 The payments provided in subsections (A), (C) and (D) of Section 6.1 hereof and in subsections (A) and (B) of Section 6.2 hereof shall be made not later than the fifth day following the Date of Termination; provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Company shall pay to the Executive on such day an estimate, as determined in good faith by the Company or, in the case of payments under Section 6.2 hereof, in accordance with Section 6.2 hereof, of the minimum amount of such payments to which the Executive is clearly entitled and shall pay the remainder of such payments (together with interest on the unpaid remainder (or on all such payments to the extent the Company fails to make such payments when due) at 120% of the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth (30th) day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Executive, payable on the fifth (5th) business day after demand by the Company (together with interest at 120% of the rate provided in Section 1274(b)(2)(B) of the Code). At the time that payments are made under this Agreement, the Company shall provide the Executive with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations including, without limitation, any opinions or other advice the Company has received from Tax Counsel, the Auditor or other advisors or consultants (and any such opinions or advice which are in writing shall be attached to the statement). 6.4 The Company also shall pay to the Executive all legal fees and expenses incurred by the Executive in seeking in good faith to obtain or enforce any benefit or right provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Code to any payment or benefit provided hereunder. Such payments shall be made within five (5) business days after delivery of the Executive's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 7. Termination Procedures and Compensation During Dispute. 7.1 Notice of Termination. After a Change in Control and during the Term, any purported termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in detail. 7.2 Date of Termination. "Date of Termination," with respect to any purported termination of the Executive's employment after a Change in Control and during the Term, shall mean (i) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such thirty (30) day period), and (ii) if the Executive's employment is terminated for any other reason, the date specified in the Notice of Termination (which, in the case of a termination by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days, respectively, from the date such Notice of Termination is given). 8. No Mitigation. The Company agrees that, if the Executive's employment with the Company terminates during the Term, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 hereof. Further, the amount of any payment or benefit provided for in this Agreement (other than to the extent provided in Section 6.1(B) and 6.1(C) hereof) shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise. 9. Successors; Binding Agreement. 9.1 In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive's employment for Good Reason after a Change in Control, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. 9.2 This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate. 10. Notices. All notices and other communications provided for in this Agreement (i) shall be in writing, (ii) shall be hand delivered, sent by overnight courier or by United States registered mail, return receipt requested and postage prepaid, addressed, in the case of the Executive, to the address inserted below the Executive's signature on the final page hereof and, if to the Company, to the address set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, and (iii) shall be effective only upon actual receipt. To the Company: CNF Inc. 3240 Hillview Avenue Palo Alto, CA 94304 Attention: General Counsel 11. Miscellaneous. Except as otherwise expressly provided herein, no provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or of any lack of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement supersedes any other agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof which have been made by either party; provided, however, that this Agreement shall supersede any written agreement setting forth the terms and conditions of the Executive's employment with the Company only in the event that the Executive's employment with the Company is terminated on or following a Change in Control, by the Company other than for Cause or by the Executive for Good Reason. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and the Executive under this Agreement which by their nature may require either partial or total performance after the expiration of the Term (including, without limitation, those under Sections 6 and 7 hereof) shall survive such expiration. 12. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 13. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 14. Settlement of Disputes; Arbitration. 14.1 All claims by the Executive for benefits under this Agreement shall be directed to and determined by the Board and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive's claim has been denied. 14.2 Any further dispute or controversy arising under or in connection with this Agreement shall be finally settled exclusively by arbitration in Palo Alto, California, in accordance with the rules of the American Arbitration Association then in effect; provided, however, that the evidentiary standards set forth in this Agreement shall apply. Judgment may be entered on the arbitrator's award in any court having jurisdiction. 15. Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated below: (A) "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act. (B) "Auditor" shall have the meaning set forth in Section 6.2 hereof. (C) "Base Amount" shall have the meaning set forth in Section 280G(b)(3) of the Code. (D) "Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under the Exchange Act. (E) "Board" shall mean the Board of Directors of the Company. (F) "Cause" for termination by the Company of the Executive's employment shall mean (i) the willful and continued failure by the Executive to substantially perform the Executive's duties with the Company (other than any such failure resulting from the Executive's incapacity due to disability, including physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination for Good Reason by the Executive pursuant to Section 7.1 hereof) after a written demand for substantial performance is delivered to the Executive by the Board, which demand specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive's duties, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of this definition, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's act, or failure to act, was in the best interest of the Company. In the event of a dispute concerning the application of this provision, no claim by the Company that Cause exists shall be given effect unless the Company establishes to the Board and, in the event of an arbitration as contemplated by Section 14.2, to the arbitrator, by clear and convincing evidence that Cause exists. (G) Change in Control" means the occurrence of an event described in any one of the following clauses (1) through (5): (1) any "person," as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (A) the Company or its Affiliates, (B) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or its Affiliates, and (C) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the Common Stock), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its Affiliates) representing 25% or more of the combined voting power of the Company's then outstanding voting securities; (2) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the Effective Date, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company's stockholders was approved or recommended by a vote of at least two- thirds (2/3) of the directors then still in office who either were directors on the Effective Date or whose appointment, election or nomination for election was previously so approved or recommended; (3) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or parent entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving or parent entity outstanding immediately afer such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as hereinabove defined), directly or indirectly, acquired 25% or more of the combined voting power of the Company's then outstanding securities (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its Affiliates); (4) the stockholders of the Company approve a plan of complete liquidation of the Company or there is consummated an agreement for the sale or disposition by the Company of assets having an aggregate book value at the time of such sale or disposition of more than 75% of the total book value of the Company's assets on a consolidated basis (or any transaction having a similar effect), other than any such sale or disposition by the Company (including by way of spin-off or other distribution) to an entity, at least 50% of the combined voting power of the voting securities of which are owned immediately following such sale or disposition by stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale or disposition; provided, however, that a Change in Control shall be deemed not to have occurred under this clause (4) if, immediately prior to the consummation of any sale or disposition of a business unit that is taken into account in determining whether a Change in Control has occurred, the Executive is employed by, and is party to a severance agreement with, such business unit; or (5) there is consummated the sale or other disposition by the Company, however effected, of at least two of the three primary business units of the Company, whether in a single transaction or in a series of transactions occurring within an 18- month period, and whether or not one or both of such business units constitute part of a larger enterprise at the time of the sale or other disposition; provided, however, that the Board of Directors of the Company may, upon notice to the Executive given at any time, terminate this clause (5) without the consent of the Executive, except that any such notice shall not be effective to terminate this clause (5) if a Change in Control occurs pursuant to this clause (5) within ninety (90) days after such notice is given. As used in clause (5) above: (A) primary business units means Con-Way Transportation Services, Inc., Emery Air Freight Corporation and Menlo Logistics, Inc., and (B) a sale or other disposition of a business unit includes: (i) a sale by the Company of the then outstanding shares of capital stock of the business unit having more than 50% of the then existing voting power of all outstanding securities of the business unit, whether by merger, consolidation or otherwise; (ii) the sale of all or substantially all of the assets of the business unit; and (iii) any other transaction or course of action (including, without limitation, a spin-off or other distribution) engaged in, directly or indirectly, by the Company or the business unit that has a substantially similar effect as the transactions of the type referred to in clause (i) or (ii) above; it being the intent that a sale or other disposition of a business unit occurs even if (x) such business unit constitutes part of a larger enterprise at the time of the relevant sale or disposition transaction and (y) such sale or disposition transaction involves such larger enterprise (such as, by way of example and without limitation, when one or more business units are subsidiaries of a common parent and either (I) the common parent is spun-off or (II) there is consummated a sale of the stock or other equity interests in the common parent having more than 50% of the then existing voting power of all outstanding securities of the common parent). The foregoing notwithstanding, a sale or other disposition of a business unit shall not be deemed to have occurred for purposes of clause (5) above (x) except in the case of a transaction described in clause (ii) above, so long as the Company or any of its Affiliates (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended), individually or collectively, own the then outstanding shares of capital stock of the business unit having 50% or more of the then existing voting power of all outstanding securities of the business unit, or (y) in the event of the sale of shares of capital stock of the business unit (or the sale of shares or other equity interests in any parent company of such business unit) to any trustee or other fiduciary holding securities under an employee benefit plan of the Company, the business unit or any other Affiliate of the Company. (H) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (I) "Company" shall mean CNF Inc. and, except in determining under Section 15(G) hereof whether or not any Change in Control of the Company has occurred, shall include any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise. In addition, when used in the context of the Executive's employment, Company shall mean the Company or any of its subsidiaries. (J) "Common Stock" shall mean the common stock, par value $0.625 per share, of the Company. (K) "Date of Termination" shall have the meaning set forth in Section 7.2 hereof. (L) "Disability" shall be deemed the reason for the termination by the Company of the Executive's employment, if, as a result of the Executive's incapacity due to disability, including physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with the Company for a period of six (6) consecutive months, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties. (M) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. (N) "Excise Tax" shall mean any excise tax imposed under Section 4999 of the Code. (O) "Executive" shall mean the individual named in the first paragraph of this Agreement. (P) "Good Reason" for termination by the Executive of the Executive's employment shall mean the occurrence (without the Executive's express written consent) after any Change in Control and during the Term of any one of the following acts by the Company, or failures by the Company to act, unless such act or failure to act is corrected within 30 days of receipt by the Company of notice of the Executive's intent to terminate for Good Reason hereunder: (I) the failure of the successor company, following the Change in Control, to assume this Agreement and all obligations hereunder, as of the date of such Change in Control; (II) the assignment to the Executive of any duties inconsistent with the Executive's status as an executive of the Company or a substantial adverse alteration in the nature or status of the Executive's responsibilities from those in effect immediately prior to the Change in Control; (III) a reduction by the Company in the Executive's annual base salary (except for across-the-board salary reductions similarly affecting all executives of the Company and all executives of any Person in control of the Company) or incentive compensation opportunity (both short-term and long- term, valued in a manner consistent with the valuation methodology used by the Company prior to the Change in Control), each as in effect immediately prior to the Change in Control or as the same may thereafter be increased from time to time; (IV) the relocation of the Executive's principal place of employment to a location that results in an increase in the Executive's one way commute of at least 50 miles more than the Executive's one way commute immediately prior to the Change in Control, except for required travel on the Company's business to an extent substantially consistent with the Executive's business travel obligations immediately prior to the Change in Control; (V) the failure by the Company to pay to the Executive when due any portion of the Executive's current compensation; (VI) the failure by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of the Company's pension, savings, life insurance, medical, health and accident, or disability plans in which the Executive was participating immediately prior to the Change in Control (except for across the board changes similarly affecting all or substantially all employees of the Company and any entity in control of the Company), the taking of any other action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive immediately prior to the Change in Control, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled. The Executive's right to terminate the Executive's employment for Good Reason shall not be affected by the Executive's incapacity due to disability, including physical or mental illness. The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. Notwithstanding anything in this Agreement to the contrary, if the Executives employment is terminated by the Executive for any reason during the one-month period commencing on the first anniversary of a Change in Control, such termination shall be deemed a termination of the Executives employment for Good Reason. (Q) "Gross-Up Payment" shall have the meaning set forth in Section 6.2 hereof. (R) "Notice of Termination" shall have the meaning set forth in Section 7.1 hereof. (S) "Pension Plan" shall mean any tax-qualified, supplemental or excess benefit pension plan maintained by the Company and any other plan or agreement entered into between the Executive and the Company which is designed to provide the Executive with supplemental retirement benefits. (T) "Person" shall mean any person, as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (A) the Company or its Affiliates, (B) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or its Affiliates, and (C) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the Common Stock) (U) "Potential Change in Control" shall be deemed to have occurred if: (I) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control; (II) the Company or any Person publicly announces an intention to take or to consider taking actions, including but not limited to proxy contests or consent solicitations, which, if consummated, would constitute a Change in Control; (III) any Person becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 15% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company's then outstanding securities (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its affiliates); or (IV) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred. (V) "Retirement" shall be deemed the reason for the termination by the Executive of the Executive's employment if such employment is terminated in accordance with the Company's retirement policy, including early retirement, generally applicable to its salaried employees. (W) "Severance Payments" shall have the meaning set forth in Section 6.1 hereof. (X) "Tax Counsel" shall have the meaning set forth in Section 6.2 hereof. (Y) "Term" shall mean the period of time described in Section 2 hereof (including any extension, continuation or termination described therein). (Z) "Total Payments" shall mean those payments so described in Section 6.2 hereof. CNF INC. By: /s/ Gregory L. Quesnel ----------------------------- Name: Gregory L. Quesnel Title: President and Chief Executive Officer EXECUTIVE Name: Sanchayan C. Ratnathicam Address: 704 Murphy Drive San Mateo, CA 94402 16chw2932 EXHIBIT A WAIVER AND RELEASE OF CLAIMS In consideration of, and subject to, the payment to be made to me by CNF Inc. (the "Company") of the "Severance Payments" (as defined in the Amended and Restated Severance Agreement, dated as of December 4, 2001, entered into between me and the Company (the "Agreement")), I hereby waive any claims I may have for employment or re-employment by the Company or any subsidiary of the Company after the date hereof, and I further agree to and do release and forever discharge the Company or any subsidiary of the Company, and their respective past and present officers, directors, shareholders, insurers, employees and agents from any and all claims and causes of action, known or unknown, arising out of or relating to my employment with the Company or any subsidiary of the Company, or the termination thereof, including, but not limited to, wrongful discharge, breach of contract, tort, fraud, the Civil Rights Acts, Age Discrimination in Employment Act, Employee Retirement Income Security Act of 1974, Americans with Disabilities Act, or any other federal, state or local legislation or common law relating to employment or discrimination in employment or otherwise. Notwithstanding the foregoing or any other provision hereof, nothing in this Waiver and Release of Claims shall adversely affect (i) my rights under the Agreement; (ii) my rights to benefits other than severance benefits under plans, programs and arrangements of the Company or any subsidiary or parent of the Company which are accrued but unpaid as of the date of my termination; or (iii) my rights to indemnification under any indemnification agreement, applicable law and the certificates of incorporation and bylaws of the Company and any subsidiary or parent of the Company, and my rights under any director's and officers' liability insurance policy covering me. I acknowledge that I have signed this Waiver and Release of Claims voluntarily, knowingly, of my own free will and without reservation or duress, and that no promises or representations have been made to me by any person to induce me to do so other than the promise of payment set forth in the first paragraph above and the Company's acknowledgment of my rights reserved under the second paragraph above. I understand that this release will be deemed to be an application for benefits under the Agreement and that my entitlement thereto shall be governed by the terms and conditions of the Agreement and any applicable plan. I expressly hereby consent to such terms and conditions. I acknowledge that I have been given not less than forty-five (45) days to review and consider this Waiver and Release of Claims (unless I have signed a written waiver of such review and consideration period), and that I have had the opportunity to consult with an attorney or other advisor of my choice and have been advised by the Company to do so if I choose. I may revoke this Waiver and Release of Claims seven days or less after its execution by providing written notice to the Company. I acknowledge that it is my intention and the intention of the Company in executing this Waiver and Release of Claims that the same shall be effective as a bar to each and every claim, demand and cause of action hereinabove specified. In furtherance of this intention, I hereby expressly waive any and all rights and benefits conferred upon me by the provisions of SECTION 1542 OF THE CALIFORNIA CIVIL CODE, to the extent applicable to me, and expressly I consent that this Waiver and Release of Claims shall be given full force and effect according to each and all of its express terms and provisions, including as well those related to unknown and unsuspected claims, demands and causes of action, if any, as well as those relating to any other claims, demands and causes of action hereinabove specified. SECTION 1542 provides: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR." I acknowledge that I may hereafter discover claims or facts in addition to or different from those which I now know or believe to exist with respect to the subject matter of this Waiver and Release of Claims and which, if known or suspected at the time of executing this Waiver and Release of Claims, may have materially affected this settlement. Finally, I acknowledge that I have read this Waiver and Release of Claims and understand all of its terms. /s/ Sanchayan C. Ratnathicam ---------------------------- Signature of Executive Print Name Date Signed EX-10 5 ex104.txt Execution Copy 1 AMENDMENT NO.1 TO AMENDED AND RESTATED SEVERANCE AGREEMENT BY AND BETWEEN CNF INC. AND SANCHAYAN C. RATNATHICAM Effective January 1, 2003 This Amendment No. 1 (this "Amendment") is made to the Amended and Restated Severance Agreement as of December 4, 2001 by and between CNF Inc., a Delaware corporation (the "Company"), and Sanchayan C. Ratnathicam (the "Executive") (the "Severance Agreement"). WHEREAS, on December 4, 2001, the Company and the Executive entered into this Severance Agreement; WHEREAS, the Board of Directors of the Company has determined that it is in the best interests of the Company and of its stockholders to amend the Severance Agreement; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained in this Amendment, the Company and the Executive agree as follows (capitalized terms used without definition have the meanings given to those terms in the Severance Agreement): 1. Amendment to Severance Payment. The severance payment set forth in Section 6.1(A) of the Severance Agreement shall be amended in its entirety to read as follows: (A) In lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination and in lieu of any severance benefit otherwise payable to the Executive, the Company shall pay to the Executive a lump sum severance payment, in cash, equal to three times the sum of (i) the Executive's annual base salary as in effect immediately prior to the Date of Termination or, if higher, in effect immediately prior to the Change in Control and (ii) the average annual bonus earned by the Executive pursuant to any annual bonus or incentive plan maintained by the Company in respect of the three fiscal years ending immediately prior to the fiscal year in which occurs the Change in Control. 2. Amendment to Additional Retirement Benefits. The additional retirement benefits set forth in Section 6.1(D) of the Severance Agreement shall be amended in its entirety to read as follows: (D) In addition to the retirement benefits to which the Executive is entitled under each Pension Plan or any successor plan thereto, the Company shall pay the Executive a lump sum amount, in cash, equal to the excess, if any, of (i) the actuarial equivalent of the aggregate retirement pension which the Executive would have accrued under the terms of all Pension Plans (without regard to any amendment to any Pension Plan made subsequent to a Change in Control and on or prior to the Date of Termination, which amendment adversely affects in any manner the computation of retirement benefits thereunder), determined only for the purposes of meeting the Rule of 85 (as defined in the Company Retirement Plan) as if the Executive (A) had accumulated (after the Date of Termination) thirty-six (36) additional months of service credit thereunder and (B) had attained an age which is three years older than the age the Executive had attained as of the Date of Termination, over (ii) the actuarial equivalent of the aggregate retirement pension (taking into account any early retirement subsidies associated therewith) which the Executive had accrued pursuant to the provisions of the Pension Plans as of the Date of Termination; provided, however, if the Rule of 85 applies to the Executive on the Date of Termination, then no payment shall be due under this Section 6.1 (D). For purposes of this Section 6.1(D), "actuarial equivalent" shall be determined using the same assumptions utilized under the applicable Pension Plan immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control. 3. Amendment to Definition of the Term "Good Reason". Section 15(P) of the Severance Agreement (definition of the term "Good Reason") shall be amended by deleting the following paragraph at the end of Section 15(P): "Notwithstanding anything in this Agreement to the contrary, if the Executive's employment is terminated by the Executive for any reason during the one-month period commencing on the first anniversary of a Change in Control, such termination shall be deemed a termination of the Executive's employment for Good Reason." 4. Effective Date. The effective date of this Amendment shall be January 1, 2003. Except as expressly amended, the Severance Agreement remains unchanged and in full force and effect. CNF INC. By: /s/ Gregory L. Quesnel ----------------------------- Name: Gregory L. Quesnel Title: President and Chief Executive Officer EXECUTIVE By: /s/ Sanchayan C. Ratnathicam ----------------------------- Name: Sanchayan C. Ratnathicam Address: 704 Murphy Drive San Mateo, CA 94402 EX-10 6 ex109.txt 1 SEVERANCE AGREEMENT THIS AGREEMENT, dated as of July 31, 2000, is made by and between Con-Way Transportation Services, Inc. (the "Company"), a wholly owned subsidiary of CNF Transportation Inc., a Delaware corporation ("CNF"), and Gerald L. Detter (the "Executive"). WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's management, including the Executive, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change in Control of the Company; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Company and the Executive hereby agree as follows: 1. Defined Terms. The definitions of capitalized terms used in this Agreement are provided in the last Section hereof. 2. Term of Agreement. The Term of this Agreement shall commence on the date hereof and shall continue in effect through December 31, 2001; provided, however, that commencing on January 1, 2001, and each January 1 thereafter, the Term shall automatically be extended for one additional year unless, not later than September 30 of the preceding year, the Company or the Executive shall have given notice not to extend the Term; and further provided, however, that if a Change in Control of the Company shall have occurred during the Term, the Term shall expire no earlier than twenty-four (24) months beyond the month in which such Change in Control of the Company occurred. Notwithstanding anything in this Agreement to the contrary, unless a Change in Control of the Company has previously occurred, this Agreement shall terminate, and be of no further force or effect, upon the occurrence of a "Change in Control" of CNF (within the meaning of Section 15 of the severance agreement between the Executive and CNF dated as of July 31, 2000 (the "CNF Severance Agreement")), provided that the CNF Severance Agreement remains in effect at the time of such Change in Control of CNF. 3. Company's Covenants Summarized. In order to induce the Executive to remain in the employ of the Company and in consideration of the Executive's covenants set forth in Section 4 hereof, the Company agrees, under the conditions described herein, to pay the Executive the Severance Payments and the other payments and benefits described herein. Except as provided in Section 9.1 hereof, no Severance Payments shall be payable under this Agreement unless there shall have been (or, under the terms of the second paragraph of Section 6.1 hereof, there shall be deemed to have been) a termination of the Executive's employment with the Company following a Change in Control of the Company and during the Term. This Agreement shall not be construed as creating an express or implied contract of employment and, except as otherwise agreed in writing between the Executive and the Company, the Executive (i) shall not have any right to be retained in the employ of the Company, and (ii) shall remain subject to discharge to the same extent as if this Agreement had not been entered into by the Company and the Executive. 4. Executive's Covenants. The Executive agrees that, subject to the terms and conditions of this Agreement, in the event of a Potential Change in Control of the Company during the Term, the Executive will remain in the employ of the Company until the earliest of (i) a date which is six (6) months from the date of such Potential Change in Control of the Company, (ii) the date of a Change in Control of the Company, (iii) the date of termination by the Executive of the Executive's employment for Good Reason or by reason of death, Disability or Retirement or (iv) the termination by the Company of the Executive's employment for any reason. 5. Compensation Other Than Severance Payments. 5.1 Following a Change in Control of the Company and during the Term, during any period that the Executive fails to perform the Executive's full-time duties with the Company as a result of incapacity due to disability, including physical or mental illness, the Company shall pay the Executive's full salary to the Executive at the rate in effect at the commencement of any such period, together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period (other than any disability plan), until the Executive's employment is terminated by the Company for Disability. 5.2 If the Executive's employment shall be terminated for any reason following a Change in Control of the Company and during the Term, the Company shall pay the Executive's full salary to the Executive through the Date of Termination at the rate in effect immediately prior to the Date of Termination or, if higher, the rate in effect immediately prior to the Change in Control of the Company, together with all compensation and benefits payable to the Executive through the Date of Termination under the terms of CNF's or the Company's compensation and benefit plans, programs or arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the Change in Control of the Company. 5.3 If the Executive's employment shall be terminated for any reason following a Change in Control of the Company and during the Term, the Company shall pay, or shall make satisfactory arrangements with CNF to pay, to the Executive the Executive's normal post-termination compensation and benefits as such payments become due (other than severance payments under any severance plan as in effect immediately prior to the Date of Termination). Such post-termination compensation and benefits shall be determined under, and paid in accordance with, the CNF's or Company's retirement, insurance and other compensation or benefit plans, programs and arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the Change in Control of the Company. 6. Severance Payments. 6.1 If the Executive's employment is terminated following a Change in Control of the Company and during the Term, other than (A) by the Company for Cause, (B) by reason of death or Disability, or (C) by the Executive without Good Reason, then the Company shall pay the Executive the amounts, and provide the Executive the benefits, described in this Section 6.1 ("Severance Payments") and Section 6.2, in addition to any payments and benefits to which the Executive is entitled under Section 5 hereof; provided, however, that the Executive shall not be entitled to the Severance Payments unless and until the Executive (or, in the event of the Executive's death, the executor, personal representative or administrator of the Executive's estate) has signed a written waiver and release substantially in the form set forth on Exhibit A hereto. For purposes of this Agreement, the Executive's employment shall be deemed to have been terminated following a Change in Control of the Company by the Company without Cause or by the Executive with Good Reason, if (i) during the Term the Executive's employment is terminated by the Company without Cause following a Potential Change in Control of the Company but prior to a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs) and such termination was at the request or direction of a Person who has entered into an agreement with the Company the consummation of which would constitute a Change in Control of the Company, (ii) during the Term the Executive terminates his employment for Good Reason following a Potential Change in Control of the Company but prior to a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs) and the circumstance or event which constitutes Good Reason occurs at the request or direction of such Person or (iii) during the Term the Executive's employment is terminated by the Company without Cause or by the Executive for Good Reason and such termination or the circumstance or event which constitutes Good Reason is otherwise in connection with or in anticipation of a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs). (A) In lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination and in lieu of any severance benefit otherwise payable to the Executive, the Company shall pay to the Executive a lump sum severance payment, in cash, equal to three times the sum of (i) the Executive's annual base salary as in effect immediately prior to the Date of Termination or, if higher, in effect immediately prior to the Change in Control of the Company and (ii) the highest of (1) the average annual bonus earned by the Executive pursuant to any annual bonus or incentive plan maintained by CNF or the Company in respect of the three fiscal years ending immediately prior to the fiscal year in which occurs the Date of Termination, (2) the average annual bonus earned by the Executive pursuant to any such plan in respect of the three fiscal years ending immediately prior to the fiscal year in which occurs the Change in Control of the Company or (3) the target annual bonus in effect for the Executive for the fiscal year in which occurs the Date of Termination. (B) For the thirty-six (36) month period immediately following the Date of Termination, the Company shall arrange to provide the Executive and his dependents life, disability and accident benefits substantially similar to those provided to the Executive and his dependents immediately prior to the Date of Termination or, if more favorable to the Executive, those provided to the Executive and his dependents immediately prior to the Change in Control of the Company, at no greater cost to the Executive than the cost to the Executive immediately prior to such Date of Termination or Change in Control of the Company; provided, however, that any across the board changes to life, disability or accident benefits similarly affecting all or substantially all employees of the Company and any entity in control of the Company shall not be deemed a breach of this Section 6.1(B). Benefits otherwise receivable by the Executive pursuant to this Section 6.1(B) shall be reduced to the extent benefits of the same type are received by or made available to the Executive during the thirty-six (36) month period following the Executive's termination of employment (and any such benefits received by or made available to the Executive shall be reported to the Company by the Executive); provided, however, that the Company shall reimburse the Executive for the excess, if any, of the cost of such benefits to the Executive over such cost immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control of the Company. If the Executive dies during the thirty-six (36) month period following the Date of Termination, life, disability and accident benefit coverage of the Executive's dependents shall continue for the remainder of the thirty-six (36) month period. (C) Notwithstanding any provision of any health or dental insurance plan or health or dental benefit plan to the contrary, the Company shall provide health and dental benefits to the Executive and his dependents as if the Executive, as of the Date of Termination, has retired (i) under the terms of CNF's or the Company's plan as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control of the Company and (ii) with age plus years of service totaling 85 or more. Benefits otherwise receivable by the Executive pursuant to this Section 6.1(C) shall be reduced to the extent benefits of the same type are received by or made available to the Executive following the Executive's termination of employment (and any such benefits received by or made available to the Executive shall be reported to the Company by the Executive); provided, however, that the Company shall reimburse the Executive for the excess, if any, of the cost of such benefits to the Executive over such cost immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control of the Company. If the Executive dies at a time when health and dental benefits are being provided under this Section 6.1(C) to the Executive's dependents, the Company shall continue to provide the dependents with health and dental benefits for as long as, and on the same basis as, such benefits are provided to dependents of retired employees who have retired with age plus years of service totaling 85 or more. (D) In addition to the retirement benefits to which the Executive is entitled under each Pension Plan or any successor plan thereto, the Company shall pay the Executive a lump sum amount, in cash, equal to the excess of (i) the actuarial equivalent of the aggregate retirement pension (taking into account any early retirement subsidies associated therewith and determined as a straight life annuity commencing at the date (but in no event earlier than the third anniversary of the Date of Termination) as of which the actuarial equivalent of such annuity is greatest) which the Executive would have accrued under the terms of all Pension Plans (without regard to any amendment to any Pension Plan made subsequent to a Change in Control of the Company and on or prior to the Date of Termination, which amendment adversely affects in any manner the computation of retirement benefits thereunder), determined as if the Executive (A) were fully vested thereunder, (B) had accumulated (after the Date of Termination) thirty-six (36) additional months of service credit thereunder, (C) had attained an age which is three years older than the age the Executive had attained as of the Date of Termination and (D) had been credited under each Pension Plan during such period with compensation equal to the Executive's annual amount taken into account under Section 6.1(A) hereof, over (ii) the actuarial equivalent of the aggregate retirement pension (taking into account any early retirement subsidies associated therewith and determined as a straight life annuity commencing at the date (but in no event earlier than the Date of Termination) as of which the actuarial equivalent of such annuity is greatest) which the Executive had accrued pursuant to the provisions of the Pension Plans as of the Date of Termination. For purposes of this Section 6.1(D), "actuarial equivalent" shall be determined using the same assumptions utilized under the applicable Pension Plan immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control of the Company. 6.2 (A) Whether or not the Executive becomes entitled to the Severance Payments, if any of the payments or benefits received or to be received by the Executive in connection with a Change in Control of the Company or the Executive's termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any Person whose actions result in a Change in Control of the Company or any Person affiliated with the Company or such Person) (such payments or benefits, excluding the Gross-Up Payment, being hereinafter referred to as the "Total Payments") will be subject to the Excise Tax, the Company shall pay to the Executive an additional amount (the "Gross- Up Payment") such that the net amount retained by the Executive, after deduction of any Excise Tax on the Total Payments and any federal, state and local income and employment taxes and Excise Tax upon the Gross-Up Payment, shall be equal to the Total Payments. (B) For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) all of the Total Payments shall be treated as "parachute payments" (within the meaning of Section 280G(b)(2) of the Code) unless, in the opinion of tax counsel ("Tax Counsel") reasonably acceptable to the Executive and selected by the accounting firm which was, immediately prior to the Change in Control of the Company, the Company's independent auditor (the "Auditor"), such payments or benefits (in whole or in part) should not constitute parachute payments, including by reason of Section 280G(b)(4)(A) of the Code, (ii) all "excess parachute payments" within the meaning of Section 280G(b)(l) of the Code shall be treated as subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered (within the meaning of Section 280G(b)(4)(B) of the Code) in excess of the Base Amount allocable to such reasonable compensation, or should otherwise not be subject to the Excise Tax and (iii) the value of any noncash benefits or any deferred payment or benefit shall be determined by the Auditor in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the Date of Termination (or if there is no Date of Termination, then the date on which the Gross-Up Payment is calculated for purposes of this Section 6.2), net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. (C) In the event that the Excise Tax is finally determined to be less than the amount taken into account hereunder in calculating the Gross-Up Payment, the Executive shall repay to the Company, within five (5) business days following the time that the amount of such reduction in the Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income and employment taxes imposed on the Gross-Up Payment being repaid by the Executive, to the extent that such repayment results in a reduction in the Excise Tax and a dollar-for-dollar reduction in the Executive's taxable income and wages for purposes of federal, state and local income and employment taxes), plus interest on the amount of such repayment at 120% of the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder in calculating the Gross-Up Payment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest, penalties or additions payable by the Executive with respect to such excess) within five (5) business days following the time that the amount of such excess is finally determined. The Executive and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Total Payments. 6.3 The payments provided in subsections (A), (C) and (D) of Section 6.1 hereof and in subsections (A) and (B) of Section 6.2 hereof shall be made not later than the fifth day following the Date of Termination; provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Company shall pay to the Executive on such day an estimate, as determined in good faith by the Company or, in the case of payments under Section 6.2 hereof, in accordance with Section 6.2 hereof, of the minimum amount of such payments to which the Executive is clearly entitled and shall pay the remainder of such payments (together with interest on the unpaid remainder (or on all such payments to the extent the Company fails to make such payments when due) at 120% of the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth (30th) day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Executive, payable on the fifth (5th) business day after demand by the Company (together with interest at 120% of the rate provided in Section 1274(b)(2)(B) of the Code). At the time that payments are made under this Agreement, the Company shall provide the Executive with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations including, without limitation, any opinions or other advice the Company has received from Tax Counsel, the Auditor or other advisors or consultants (and any such opinions or advice which are in writing shall be attached to the statement). 6.4 The Company also shall pay to the Executive all legal fees and expenses incurred by the Executive in seeking in good faith to obtain or enforce any benefit or right provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Code to any payment or benefit provided hereunder. Such payments shall be made within five (5) business days after delivery of the Executive's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 7. Termination Procedures and Compensation During Dispute. 7.1 Notice of Termination. After a Change in Control of the Company and during the Term, any purported termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in detail. 7.2 Date of Termination. "Date of Termination," with respect to any purported termination of the Executive's employment after a Change in Control of the Company and during the Term, shall mean (i) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full- time performance of the Executive's duties during such thirty (30) day period), and (ii) if the Executive's employment is terminated for any other reason, the date specified in the Notice of Termination (which, in the case of a termination by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days, respectively, from the date such Notice of Termination is given). 8. No Mitigation. The Company agrees that, if the Executive's employment with the Company terminates during the Term, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 hereof. Further, the amount of any payment or benefit provided for in this Agreement (other than to the extent provided in Section 6.1(B) and 6.1(C) hereof) shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise. 9. Successors; Binding Agreement. 9.1 In addition to any obligations imposed by law upon any successor to the Company, CNF and the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of CNF and the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive's employment for Good Reason after a Change in Control of the Company, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. 9.2 This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate. 10. Notices. All notices and other communications provided for in this Agreement (i) shall be in writing, (ii) shall be hand delivered, sent by overnight courier or by United States registered mail, return receipt requested and postage prepaid, addressed, in the case of the Executive, to the address inserted below the Executive's signature on the final page hereof and, if to the Company, to the address set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, and (iii) shall be effective only upon actual receipt. To the Company: Con-Way Transportation Services, Inc. 110 Parkland Plaza Ann Arbor, MI 48103 Attention: Vice President and Corporate Counsel 11. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or of any lack of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement supersedes any other agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof which have been made by either party; provided, however, that this Agreement shall supersede any written agreement setting forth the terms and conditions of the Executive's employment with the Company only in the event that the Executive's employment with the Company is terminated on or following a Change in Control of the Company, by the Company other than for Cause or by the Executive for Good Reason. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Michigan. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and the Executive under this Agreement which by their nature may require either partial or total performance after the expiration of the Term (including, without limitation, those under Sections 6 and 7 hereof) shall survive such expiration. 12. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 13. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 14. Settlement of Disputes; Arbitration. 14.1 All claims by the Executive for benefits under this Agreement shall be directed to and determined by the Board and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive's claim has been denied. 14.2 Any further dispute or controversy arising under or in connection with this Agreement shall be finally settled exclusively by arbitration in Ann Arbor, Michigan, in accordance with the rules of the American Arbitration Association then in effect; provided, however, that the evidentiary standards set forth in this Agreement shall apply. Judgment may be entered on the arbitrator's award in any court having jurisdiction. 15. Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated below: (A) "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act. (B) "Auditor" shall have the meaning set forth in Section 6.2 hereof. (C) "Base Amount" shall have the meaning set forth in Section 280G(b)(3) of the Code. (D) "Board" shall mean the Board of Directors of the Company. (E) "Cause" for termination by the Company of the Executive's employment shall mean (i) the willful and continued failure by the Executive to substantially perform the Executive's duties with the Company (other than any such failure resulting from the Executive's incapacity due to disability, including physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination for Good Reason by the Executive pursuant to Section 7.1 hereof) after a written demand for substantial performance is delivered to the Executive by the Board, which demand specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive's duties, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of this definition, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's act, or failure to act, was in the best interest of the Company. In the event of a dispute concerning the application of this provision, no claim by the Company that Cause exists shall be given effect unless the Company establishes to the Board and, in the event of an arbitration as contemplated by Section 14.2, to the arbitrator, by clear and convincing evidence that Cause exists. (F) A "Change in Control of the Company" means the occurrence of any one of the following events: (I) a sale by CNF of the then outstanding shares of capital stock of the Company having more than 50% of the then existing voting power of all outstanding securities of the Company, whether by merger, consolidation or otherwise; (II) the sale of all or substantially all of the assets of the Company; or (III) any other transaction or course of action engaged in, directly or indirectly, by the Company or CNF that has a substantially similar effect as the transactions of the type referred to in clause (I) or (II) above. The foregoing notwithstanding, a Change in Control of the Company shall not be deemed to have occurred (A) by reason of the occurrence of a "Change in Control" of CNF (within the meaning of Section 15 of the CNF Severance Agreement), (B) except in the case of a transaction described in clause (II) above, so long as CNF or any of its Affiliates, individually or collectively, own the then outstanding shares of capital stock of the Company having 50% or more of the then existing voting power of all outstanding securities of the Company, (C) in the event of the sale of shares of capital stock of the Company to any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any other Affiliate of CNF, or (D) in the event of the sale or distribution of shares of capital stock of the Company to shareholders of CNF, or the sale of assets of the Company to any corporation or other entity owned, directly or indirectly, by the shareholders of CNF, in either case in substantially the same proportions as their ownership of stock in CNF. (G) "CNF" shall mean CNF Transportation Inc. and any successor to its business and/or assets. (H) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (I) "Company" shall mean Con-Way Transportation Services, Inc. and, except in determining under Section 15(G) hereof whether or not any Change in Control of the Company has occurred, shall include any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise. In addition, when used in the context of the Executive's employment, "Company" shall mean the Company or any of its subsidiaries. (J) "Common Stock" shall mean the common stock, par value $1.00 per share, of the Company. (K) "Date of Termination" shall have the meaning set forth in Section 7.2 hereof. (L) "Disability" shall be deemed the reason for the termination by the Company of the Executive's employment, if, as a result of the Executive's incapacity due to disability, including physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with the Company for a period of six (6) consecutive months, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties. (M) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. (N) "Excise Tax" shall mean any excise tax imposed under Section 4999 of the Code. (O) "Executive" shall mean the individual named in the first paragraph of this Agreement. (P) "Good Reason" for termination by the Executive of the Executive's employment shall mean the occurrence (without the Executive's express written consent) after any Change in Control of the Company and during the Term of any one of the following acts by the Company, or failures by the Company to act, unless such act or failure to act is corrected within 30 days of receipt by the Company of notice of the Executive's intent to terminate for Good Reason hereunder: (I) the failure of the successor company, following the Change in Control of the Company, to assume this Agreement and all obligations hereunder, as of the date of such Change in Control of the Company; (II) the assignment to the Executive of any duties inconsistent with the Executive's status as an executive of the Company or a substantial adverse alteration in the nature or status of the Executive's responsibilities from those in effect immediately prior to the Change in Control of the Company; (III) a reduction by the Company in the Executive's annual base salary (except for across-the-board salary reductions similarly affecting all executives of the Company and all executives of any Person in control of the Company) or incentive compensation opportunity (both short-term and long- term, valued in a manner consistent with the valuation methodology used by the Company prior to the Change in Control of the Company), each as in effect immediately prior to the Change in Control of the Company or as the same may thereafter be increased from time to time; (IV) the relocation of the Executive's principal place of employment to a location that results in an increase in the Executive's one way commute of at least 50 miles more than the Executive's one way commute immediately prior to the Change in Control of the Company, except for required travel on the Company's business to an extent substantially consistent with the Executive's business travel obligations immediately prior to the Change in Control of the Company; (V) the failure by the Company to pay to the Executive when due any portion of the Executive's current compensation; (VI) the failure by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of CNF's or the Company's pension, savings, life insurance, medical, health and accident, or disability plans in which the Executive was participating immediately prior to the Change in Control of the Company (except for across the board changes similarly affecting all or substantially all employees of the Company and any entity in control of the Company), the taking of any other action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive immediately prior to the Change in Control of the Company, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled. The Executive's right to terminate the Executive's employment for Good Reason shall not be affected by the Executive's incapacity due to disability, including physical or mental illness. The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. Notwithstanding anything in this Agreement to the contrary, if the Executive's employment is terminated by the Executive for any reason during the one-month period commencing on the first anniversary of a Change in Control, such termination shall be deemed a termination of the Executive's employment for Good Reason. (Q) "Gross-Up Payment" shall have the meaning set forth in Section 6.2 hereof. (R) "Notice of Termination" shall have the meaning set forth in Section 7.1 hereof. (S) "Pension Plan" shall mean any tax-qualified, supplemental or excess benefit pension plan maintained by CNF or the Company and any other plan or agreement entered into between the Executive and the Company which is designed to provide the Executive with supplemental retirement benefits. (T) "Person" shall mean any person, as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (A) the Company or its Affiliates, (B) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or its Affiliates, and (C) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the Common Stock). (U) "Potential Change in Control of the Company" shall be deemed to have occurred if: (I) CNF or the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control of the Company; or (II) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control of the Company has occurred. (W) "Retirement" shall be deemed the reason for the termination by the Executive of the Executive's employment if such employment is terminated in accordance with the Company's retirement policy, including early retirement, generally applicable to its salaried employees. (X) "Severance Payments" shall have the meaning set forth in Section 6.1 hereof. (Y) "Tax Counsel" shall have the meaning set forth in Section 6.2 hereof. (Z) "Term" shall mean the period of time described in Section 2 hereof (including any extension, continuation or termination described therein). (AA) "Total Payments" shall mean those payments so described in Section 6.2 hereof. CON-WAY TRANSPORTATION SERVICES, INC. By: /s/ Gregory L. Quesnel ---------------------------------- Name: Gregory L. Quesnel Title: Chairman of the Board EXECUTIVE /s/ Gerald L. Detter ---------------------------------- Name: Gerald L. Detter Address: 506 Woodland Drive Clarklake, MI 49234 16chw2955 EXHIBIT A WAIVER AND RELEASE OF CLAIMS In consideration of, and subject to, the payment to be made to me by Con-Way Transportation Services, Inc. (the "Company") of the "Severance Payments" (as defined in the Severance Agreement, dated as of July 31, 2000, entered into between me and the Company (the "Agreement")), I hereby waive any claims I may have for employment or re-employment by the Company or any subsidiary of the Company after the date hereof, and I further agree to and do release and forever discharge the Company or any subsidiary of the Company, and their respective past and present officers, directors, shareholders, insurers, employees and agents from any and all claims and causes of action, known or unknown, arising out of or relating to my employment with the Company or any subsidiary of the Company, or the termination thereof, including, but not limited to, wrongful discharge, breach of contract, tort, fraud, the Civil Rights Acts, Age Discrimination in Employment Act, Employee Retirement Income Security Act of 1974, Americans with Disabilities Act, or any other federal, state or local legislation or common law relating to employment or discrimination in employment or otherwise. Notwithstanding the foregoing or any other provision hereof, nothing in this Waiver and Release of Claims shall adversely affect (i) my rights under the Agreement; (ii) my rights to benefits other than severance benefits under plans, programs and arrangements of the Company or any subsidiary or parent of the Company which are accrued but unpaid as of the date of my termination; or (iii) my rights to indemnification under any indemnification agreement, applicable law and the certificates of incorporation and bylaws of the Company and any subsidiary or parent of the Company, and my rights under any director's and officers' liability insurance policy covering me. I acknowledge that I have signed this Waiver and Release of Claims voluntarily, knowingly, of my own free will and without reservation or duress, and that no promises or representations have been made to me by any person to induce me to do so other than the promise of payment set forth in the first paragraph above and the Company's acknowledgment of my rights reserved under the second paragraph above. I understand that this release will be deemed to be an application for benefits under the Agreement and that my entitlement thereto shall be governed by the terms and conditions of the Agreement and any applicable plan. I expressly hereby consent to such terms and conditions. I acknowledge that I have been given not less than forty-five (45) days to review and consider this Waiver and Release of Claims (unless I have signed a written waiver of such review and consideration period), and that I have had the opportunity to consult with an attorney or other advisor of my choice and have been advised by the Company to do so if I choose. I may revoke this Waiver and Release of Claims seven days or less after its execution by providing written notice to the Company. I acknowledge that it is my intention and the intention of the Company in executing this Waiver and Release of Claims that the same shall be effective as a bar to each and every claim, demand and cause of action hereinabove specified. In furtherance of this intention, I hereby expressly waive any and all rights and benefits conferred upon me by the provisions of SECTION 1542 OF THE CALIFORNIA CIVIL CODE, to the extent applicable to me, and expressly I consent that this Waiver and Release of Claims shall be given full force and effect according to each and all of its express terms and provisions, including as well those related to unknown and unsuspected claims, demands and causes of action, if any, as well as those relating to any other claims, demands and causes of action hereinabove specified. SECTION 1542 provides: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR." I acknowledge that I may hereafter discover claims or facts in addition to or different from those which I now know or believe to exist with respect to the subject matter of this Waiver and Release of Claims and which, if known or suspected at the time of executing this Waiver and Release of Claims, may have materially affected this settlement. Finally, I acknowledge that I have read this Waiver and Release of Claims and understand all of its terms. /s/ Gerald L. Detter ---------------------------- Signature of Executive Print Name Date Signed EX-10 7 ex106.txt Execution Copy 2 AMENDMENT NO.1 TO AMENDED AND RESTATED SEVERANCE AGREEMENT BY AND BETWEEN CNF INC. AND EBERHARD G.H. SCHMOLLER Effective January 1, 2003 This Amendment No. 1 (this "Amendment") is made to the Amended and Restated Severance Agreement as of December 4, 2001 by and between CNF Inc., a Delaware corporation (the "Company"), and Eberhard G.H. Schmoller (the "Executive") (the "Severance Agreement"). WHEREAS, on December 4, 2001, the Company and the Executive entered into this Severance Agreement; WHEREAS, the Board of Directors of the Company has determined that it is in the best interests of the Company and of its stockholders to amend the Severance Agreement; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained in this Amendment, the Company and the Executive agree as follows (capitalized terms used without definition have the meanings given to those terms in the Severance Agreement): 1. Amendment to Severance Payment. The severance payment set forth in Section 6.1(A) of the Severance Agreement shall be amended in its entirety to read as follows: (A) In lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination and in lieu of any severance benefit otherwise payable to the Executive, the Company shall pay to the Executive a lump sum severance payment, in cash, equal to three times the sum of (i) the Executive's annual base salary as in effect immediately prior to the Date of Termination or, if higher, in effect immediately prior to the Change in Control and (ii) the average annual bonus earned by the Executive pursuant to any annual bonus or incentive plan maintained by the Company in respect of the three fiscal years ending immediately prior to the fiscal year in which occurs the Change in Control. 2. Amendment to Additional Retirement Benefits. Section 6.1(D) of the Severance Agreement shall be deleted. 3. Amendment to Definition of the Term "Good Reason". Section 15(P) of the Severance Agreement (definition of the term "Good Reason") shall be amended by deleting the following paragraph at the end of Section 15(P): "Notwithstanding anything in this Agreement to the contrary, if the Executive's employment is terminated by the Executive for any reason during the one-month period commencing on the first anniversary of a Change in Control, such termination shall be deemed a termination of the Executive's employment for Good Reason." 4. Effective Date. The effective date of this Amendment shall be January 1, 2003. Except as expressly amended, the Severance Agreement remains unchanged and in full force and effect. CNF INC. By: s/s Gregory L. Quesnel ----------------------------- Name: Gregory L. Quesnel Title: President and Chief Executive Officer EXECUTIVE By: /s/ Eberhard G.H. Schmoller ----------------------------- Name: Eberhard G.H. Schmoller Address: 409 Claremont Way Menlo Park, CA 94025 EX-10 8 ex107.txt 19 AMENDED AND RESTATED SEVERANCE AGREEMENT THIS AGREEMENT, originally dated December 9, 1998, is amended and restated in its entirety as of July 31, 2000. This Agreement is made by and between CNF Transportation Inc., a Delaware corporation (the "Company"), and Gerald L. Detter (the "Executive"). WHEREAS, the Company considers it essential to the best interests of its stockholders to foster the continued employment of key management personnel; and WHEREAS, the Board recognizes that, as is the case with many publicly held corporations, the possibility of a Change in Control exists and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders; and WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's management, including the Executive, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change in Control; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Company and the Executive hereby agree as follows: 1. Defined Terms. The definitions of capitalized terms used in this Agreement are provided in the last Section hereof. 2. Term of Agreement. The Term of this Agreement shall commence on the date hereof and shall continue in effect through December 31, 2001; provided, however, that commencing on January 1, 2001, and each January 1 thereafter, the Term shall automatically be extended for one additional year unless, not later than September 30 of the preceding year, the Company or the Executive shall have given notice not to extend the Term; and further provided, however, that if a Change in Control shall have occurred during the Term, the Term shall expire no earlier than twenty-four (24) months beyond the month in which such Change in Control occurred. 3. Company's Covenants Summarized. In order to induce the Executive to remain in the employ of the Company and in consideration of the Executive's covenants set forth in Section 4 hereof, the Company agrees, under the conditions described herein, to pay the Executive the Severance Payments and the other payments and benefits described herein. Except as provided in Section 9.1 hereof, no Severance Payments shall be payable under this Agreement unless there shall have been (or, under the terms of the second paragraph of Section 6.1 hereof, there shall be deemed to have been) a termination of the Executive's employment with the Company following a Change in Control and during the Term. This Agreement shall not be construed as creating an express or implied contract of employment and, except as otherwise agreed in writing between the Executive and the Company, the Executive (i) shall not have any right to be retained in the employ of the Company, and (ii) shall remain subject to discharge to the same extent as if this Agreement had not been entered into by the Company and the Executive. 4. Executive's Covenants. The Executive agrees that, subject to the terms and conditions of this Agreement, in the event of a Potential Change in Control during the Term, the Executive will remain in the employ of the Company until the earliest of (i) a date which is six (6) months from the date of such Potential Change in Control, (ii) the date of a Change in Control, (iii) the date of termination by the Executive of the Executive's employment for Good Reason or by reason of death, Disability or Retirement or (iv) the termination by the Company of the Executive's employment for any reason. 5. Compensation Other Than Severance Payments. 5.1 Following a Change in Control and during the Term, during any period that the Executive fails to perform the Executive's full-time duties with the Company as a result of incapacity due to disability, including physical or mental illness, the Company shall pay the Executive's full salary to the Executive at the rate in effect at the commencement of any such period, together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period (other than any disability plan), until the Executive's employment is terminated by the Company for Disability. 5.2 If the Executive's employment shall be terminated for any reason following a Change in Control and during the Term, the Company shall pay the Executive's full salary to the Executive through the Date of Termination at the rate in effect immediately prior to the Date of Termination or, if higher, the rate in effect immediately prior to the Change in Control, together with all compensation and benefits payable to the Executive through the Date of Termination under the terms of the Company's compensation and benefit plans, programs or arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the Change in Control. 5.3 If the Executive's employment shall be terminated for any reason following a Change in Control and during the Term, the Company shall pay to the Executive the Executive's normal post-termination compensation and benefits as such payments become due (other than severance payments under any severance plan as in effect immediately prior to the Date of Termination). Such post-termination compensation and benefits shall be determined under, and paid in accordance with, the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the Change in Control. 6. Severance Payments. 6.1 If the Executive's employment is terminated following a Change in Control and during the Term, other than (A) by the Company for Cause, (B) by reason of death or Disability, or (C) by the Executive without Good Reason, then the Company shall pay the Executive the amounts, and provide the Executive the benefits, described in this Section 6.1 ("Severance Payments") and Section 6.2, in addition to any payments and benefits to which the Executive is entitled under Section 5 hereof; provided, however, that the Executive shall not be entitled to the Severance Payments unless and until the Executive (or, in the event of the Executive's death, the executor, personal representative or administrator of the Executive's estate) has signed a written waiver and release substantially in the form set forth on Exhibit A hereto. For purposes of this Agreement, the Executive's employment shall be deemed to have been terminated following a Change in Control by the Company without Cause or by the Executive with Good Reason, if (i) during the Term the Executive's employment is terminated by the Company without Cause following a Potential Change in Control but prior to a Change in Control (whether or not a Change in Control ever occurs) and such termination was at the request or direction of a Person who has entered into an agreement with the Company the consummation of which would constitute a Change in Control, (ii) during the Term the Executive terminates his employment for Good Reason following a Potential Change in Control but prior to a Change in Control (whether or not a Change in Control ever occurs) and the circumstance or event which constitutes Good Reason occurs at the request or direction of such Person or (iii) during the Term the Executive's employment is terminated by the Company without Cause or by the Executive for Good Reason and such termination or the circumstance or event which constitutes Good Reason is otherwise in connection with or in anticipation of a Change in Control (whether or not a Change in Control ever occurs). An Executive will not be considered to have been terminated by reason of the divestiture of a facility, sale or other disposition of a business or business unit, or the outsourcing of a business activity with which the Executive is affiliated, notwithstanding the fact that such divestiture, sale or outsourcing takes place within two years following a Change in Control, if the Executive is offered comparable employment by the successor company and such successor company agrees to assume the Company's obligations to the Executive under this Agreement. (A) In lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination and in lieu of any severance benefit otherwise payable to the Executive, the Company shall pay to the Executive a lump sum severance payment, in cash, equal to three times the sum of (i) the Executive's annual base salary as in effect immediately prior to the Date of Termination or, if higher, in effect immediately prior to the Change in Control and (ii) the highest of (1) the average annual bonus earned by the Executive pursuant to any annual bonus or incentive plan maintained by the Company in respect of the three fiscal years ending immediately prior to the fiscal year in which occurs the Date of Termination, (2) the average annual bonus earned by the Executive pursuant to any such plan in respect of the three fiscal years ending immediately prior to the fiscal year in which occurs the Change in Control or (3) the target annual bonus in effect for the Executive for the fiscal year in which occurs the Date of Termination. (B) For the thirty-six (36) month period immediately following the Date of Termination, the Company shall arrange to provide the Executive and his dependents life, disability and accident benefits substantially similar to those provided to the Executive and his dependents immediately prior to the Date of Termination or, if more favorable to the Executive, those provided to the Executive and his dependents immediately prior to the Change in Control, at no greater cost to the Executive than the cost to the Executive immediately prior to such Date of Termination or Change in Control; provided, however, that any across the board changes to life, disability or accident benefits similarly affecting all or substantially all employees of the Company and any entity in control of the Company shall not be deemed a breach of this Section 6.1(B). Benefits otherwise receivable by the Executive pursuant to this Section 6.1(B) shall be reduced to the extent benefits of the same type are received by or made available to the Executive during the thirty-six (36) month period following the Executive's termination of employment (and any such benefits received by or made available to the Executive shall be reported to the Company by the Executive); provided, however, that the Company shall reimburse the Executive for the excess, if any, of the cost of such benefits to the Executive over such cost immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control. If the Executive dies during the thirty- six (36) month period following the Date of Termination, life, disability and accident benefit coverage of the Executive's dependents shall continue for the remainder of the thirty-six (36) month period. (C) Notwithstanding any provision of any health or dental insurance plan or health or dental benefit plan to the contrary, the Company shall provide health and dental benefits to the Executive and his dependents as if the Executive, as of the Date of Termination, has retired (i) under the terms of such plan as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control and (ii) with age plus years of service totaling 85 or more. Benefits otherwise receivable by the Executive pursuant to this Section 6.1(C) shall be reduced to the extent benefits of the same type are received by or made available to the Executive following the Executive's termination of employment (and any such benefits received by or made available to the Executive shall be reported to the Company by the Executive); provided, however, that the Company shall reimburse the Executive for the excess, if any, of the cost of such benefits to the Executive over such cost immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control. If the Executive dies at a time when health and dental benefits are being provided under this Section 6.1(C) to the Executive's dependents, the Company shall continue to provide the dependents with health and dental benefits for as long as, and on the same basis as, such benefits are provided to dependents of retired employees who have retired with age plus years of service totaling 85 or more. (D) In addition to the retirement benefits to which the Executive is entitled under each Pension Plan or any successor plan thereto, the Company shall pay the Executive a lump sum amount, in cash, equal to the excess of (i) the actuarial equivalent of the aggregate retirement pension (taking into account any early retirement subsidies associated therewith and determined as a straight life annuity commencing at the date (but in no event earlier than the third anniversary of the Date of Termination) as of which the actuarial equivalent of such annuity is greatest) which the Executive would have accrued under the terms of all Pension Plans (without regard to any amendment to any Pension Plan made subsequent to a Change in Control and on or prior to the Date of Termination, which amendment adversely affects in any manner the computation of retirement benefits thereunder), determined as if the Executive (A) were fully vested thereunder, (B) had accumulated (after the Date of Termination) thirty-six (36) additional months of service credit thereunder, (C) had attained an age which is three years older than the age the Executive had attained as of the Date of Termination and (D) had been credited under each Pension Plan during such period with compensation equal to the Executive's annual amount taken into account under Section 6.1(A) hereof, over (ii) the actuarial equivalent of the aggregate retirement pension (taking into account any early retirement subsidies associated therewith and determined as a straight life annuity commencing at the date (but in no event earlier than the Date of Termination) as of which the actuarial equivalent of such annuity is greatest) which the Executive had accrued pursuant to the provisions of the Pension Plans as of the Date of Termination. For purposes of this Section 6.1(D), "actuarial equivalent" shall be determined using the same assumptions utilized under the applicable Pension Plan immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control. 6.2 (A) Whether or not the Executive becomes entitled to the Severance Payments, if any of the payments or benefits received or to be received by the Executive in connection with a Change in Control or the Executive's termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any Person whose actions result in a Change in Control or any Person affiliated with the Company or such Person) (such payments or benefits, excluding the Gross-Up Payment, being hereinafter referred to as the "Total Payments") will be subject to the Excise Tax, the Company shall pay to the Executive an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive, after deduction of any Excise Tax on the Total Payments and any federal, state and local income and employment taxes and Excise Tax upon the Gross-Up Payment, shall be equal to the Total Payments. (B) For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) all of the Total Payments shall be treated as "parachute payments" (within the meaning of Section 280G(b)(2) of the Code) unless, in the opinion of tax counsel ("Tax Counsel") reasonably acceptable to the Executive and selected by the accounting firm which was, immediately prior to the Change in Control, the Company's independent auditor (the "Auditor"), such payments or benefits (in whole or in part) should not constitute parachute payments, including by reason of Section 280G(b)(4)(A) of the Code, (ii) all "excess parachute payments" within the meaning of Section 280G(b)(l) of the Code shall be treated as subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered (within the meaning of Section 280G(b)(4)(B) of the Code) in excess of the Base Amount allocable to such reasonable compensation, or should otherwise not be subject to the Excise Tax and (iii) the value of any noncash benefits or any deferred payment or benefit shall be determined by the Auditor in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the Date of Termination (or if there is no Date of Termination, then the date on which the Gross-Up Payment is calculated for purposes of this Section 6.2), net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. (C) In the event that the Excise Tax is finally determined to be less than the amount taken into account hereunder in calculating the Gross-Up Payment, the Executive shall repay to the Company, within five (5) business days following the time that the amount of such reduction in the Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income and employment taxes imposed on the Gross-Up Payment being repaid by the Executive, to the extent that such repayment results in a reduction in the Excise Tax and a dollar-for-dollar reduction in the Executive's taxable income and wages for purposes of federal, state and local income and employment taxes), plus interest on the amount of such repayment at 120% of the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder in calculating the Gross-Up Payment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest, penalties or additions payable by the Executive with respect to such excess) within five (5) business days following the time that the amount of such excess is finally determined. The Executive and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Total Payments. 6.3 The payments provided in subsections (A), (C) and (D) of Section 6.1 hereof and in subsections (A) and (B) of Section 6.2 hereof shall be made not later than the fifth day following the Date of Termination; provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Company shall pay to the Executive on such day an estimate, as determined in good faith by the Company or, in the case of payments under Section 6.2 hereof, in accordance with Section 6.2 hereof, of the minimum amount of such payments to which the Executive is clearly entitled and shall pay the remainder of such payments (together with interest on the unpaid remainder (or on all such payments to the extent the Company fails to make such payments when due) at 120% of the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth (30th) day after the Date of Termina tion. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Executive, payable on the fifth (5th) business day after demand by the Company (together with interest at 120% of the rate provided in Section 1274(b)(2)(B) of the Code). At the time that payments are made under this Agreement, the Company shall provide the Executive with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations including, without limitation, any opinions or other advice the Company has received from Tax Counsel, the Auditor or other advisors or consultants (and any such opinions or advice which are in writing shall be attached to the statement). 6.4 The Company also shall pay to the Executive all legal fees and expenses incurred by the Executive in seeking in good faith to obtain or enforce any benefit or right provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Code to any payment or benefit provided hereunder. Such payments shall be made within five (5) business days after delivery of the Executive's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 7. Termination Procedures and Compensation During Dispute. 7.1 Notice of Termination. After a Change in Control and during the Term, any purported termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in detail. 7.2 Date of Termination. "Date of Termination," with respect to any purported termination of the Executive's employment after a Change in Control and during the Term, shall mean (i) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such thirty (30) day period), and (ii) if the Executive's employment is terminated for any other reason, the date specified in the Notice of Termination (which, in the case of a termination by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days, respectively, from the date such Notice of Termination is given). 8. No Mitigation. The Company agrees that, if the Executive's employment with the Company terminates during the Term, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 hereof. Further, the amount of any payment or benefit provided for in this Agreement (other than to the extent provided in Section 6.1(B) and 6.1(C) hereof) shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise. 9. Successors; Binding Agreement. 9.1 In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substan tially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive's employment for Good Reason after a Change in Control, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. 9.2 This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate. 10. Notices. All notices and other communications provided for in this Agreement (i) shall be in writing, (ii) shall be hand delivered, sent by overnight courier or by United States registered mail, return receipt requested and postage prepaid, addressed, in the case of the Executive, to the address inserted below the Executive's signature on the final page hereof and, if to the Company, to the address set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, and (iii) shall be effective only upon actual receipt. To the Company: CNF Transportation Inc. 3240 Hillview Avenue Palo Alto, CA 94304 Attention: General Counsel 11. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or of any lack of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement supersedes any other agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof which have been made by either party; provided, however, that this Agreement shall supersede any written agreement setting forth the terms and conditions of the Executive's employment with the Company only in the event that the Executive's employment with the Company is terminated on or following a Change in Control, by the Company other than for Cause or by the Executive for Good Reason. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and the Executive under this Agreement which by their nature may require either partial or total performance after the expiration of the Term (including, without limitation, those under Sections 6 and 7 hereof) shall survive such expiration. 12. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 13. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 14. Settlement of Disputes; Arbitration. 14.1 All claims by the Executive for benefits under this Agreement shall be directed to and determined by the Board and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive's claim has been denied. 14.2 Any further dispute or controversy arising under or in connection with this Agreement shall be finally settled exclusively by arbitration in Palo Alto, California, in accordance with the rules of the American Arbitration Association then in effect; provided, however, that the evidentiary standards set forth in this Agreement shall apply. Judgment may be entered on the arbitrator's award in any court having jurisdiction. 15. Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated below: (A) "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act. (B) "Auditor" shall have the meaning set forth in Section 6.2 hereof. (C) "Base Amount" shall have the meaning set forth in Section 280G(b)(3) of the Code. (D) "Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under the Exchange Act. (E) "Board" shall mean the Board of Directors of the Company. (F) "Cause" for termination by the Company of the Executive's employment shall mean (i) the willful and continued failure by the Executive to substantially perform the Executive's duties with the Company (other than any such failure resulting from the Executive's incapacity due to disability, including physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination for Good Reason by the Executive pursuant to Section 7.1 hereof) after a written demand for substantial performance is delivered to the Executive by the Board, which demand specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive's duties, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of this definition, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's act, or failure to act, was in the best interest of the Company. In the event of a dispute concerning the application of this provision, no claim by the Company that Cause exists shall be given effect unless the Company establishes to the Board and, in the event of an arbitration as contemplated by Section 14.2, to the arbitrator, by clear and convincing evidence that Cause exists. (G) A "Change in Control" means the occurrence of any one of the following events: (I) any "person," as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (A) the Company or its Affiliates, (B) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or its Affiliates and (C) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the Common Stock), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its Affiliates) representing 25% or more of the combined voting power of the Company's then outstanding voting securities; (II) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the date hereof, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company's stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors as of the date hereof or whose appointment, election or nomination for election was previously so approved or recommended; (III) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or parent entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving or parent entity outstanding immediately afer such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as hereinabove defined), directly or indirectly, acquired 25% or more of the combined voting power of the Company's then outstanding securities (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its Affiliates); or (IV) the stockholders of the Company approve a plan of complete liquidation of the Company or there is consummated an agreement for the sale or disposition by the Company of assets having an aggregate book value at the time of such sale or disposition of more than 75% of the total book value of the Company's assets on a consolidated basis (or any transaction having a similar effect), other than any such sale or disposition by the Company (including by way of spin-off or other distribution) to an entity, at least 50% of the combined voting power of the voting securities of which are owned immediately following such sale or disposition by stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale or disposition; provided, however, that a Change in Control shall be deemed not to have occurred under this clause (IV) if, immediately prior to the consummation of any sale or disposition of a business unit that is taken into account in determining whether a Change in Control has occurred, the Executive is employed by, and is party to a severance agreement with, such business unit. (H) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (I) "Company" shall mean CNF Transportation Inc. and, except in determining under Section 15(G) hereof whether or not any Change in Control of the Company has occurred, shall include any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise. In addition, when used in the context of the Executive's employment, Company shall mean the Company or any of its subsidiaries. (J) "Common Stock" shall mean the common stock, par value $0.625 per share, of the Company. (K) "Date of Termination" shall have the meaning set forth in Section 7.2 hereof. (L) "Disability" shall be deemed the reason for the termination by the Company of the Executive's employment, if, as a result of the Executive's incapacity due to disability, including physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with the Company for a period of six (6) consecutive months, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties. (M) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. (N) "Excise Tax" shall mean any excise tax imposed under Section 4999 of the Code. (O) "Executive" shall mean the individual named in the first paragraph of this Agreement. (P) "Good Reason" for termination by the Executive of the Executive's employment shall mean the occurrence (without the Executive's express written consent) after any Change in Control and during the Term of any one of the following acts by the Company, or failures by the Company to act, unless such act or failure to act is corrected within 30 days of receipt by the Company of notice of the Executive's intent to terminate for Good Reason hereunder: (I) the failure of the successor company, following the Change in Control, to assume this Agreement and all obligations hereunder, as of the date of such Change in Control; (II) the assignment to the Executive of any duties inconsistent with the Executive's status as an executive of the Company or a substantial adverse alteration in the nature or status of the Executive's responsibilities from those in effect immediately prior to the Change in Control; (III) a reduction by the Company in the Executive's annual base salary (except for across-the-board salary reductions similarly affecting all executives of the Company and all executives of any Person in control of the Company) or incentive compensation opportunity (both short-term and long- term, valued in a manner consistent with the valuation methodology used by the Company prior to the Change in Control), each as in effect immediately prior to the Change in Control or as the same may thereafter be increased from time to time; (IV) the relocation of the Executive's principal place of employment to a location that results in an increase in the Executive's one way commute of at least 50 miles more than the Executive's one way commute immediately prior to the Change in Control, except for required travel on the Company's business to an extent substantially consistent with the Executive's business travel obligations immediately prior to the Change in Control; (V) the failure by the Company to pay to the Executive when due any portion of the Executive's current compensation; (VI) the failure by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of the Company's pension, savings, life insurance, medical, health and accident, or disability plans in which the Executive was participating immediately prior to the Change in Control (except for across the board changes similarly affecting all or substantially all employees of the Company and any entity in control of the Company), the taking of any other action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive immediately prior to the Change in Control, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled. The Executive's right to terminate the Executive's employment for Good Reason shall not be affected by the Executive's incapacity due to disability, including physical or mental illness. The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. Notwithstanding anything in this Agreement to the contrary, if the Executives employment is terminated by the Executive for any reason during the one-month period commencing on the first anniversary of a Change in Control, such termination shall be deemed a termination of the Executives employment for Good Reason. (Q) "Gross-Up Payment" shall have the meaning set forth in Section 6.2 hereof. (R) "Notice of Termination" shall have the meaning set forth in Section 7.1 hereof. (S) "Pension Plan" shall mean any tax-qualified, supplemental or excess benefit pension plan maintained by the Company and any other plan or agreement entered into between the Executive and the Company which is designed to provide the Executive with supplemental retirement benefits. (T) "Person" shall mean any person, as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (A) the Company or its Affiliates, (B) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or its Affiliates, and (C) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the Common Stock) (U) "Potential Change in Control" shall be deemed to have occurred if: (I) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control; (II) the Company or any Person publicly announces an intention to take or to consider taking actions, including but not limited to proxy contests or consent solicitations, which, if consummated, would constitute a Change in Control; (III) any Person becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 15% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company's then outstanding securities (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its affiliates); or (IV) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred. (V) "Retirement" shall be deemed the reason for the termination by the Executive of the Executive's employment if such employment is terminated in accordance with the Company's retirement policy, including early retirement, generally applicable to its salaried employees. (W) "Severance Payments" shall have the meaning set forth in Section 6.1 hereof. (X) "Tax Counsel" shall have the meaning set forth in Section 6.2 hereof. (Y) "Term" shall mean the period of time described in Section 2 hereof (including any extension, continuation or termination described therein). (Z) "Total Payments" shall mean those payments so described in Section 6.2 hereof. CNF TRANSPORTATION INC. By: /s/ Gregory L. Quesnel -------------------------------- Name: Gregory L. Quesnel Title: President and Chief Executive Officer EXECUTIVE Name: Gerald L. Detter Address: 506 Woodland Drive Clarklake, MI 49234 16chw2937 EXHIBIT A WAIVER AND RELEASE OF CLAIMS In consideration of, and subject to, the payment to be made to me by CNF Transportation Inc. (the "Company") of the "Severance Payments" (as defined in the Amended and Restated Severance Agreement, dated as of July 31, 2000, entered into between me and the Company (the "Agreement")), I hereby waive any claims I may have for employment or re-employment by the Company or any subsidiary of the Company after the date hereof, and I further agree to and do release and forever discharge the Company or any subsidiary of the Company, and their respective past and present officers, directors, shareholders, insurers, employees and agents from any and all claims and causes of action, known or unknown, arising out of or relating to my employment with the Company or any subsidiary of the Company, or the termination thereof, including, but not limited to, wrongful discharge, breach of contract, tort, fraud, the Civil Rights Acts, Age Discrimination in Employment Act, Employee Retirement Income Security Act of 1974, Americans with Disabilities Act, or any other federal, state or local legislation or common law relating to employment or discrimination in employment or otherwise. Notwithstanding the foregoing or any other provision hereof, nothing in this Waiver and Release of Claims shall adversely affect (i) my rights under the Agreement; (ii) my rights to benefits other than severance benefits under plans, programs and arrangements of the Company or any subsidiary or parent of the Company which are accrued but unpaid as of the date of my termination; or (iii) my rights to indemnification under any indemnification agreement, applicable law and the certificates of incorporation and bylaws of the Company and any subsidiary or parent of the Company, and my rights under any director's and officers' liability insurance policy covering me. I acknowledge that I have signed this Waiver and Release of Claims voluntarily, knowingly, of my own free will and without reservation or duress, and that no promises or representations have been made to me by any person to induce me to do so other than the promise of payment set forth in the first paragraph above and the Company's acknowledgment of my rights reserved under the second paragraph above. I understand that this release will be deemed to be an application for benefits under the Agreement and that my entitlement thereto shall be governed by the terms and conditions of the Agreement and any applicable plan. I expressly hereby consent to such terms and conditions. I acknowledge that I have been given not less than forty-five (45) days to review and consider this Waiver and Release of Claims (unless I have signed a written waiver of such review and consideration period), and that I have had the opportunity to consult with an attorney or other advisor of my choice and have been advised by the Company to do so if I choose. I may revoke this Waiver and Release of Claims seven days or less after its execution by providing written notice to the Company. I acknowledge that it is my intention and the intention of the Company in executing this Waiver and Release of Claims that the same shall be effective as a bar to each and every claim, demand and cause of action hereinabove specified. In furtherance of this intention, I hereby expressly waive any and all rights and benefits conferred upon me by the provisions of SECTION 1542 OF THE CALIFORNIA CIVIL CODE, to the extent applicable to me, and expressly I consent that this Waiver and Release of Claims shall be given full force and effect according to each and all of its express terms and provisions, including as well those related to unknown and unsuspected claims, demands and causes of action, if any, as well as those relating to any other claims, demands and causes of action hereinabove specified. SECTION 1542 provides: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR." I acknowledge that I may hereafter discover claims or facts in addition to or different from those which I now know or believe to exist with respect to the subject matter of this Waiver and Release of Claims and which, if known or suspected at the time of executing this Waiver and Release of Claims, may have materially affected this settlement. Finally, I acknowledge that I have read this Waiver and Release of Claims and understand all of its terms. /s/ Gerald L. Detter --------------------------- Signature of Executive Print Name Date Signed EX-10 9 ex108.txt Execution Copy 1 AMENDMENT NO.1 TO AMENDED AND RESTATED SEVERANCE AGREEMENT BY AND BETWEEN CNF INC. AND GERALD L. DETTER Effective January 1, 2003 This Amendment No. 1 (this "Amendment") is made to the Amended and Restated Severance Agreement as of July 31, 2000 by and between CNF Inc. (formerly CNF Transportation Inc.), a Delaware corporation (the "Company"), and Gerald L. Detter (the "Executive") (the "Severance Agreement"). WHEREAS, on July 31, 2000, the Company and the Executive entered into this Severance Agreement; WHEREAS, the Board of Directors of the Company has determined that it is in the best interests of the Company and of its stockholders to amend the Severance Agreement; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained in this Amendment, the Company and the Executive agree as follows (capitalized terms used without definition have the meanings given to those terms in the Severance Agreement): 1. Amendment to Severance Payment. The severance payment set forth in Section 6.1(A) of the Severance Agreement shall be amended in its entirety to read as follows: (A) In lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination and in lieu of any severance benefit otherwise payable to the Executive, the Company shall pay to the Executive a lump sum severance payment, in cash, equal to three times the sum of (i) the Executive's annual base salary as in effect immediately prior to the Date of Termination or, if higher, in effect immediately prior to the Change in Control and (ii) the average annual bonus earned by the Executive pursuant to any annual bonus or incentive plan maintained by the Company in respect of the three fiscal years ending immediately prior to the fiscal year in which occurs the Change in Control. 2. Amendment to Additional Retirement Benefits. Section 6. 1(D) of the Severance Agreement shall be deleted. 3. Amendment to Definition of the Term "Good Reason". Section 15(P) of the Severance Agreement (definition of the term "Good Reason") shall be amended by deleting the following paragraph at the end of Section 15(P): "Notwithstanding anything in this Agreement to the contrary, if the Executive's employment is terminated by the Executive for any reason during the one-month period commencing on the first anniversary of a Change in Control, such termination shall be deemed a termination of the Executive's employment for Good Reason." 4. Name Change. The name of the Company has been changed to "CNF Inc." and all references in the Severance Agreement to "CNF Transportation Inc." shall be changed to references to "CNF Inc." 5. Effective Date. The effective date of this Amendment shall be January 1, 2003. Except as expressly amended, the Severance Agreement remains unchanged and in full force and effect. CNF INC. By: /s/ Gregory L. Quesnel ----------------------------- Name: Gregory L. Quesnel Title: President and Chief Executive Officer EXECUTIVE By: /s/ Gerald L. Detter ----------------------------- Name: Gerald L. Detter Address: 506 Woodland Drive Clarklake, MI 49234 EX-10 10 ex105.txt 17 AMENDED AND RESTATED SEVERANCE AGREEMENT THIS AGREEMENT, originally dated December 9, 1998, as amended and restated as of August 21, 2000, and as subsequently amended, is hereby amended and restated in its entirety as of December 4, 2001. This Agreement is made by and between CNF Inc., a Delaware corporation (the "Company"), and Eberhard G.H. Schmoller (the "Executive"). WHEREAS, the Company considers it essential to the best interests of its stockholders to foster the continued employment of key management personnel; and WHEREAS, the Board recognizes that, as is the case with many publicly held corporations, the possibility of a Change in Control exists and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders; and WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's management, including the Executive, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change in Control; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Company and the Executive hereby agree as follows: 1. Defined Terms. The definitions of capitalized terms used in this Agreement are provided in the last Section hereof. 2. Term of Agreement. The Term of this Agreement shall commence on December 9, 1998 (the "Effective Date") and shall continue in effect through December 31, 2002; provided, however, that commencing on January 1, 2003, and each January 1 thereafter, the Term shall automatically be extended for one additional year unless, not later than September 30 of the preceding year, the Company or the Executive shall have given notice not to extend the Term; and further provided, however, that if a Change in Control shall have occurred during the Term, the Term shall expire no earlier than twenty_four (24) months beyond the month in which such Change in Control occurred. 3. Company's Covenants Summarized. In order to induce the Executive to remain in the employ of the Company and in consideration of the Executive's covenants set forth in Section 4 hereof, the Company agrees, under the conditions described herein, to pay the Executive the Severance Payments and the other payments and benefits described herein. Except as provided in Section 9.1 hereof, no Severance Payments shall be payable under this Agreement unless there shall have been (or, under the terms of the second paragraph of Section 6.1 hereof, there shall be deemed to have been) a termination of the Executive's employment with the Company following a Change in Control and during the Term. This Agreement shall not be construed as creating an express or implied contract of employment and, except as otherwise agreed in writing between the Executive and the Company, the Executive (i) shall not have any right to be retained in the employ of the Company, and (ii) shall remain subject to discharge to the same extent as if this Agreement had not been entered into by the Company and the Executive. 4. Executive's Covenants. The Executive agrees that, subject to the terms and conditions of this Agreement, in the event of a Potential Change in Control during the Term, the Executive will remain in the employ of the Company until the earliest of (i) a date which is six (6) months from the date of such Potential Change in Control, (ii) the date of a Change in Control, (iii) the date of termination by the Executive of the Executive's employment for Good Reason or by reason of death, Disability or Retirement or (iv) the termination by the Company of the Executive's employment for any reason. 5. Compensation Other Than Severance Payments. 5.1 Following a Change in Control and during the Term, during any period that the Executive fails to perform the Executive's full-time duties with the Company as a result of incapacity due to disability, including physical or mental illness, the Company shall pay the Executive's full salary to the Executive at the rate in effect at the commencement of any such period, together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period (other than any disability plan), until the Executive's employment is terminated by the Company for Disability. 5.2 If the Executive's employment shall be terminated for any reason following a Change in Control and during the Term, the Company shall pay the Executive's full salary to the Executive through the Date of Termination at the rate in effect immediately prior to the Date of Termination or, if higher, the rate in effect immediately prior to the Change in Control, together with all compensation and benefits payable to the Executive through the Date of Termination under the terms of the Company's compensation and benefit plans, programs or arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the Change in Control. 5.3 If the Executive's employment shall be terminated for any reason following a Change in Control and during the Term, the Company shall pay to the Executive the Executive's normal post_termination compensation and benefits as such payments become due (other than severance payments under any severance plan as in effect immediately prior to the Date of Termination). Such post_termination compensation and benefits shall be determined under, and paid in accordance with, the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the Change in Control. 6. Severance Payments. 6.1 If the Executive's employment is terminated following a Change in Control and during the Term, other than (A) by the Company for Cause, (B) by reason of death or Disability, or (C) by the Executive without Good Reason, then the Company shall pay the Executive the amounts, and provide the Executive the benefits, described in this Section 6.1 ("Severance Payments") and Section 6.2, in addition to any payments and benefits to which the Executive is entitled under Section 5 hereof; provided, however, that the Executive shall not be entitled to the Severance Payments unless and until the Executive (or, in the event of the Executive's death, the executor, personal representative or administrator of the Executive's estate) has signed a written waiver and release substantially in the form set forth on Exhibit A hereto. For purposes of this Agreement, the Executive's employment shall be deemed to have been terminated following a Change in Control by the Company without Cause or by the Executive with Good Reason, if (i) during the Term the Executive's employment is terminated by the Company without Cause following a Potential Change in Control but prior to a Change in Control (whether or not a Change in Control ever occurs) and such termination was at the request or direction of a Person who has entered into an agreement with the Company the consummation of which would constitute a Change in Control, (ii) during the Term the Executive terminates his employment for Good Reason following a Potential Change in Control but prior to a Change in Control (whether or not a Change in Control ever occurs) and the circumstance or event which constitutes Good Reason occurs at the request or direction of such Person or (iii) during the Term the Executive's employment is terminated by the Company without Cause or by the Executive for Good Reason and such termination or the circumstance or event which constitutes Good Reason is otherwise in connection with or in anticipation of a Change in Control (whether or not a Change in Control ever occurs). An Executive will not be considered to have been terminated by reason of the divestiture of a facility, sale or other disposition of a business or business unit, or the outsourcing of a business activity with which the Executive is affiliated, notwithstanding the fact that such divestiture, sale or outsourcing takes place within two years following a Change in Control, if the Executive is offered comparable employment by the successor company and such successor company agrees to assume the Company's obligations to the Executive under this Agreement. (A) In lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination and in lieu of any severance benefit otherwise payable to the Executive, the Company shall pay to the Executive a lump sum severance payment, in cash, equal to three times the sum of (i) the Executive's annual base salary as in effect immediately prior to the Date of Termination or, if higher, in effect immediately prior to the Change in Control and (ii) the highest of (1) the average annual bonus earned by the Executive pursuant to any annual bonus or incentive plan maintained by the Company in respect of the three fiscal years ending immediately prior to the fiscal year in which occurs the Date of Termination, (2) the average annual bonus earned by the Executive pursuant to any such plan in respect of the three fiscal years ending immediately prior to the fiscal year in which occurs the Change in Control or (3) the target annual bonus in effect for the Executive for the fiscal year in which occurs the Date of Termination. (B) For the thirty-six (36) month period immediately following the Date of Termination, the Company shall arrange to provide the Executive and his dependents life, disability and accident benefits substantially similar to those provided to the Executive and his dependents immediately prior to the Date of Termination or, if more favorable to the Executive, those provided to the Executive and his dependents immediately prior to the Change in Control, at no greater cost to the Executive than the cost to the Executive immediately prior to such Date of Termination or Change in Control; provided, however, that any across the board changes to life, disability or accident benefits similarly affecting all or substantially all employees of the Company and any entity in control of the Company shall not be deemed a breach of this Section 6.1(B). Benefits otherwise receivable by the Executive pursuant to this Section 6.1(B) shall be reduced to the extent benefits of the same type are received by or made available to the Executive during the thirty-six (36) month period following the Executive's termination of employment (and any such benefits received by or made available to the Executive shall be reported to the Company by the Executive); provided, however, that the Company shall reimburse the Executive for the excess, if any, of the cost of such benefits to the Executive over such cost immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control. If the Executive dies during the thirty- six (36) month period following the Date of Termination, life, disability and accident benefit coverage of the Executive's dependents shall continue for the remainder of the thirty-six (36) month period. (C) Notwithstanding any provision of any health or dental insurance plan or health or dental benefit plan to the contrary, the Company shall provide health and dental benefits to the Executive and his dependents as if the Executive, as of the Date of Termination, has retired (i) under the terms of such plan as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control and (ii) with age plus years of service totaling 85 or more. Benefits otherwise receivable by the Executive pursuant to this Section 6.1(C) shall be reduced to the extent benefits of the same type are received by or made available to the Executive following the Executive's termination of employment (and any such benefits received by or made available to the Executive shall be reported to the Company by the Executive); provided, however, that the Company shall reimburse the Executive for the excess, if any, of the cost of such benefits to the Executive over such cost immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control. If the Executive dies at a time when health and dental benefits are being provided under this Section 6.1(C) to the Executive's dependents, the Company shall continue to provide the dependents with health and dental benefits for as long as, and on the same basis as, such benefits are provided to dependents of retired employees who have retired with age plus years of service totaling 85 or more. (D) In addition to the retirement benefits to which the Executive is entitled under each Pension Plan or any successor plan thereto, the Company shall pay the Executive a lump sum amount, in cash, equal to the excess of (i) the actuarial equivalent of the aggregate retirement pension (taking into account any early retirement subsidies associated therewith and determined as a straight life annuity commencing at the date (but in no event earlier than the third anniversary of the Date of Termination) as of which the actuarial equivalent of such annuity is greatest) which the Executive would have accrued under the terms of all Pension Plans (without regard to any amendment to any Pension Plan made subsequent to a Change in Control and on or prior to the Date of Termination, which amendment adversely affects in any manner the computation of retirement benefits thereunder), determined as if the Executive (A) were fully vested thereunder, (B) had accumulated (after the Date of Termination) thirty-six (36) additional months of service credit thereunder, (C) had attained an age which is three years older than the age the Executive had attained as of the Date of Termination and (D) had been credited under each Pension Plan during such period with compensation equal to the Executive's annual amount taken into account under Section 6.1(A) hereof, over (ii) the actuarial equivalent of the aggregate retirement pension (taking into account any early retirement subsidies associated therewith and determined as a straight life annuity commencing at the date (but in no event earlier than the Date of Termination) as of which the actuarial equivalent of such annuity is greatest) which the Executive had accrued pursuant to the provisions of the Pension Plans as of the Date of Termination. For purposes of this Section 6.1(D), "actuarial equivalent" shall be determined using the same assumptions utilized under the applicable Pension Plan immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control. 6.2 (A) Whether or not the Executive becomes entitled to the Severance Payments, if any of the payments or benefits received or to be received by the Executive in connection with a Change in Control or the Executive's termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any Person whose actions result in a Change in Control or any Person affiliated with the Company or such Person) (such payments or benefits, excluding the Gross-Up Payment, being hereinafter referred to as the "Total Payments") will be subject to the Excise Tax, the Company shall pay to the Executive an additional amount (the "Gross_Up Payment") such that the net amount retained by the Executive, after deduction of any Excise Tax on the Total Payments and any federal, state and local income and employment taxes and Excise Tax upon the Gross- Up Payment, shall be equal to the Total Payments. (B) For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) all of the Total Payments shall be treated as "parachute payments" (within the meaning of Section 280G(b)(2) of the Code) unless, in the opinion of tax counsel ("Tax Counsel") reasonably acceptable to the Executive and selected by the accounting firm which was, immediately prior to the Change in Control, the Company's independent auditor (the "Auditor"), such payments or benefits (in whole or in part) should not constitute parachute payments, including by reason of Section 280G(b)(4)(A) of the Code, (ii) all "excess parachute payments" within the meaning of Section 280G(b)(l) of the Code shall be treated as subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered (within the meaning of Section 280G(b)(4)(B) of the Code) in excess of the Base Amount allocable to such reasonable compensation, or should otherwise not be subject to the Excise Tax and (iii) the value of any noncash benefits or any deferred payment or benefit shall be determined by the Auditor in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross_Up Payment, the Executive shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation in the calendar year in which the Gross_Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the Date of Termination (or if there is no Date of Termination, then the date on which the Gross-Up Payment is calculated for purposes of this Section 6.2), net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. (C) In the event that the Excise Tax is finally determined to be less than the amount taken into account hereunder in calculating the Gross-Up Payment, the Executive shall repay to the Company, within five (5) business days following the time that the amount of such reduction in the Excise Tax is finally determined, the portion of the Gross_Up Payment attributable to such reduction (plus that portion of the Gross_Up Payment attributable to the Excise Tax and federal, state and local income and employment taxes imposed on the Gross_Up Payment being repaid by the Executive, to the extent that such repayment results in a reduction in the Excise Tax and a dollar-for-dollar reduction in the Executive's taxable income and wages for purposes of federal, state and local income and employment taxes), plus interest on the amount of such repayment at 120% of the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder in calculating the Gross-Up Payment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross_Up Payment), the Company shall make an additional Gross_Up Payment in respect of such excess (plus any interest, penalties or additions payable by the Executive with respect to such excess) within five (5) business days following the time that the amount of such excess is finally determined. The Executive and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Total Payments. 6.3 The payments provided in subsections (A), (C) and (D) of Section 6.1 hereof and in subsections (A) and (B) of Section 6.2 hereof shall be made not later than the fifth day following the Date of Termination; provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Company shall pay to the Executive on such day an estimate, as determined in good faith by the Company or, in the case of payments under Section 6.2 hereof, in accordance with Section 6.2 hereof, of the minimum amount of such payments to which the Executive is clearly entitled and shall pay the remainder of such payments (together with interest on the unpaid remainder (or on all such payments to the extent the Company fails to make such payments when due) at 120% of the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth (30th) day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Executive, payable on the fifth (5th) business day after demand by the Company (together with interest at 120% of the rate provided in Section 1274(b)(2)(B) of the Code). At the time that payments are made under this Agreement, the Company shall provide the Executive with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations including, without limitation, any opinions or other advice the Company has received from Tax Counsel, the Auditor or other advisors or consultants (and any such opinions or advice which are in writing shall be attached to the statement). 6.4 The Company also shall pay to the Executive all legal fees and expenses incurred by the Executive in seeking in good faith to obtain or enforce any benefit or right provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Code to any payment or benefit provided hereunder. Such payments shall be made within five (5) business days after delivery of the Executive's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 7. Termination Procedures and Compensation During Dispute. 7.1 Notice of Termination. After a Change in Control and during the Term, any purported termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three_quarters (3/4) of the entire membership of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in detail. 7.2 Date of Termination. "Date of Termination," with respect to any purported termination of the Executive's employment after a Change in Control and during the Term, shall mean (i) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such thirty (30) day period), and (ii) if the Executive's employment is terminated for any other reason, the date specified in the Notice of Termination (which, in the case of a termination by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days, respectively, from the date such Notice of Termination is given). 8. No Mitigation. The Company agrees that, if the Executive's employment with the Company terminates during the Term, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 hereof. Further, the amount of any payment or benefit provided for in this Agreement (other than to the extent provided in Section 6.1(B) and 6.1(C) hereof) shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise. 9. Successors; Binding Agreement. 9.1 In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive's employment for Good Reason after a Change in Control, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. 9.2 This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate. 10. Notices. All notices and other communications provided for in this Agreement (i) shall be in writing, (ii) shall be hand delivered, sent by overnight courier or by United States registered mail, return receipt requested and postage prepaid, addressed, in the case of the Executive, to the address inserted below the Executive's signature on the final page hereof and, if to the Company, to the address set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, and (iii) shall be effective only upon actual receipt. To the Company: CNF Inc. 3240 Hillview Avenue Palo Alto, CA 94304 Attention: General Counsel 11. Miscellaneous. Except as otherwise expressly provided herein, no provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or of any lack of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement supersedes any other agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof which have been made by either party; provided, however, that this Agreement shall supersede any written agreement setting forth the terms and conditions of the Executive's employment with the Company only in the event that the Executive's employment with the Company is terminated on or following a Change in Control, by the Company other than for Cause or by the Executive for Good Reason. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and the Executive under this Agreement which by their nature may require either partial or total performance after the expiration of the Term (including, without limitation, those under Sections 6 and 7 hereof) shall survive such expiration. 12. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 13. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 14. Settlement of Disputes; Arbitration. 14.1 All claims by the Executive for benefits under this Agreement shall be directed to and determined by the Board and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive's claim has been denied. 14.2 Any further dispute or controversy arising under or in connection with this Agreement shall be finally settled exclusively by arbitration in Palo Alto, California, in accordance with the rules of the American Arbitration Association then in effect; provided, however, that the evidentiary standards set forth in this Agreement shall apply. Judgment may be entered on the arbitrator's award in any court having jurisdiction. 15. Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated below: (A) "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act. (B) "Auditor" shall have the meaning set forth in Section 6.2 hereof. (C) "Base Amount" shall have the meaning set forth in Section 280G(b)(3) of the Code. (D) "Beneficial Owner" shall have the meaning set forth in Rule 13d_3 under the Exchange Act. (E) "Board" shall mean the Board of Directors of the Company. (F) "Cause" for termination by the Company of the Executive's employment shall mean (i) the willful and continued failure by the Executive to substantially perform the Executive's duties with the Company (other than any such failure resulting from the Executive's incapacity due to disability, including physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination for Good Reason by the Executive pursuant to Section 7.1 hereof) after a written demand for substantial performance is delivered to the Executive by the Board, which demand specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive's duties, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of this definition, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's act, or failure to act, was in the best interest of the Company. In the event of a dispute concerning the application of this provision, no claim by the Company that Cause exists shall be given effect unless the Company establishes to the Board and, in the event of an arbitration as contemplated by Section 14.2, to the arbitrator, by clear and convincing evidence that Cause exists. (G) "Change in Control" means the occurrence of an event described in any one of the following clauses (1) through (5): (1) any "person," as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (A) the Company or its Affiliates, (B) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or its Affiliates, and (C) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the Common Stock), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its Affiliates) representing 25% or more of the combined voting power of the Company's then outstanding voting securities; (2) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the Effective Date, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company's stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the Effective Date or whose appointment, election or nomination for election was previously so approved or recommended; (3) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or parent entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving or parent entity outstanding immediately afer such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as hereinabove defined), directly or indirectly, acquired 25% or more of the combined voting power of the Company's then outstanding securities (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its Affiliates); (4) the stockholders of the Company approve a plan of complete liquidation of the Company or there is consummated an agreement for the sale or disposition by the Company of assets having an aggregate book value at the time of such sale or disposition of more than 75% of the total book value of the Company's assets on a consolidated basis (or any transaction having a similar effect), other than any such sale or disposition by the Company (including by way of spin-off or other distribution) to an entity, at least 50% of the combined voting power of the voting securities of which are owned immediately following such sale or disposition by stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale or disposition; provided, however, that a Change in Control shall be deemed not to have occurred under this clause (4) if, immediately prior to the consummation of any sale or disposition of a business unit that is taken into account in determining whether a Change in Control has occurred, the Executive is employed by, and is party to a severance agreement with, such business unit; or (5) there is consummated the sale or other disposition by the Company, however effected, of at least two of the three primary business units of the Company, whether in a single transaction or in a series of transactions occurring within an 18- month period, and whether or not one or both of such business units constitute part of a larger enterprise at the time of the sale or other disposition; provided, however, that the Board of Directors of the Company may, upon notice to the Executive given at any time, terminate this clause (5) without the consent of the Executive, except that any such notice shall not be effective to terminate this clause (5) if a Change in Control occurs pursuant to this clause (5) within ninety (90) days after such notice is given. As used in clause (5) above: (A) "primary business units" means Con-Way Transportation Services, Inc., Emery Air Freight Corporation and Menlo Logistics, Inc., and (B) a "sale" or other disposition of a business unit includes: (i) a sale by the Company of the then outstanding shares of capital stock of the business unit having more than 50% of the then existing voting power of all outstanding securities of the business unit, whether by merger, consolidation or otherwise; (ii) the sale of all or substantially all of the assets of the business unit; and (iii) any other transaction or course of action (including, without limitation, a spin-off or other distribution) engaged in, directly or indirectly, by the Company or the business unit that has a substantially similar effect as the transactions of the type referred to in clause (i) or (ii) above; it being the intent that a sale or other disposition of a business unit occurs even if (x) such business unit constitutes part of a larger enterprise at the time of the relevant sale or disposition transaction and (y) such sale or disposition transaction involves such larger enterprise (such as, by way of example and without limitation, when one or more business units are subsidiaries of a common parent and either (I) the common parent is spun-off or (II) there is consummated a sale of the stock or other equity interests in the common parent having more than 50% of the then existing voting power of all outstanding securities of the common parent). The foregoing notwithstanding, a sale or other disposition of a business unit shall not be deemed to have occurred for purposes of clause (5) above (x) except in the case of a transaction described in clause (ii) above, so long as the Company or any of its Affiliates (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended), individually or collectively, own the then outstanding shares of capital stock of the business unit having 50% or more of the then existing voting power of all outstanding securities of the business unit, or (y) in the event of the sale of shares of capital stock of the business unit (or the sale of shares or other equity interests in any parent company of such business unit) to any trustee or other fiduciary holding securities under an employee benefit plan of the Company, the business unit or any other Affiliate of the Company. (H) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (I) "Company" shall mean CNF Inc. and, except in determining under Section 15(G) hereof whether or not any Change in Control of the Company has occurred, shall include any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise. In addition, when used in the context of the Executive's employment, "Company" shall mean the Company or any of its subsidiaries. (J) "Common Stock" shall mean the common stock, par value $0.625 per share, of the Company. (K) "Date of Termination" shall have the meaning set forth in Section 7.2 hereof. (L) "Disability" shall be deemed the reason for the termination by the Company of the Executive's employment, if, as a result of the Executive's incapacity due to disability, including physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with the Company for a period of six (6) consecutive months, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties. (M) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. (N) "Excise Tax" shall mean any excise tax imposed under Section 4999 of the Code. (O) "Executive" shall mean the individual named in the first paragraph of this Agreement. (P) "Good Reason" for termination by the Executive of the Executive's employment shall mean the occurrence (without the Executive's express written consent) after any Change in Control and during the Term of any one of the following acts by the Company, or failures by the Company to act, unless such act or failure to act is corrected within 30 days of receipt by the Company of notice of the Executive's intent to terminate for Good Reason hereunder: (I) the failure of the successor company, following the Change in Control, to assume this Agreement and all obligations hereunder, as of the date of such Change in Control; (II) the assignment to the Executive of any duties inconsistent with the Executive's status as an executive of the Company or a substantial adverse alteration in the nature or status of the Executive's responsibilities from those in effect immediately prior to the Change in Control; (III) a reduction by the Company in the Executive's annual base salary (except for across- the-board salary reductions similarly affecting all executives of the Company and all executives of any Person in control of the Company) or incentive compensation opportunity (both short- term and long-term, valued in a manner consistent with the valuation methodology used by the Company prior to the Change in Control), each as in effect immediately prior to the Change in Control or as the same may thereafter be increased from time to time; (IV) the relocation of the Executive's principal place of employment to a location that results in an increase in the Executive's one way commute of at least 50 miles more than the Executive's one way commute immediately prior to the Change in Control, except for required travel on the Company's business to an extent substantially consistent with the Executive's business travel obligations immediately prior to the Change in Control; (V) the failure by the Company to pay to the Executive when due any portion of the Executive's current compensation; (VI) the failure by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of the Company's pension, savings, life insurance, medical, health and accident, or disability plans in which the Executive was participating immediately prior to the Change in Control (except for across the board changes similarly affecting all or substantially all employees of the Company and any entity in control of the Company), the taking of any other action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive immediately prior to the Change in Control, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled. The Executive's right to terminate the Executive's employment for Good Reason shall not be affected by the Executive's incapacity due to disability, including physical or mental illness. The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. Notwithstanding anything in this Agreement to the contrary, if the Executive's employment is terminated by the Executive for any reason during the one-month period commencing on the first anniversary of a Change in Control, such termination shall be deemed a termination of the Executive's employment for Good Reason. (Q) "Gross_Up Payment" shall have the meaning set forth in Section 6.2 hereof. (R) "Notice of Termination" shall have the meaning set forth in Section 7.1 hereof. (S) "Pension Plan" shall mean any tax-qualified, supplemental or excess benefit pension plan maintained by the Company and any other plan or agreement entered into between the Executive and the Company which is designed to provide the Executive with supplemental retirement benefits. (T) "Person" shall mean any person, as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (A) the Company or its Affiliates, (B) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or its Affiliates, and (C) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the Common Stock) (U) "Potential Change in Control" shall be deemed to have occurred if: (I) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control; (II) the Company or any Person publicly announces an intention to take or to consider taking actions, including but not limited to proxy contests or consent solicitations, which, if consummated, would constitute a Change in Control; (III) any Person becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 15% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company's then outstanding securities (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its affiliates); or (IV) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred. (V) "Retirement" shall be deemed the reason for the termination by the Executive of the Executive's employment if such employment is terminated in accordance with the Company's retirement policy, including early retirement, generally applicable to its salaried employees. (W) "Severance Payments" shall have the meaning set forth in Section 6.1 hereof. (X) "Tax Counsel" shall have the meaning set forth in Section 6.2 hereof. (Y) "Term" shall mean the period of time described in Section 2 hereof (including any extension, continuation or termination described therein). (Z) "Total Payments" shall mean those payments so described in Section 6.2 hereof. CNF INC. By: /s/ Gregory L. Quesnel -------------------------------- Name: Gregory L. Quesnel Title: President and Chief Executive Officer EXECUTIVE Name: Eberhard G.H. Schmoller Address: 409 Claremont Way Menlo Park, CA 94025 16chw2933 EXHIBIT A WAIVER AND RELEASE OF CLAIMS In consideration of, and subject to, the payment to be made to me by CNF Inc. (the "Company") of the "Severance Payments" (as defined in the Amended and Restated Severance Agreement, dated as of December 4, 2001, entered into between me and the Company (the "Agreement")), I hereby waive any claims I may have for employment or re-employment by the Company or any subsidiary of the Company after the date hereof, and I further agree to and do release and forever discharge the Company or any subsidiary of the Company, and their respective past and present officers, directors, shareholders, insurers, employees and agents from any and all claims and causes of action, known or unknown, arising out of or relating to my employment with the Company or any subsidiary of the Company, or the termination thereof, including, but not limited to, wrongful discharge, breach of contract, tort, fraud, the Civil Rights Acts, Age Discrimination in Employment Act, Employee Retirement Income Security Act of 1974, Americans with Disabilities Act, or any other federal, state or local legislation or common law relating to employment or discrimination in employment or otherwise. Notwithstanding the foregoing or any other provision hereof, nothing in this Waiver and Release of Claims shall adversely affect (i) my rights under the Agreement; (ii) my rights to benefits other than severance benefits under plans, programs and arrangements of the Company or any subsidiary or parent of the Company which are accrued but unpaid as of the date of my termination; or (iii) my rights to indemnification under any indemnification agreement, applicable law and the certificates of incorporation and bylaws of the Company and any subsidiary or parent of the Company, and my rights under any director's and officers' liability insurance policy covering me. I acknowledge that I have signed this Waiver and Release of Claims voluntarily, knowingly, of my own free will and without reservation or duress, and that no promises or representations have been made to me by any person to induce me to do so other than the promise of payment set forth in the first paragraph above and the Company's acknowledgment of my rights reserved under the second paragraph above. I understand that this release will be deemed to be an application for benefits under the Agreement and that my entitlement thereto shall be governed by the terms and conditions of the Agreement and any applicable plan. I expressly hereby consent to such terms and conditions. I acknowledge that I have been given not less than forty-five (45) days to review and consider this Waiver and Release of Claims (unless I have signed a written waiver of such review and consideration period), and that I have had the opportunity to consult with an attorney or other advisor of my choice and have been advised by the Company to do so if I choose. I may revoke this Waiver and Release of Claims seven days or less after its execution by providing written notice to the Company. I acknowledge that it is my intention and the intention of the Company in executing this Waiver and Release of Claims that the same shall be effective as a bar to each and every claim, demand and cause of action hereinabove specified. In furtherance of this intention, I hereby expressly waive any and all rights and benefits conferred upon me by the provisions of SECTION 1542 OF THE CALIFORNIA CIVIL CODE, to the extent applicable to me, and expressly I consent that this Waiver and Release of Claims shall be given full force and effect according to each and all of its express terms and provisions, including as well those related to unknown and unsuspected claims, demands and causes of action, if any, as well as those relating to any other claims, demands and causes of action hereinabove specified. SECTION 1542 provides: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR." I acknowledge that I may hereafter discover claims or facts in addition to or different from those which I now know or believe to exist with respect to the subject matter of this Waiver and Release of Claims and which, if known or suspected at the time of executing this Waiver and Release of Claims, may have materially affected this settlement. Finally, I acknowledge that I have read this Waiver and Release of Claims and understand all of its terms. /s/ Eberhard G.H. Schmoller --------------------------------- Signature of Executive Print Name Date Signed EX-10 11 ex1030.txt CNF INC. VALUE MANAGEMENT PLAN (2004 AMENDMENT AND RESTATEMENT) 1. Purpose; Effective Date; Administration 1.1 Purpose The purpose of the CNF Inc. Value Management Plan (the "Plan"), as hereby amended and restated, is to provide eligible employees of CNF Inc. (the "Company") and its subsidiaries or affiliates with long term compensation that is linked to the Company's mission of creating long-term shareholder value. This Plan is adopted pursuant to the Company's 1997 Equity and Incentive Plan, as amended (the "1997 Plan") in order to provide for the grant of "Other Cash-Based Awards" (as defined in the 1997 Plan), and is subject to all of the applicable terms and provisions of the 1997 Plan. 1.2 Effective Date The Plan shall be effective December 1, 1999 (the "Effective Date"). The effective date of this 2004 Amendment and Restatement of the Plan is December 1, 2003[January 1, 2004]. The terms and conditions applicable to awards made with respect to Award Cycles commencing prior to January 1, 2004 shall be subject to the terms of this Plan as in effect immediately prior to this 2004 Amendment and Restatement 1.3 Administration The Plan shall be administered by the Compensation Committee (the "Committee") of the Board of Directors of the Company (the "Board"). The Committee shall interpret the Plan and determine the amount, time and form of award payments for eligible employees. Decisions by the Committee are final and binding on all parties. 2. Award Cycles; Eligibility; Vesting 2.1 Award Cycles "Award Cycle" means a period of three consecutive calendar years. Each Award Cycle shall be identified by its first calendar year. For example, the 2004 Award Cycle runs from January 1, 2004 to December 31, 2006. 2.2 Award Payout "Award Payout" means, for any Award Cycle, the cash award that a Participant is eligible to receive under the Plan for that Award Cycle. 2.3 Eligibility The Committee shall designate the employees eligible to participate in an Award Cycle. A "Participant" must be an employee of the Company or one of its subsidiaries or affiliates as designated by the Committee, and must be designated as eligible as of the beginning of each Award Cycle. The Company shall maintain in its records a list of Participants for each Award Cycle. The Committee shall also designate, for each Participant during each Award Cycle, whether such Participant's Absolute Performance Payout (as such term is defined in Section 3.1) Award Payout is to be based upon the performance of (i) the Company, (ii) a subsidiary of the Company, (iii) a business unit or division of the Company or a subsidiary, or (iv) a combination of the foregoing. Any entity upon whose performance an Absolute Performance Payout Award Payout is based, in whole or in part, whether such entity is the Company, a subsidiary of the Company, or a business unit or division of the Company or a subsidiary, is referred to herein as a "Business Unit." The terms and conditions applicable to awards made to Participants for an Award Cycle need not be identical. 2.4 Vesting A Participant shall become vested in his or her right to receive an Award Payout if the Participant is continuously employed by the Company or one of its Business Units throughout the entire applicable Award Cycle or until the occurrence of one of the events described below. A Participant who terminates from the Company before the last day of an Award Cycle shall forfeit his or her right to receive an Award Payout unless the departure coincides with one of the following (in which case the Participant's right to receive an Award Payout shall vest): (a) The Participant's death. (b) The Participant's disability as defined in the Company's Long Term Disability Plan or a successor to that plan. (c) The Participant's (i) early retirement under the Company's tax qualified Retirement Plan if the Participant elects within 60 days from the last day of regular employment to receive monthly pension benefits under such Retirement Plan starting on the first day of the month following the last day of employment, or (ii) normal or deferred retirement under such Retirement Plan. In addition, a Participant's right to receive an Award Payout shall vest upon the occurrence of a Change in Control.1 Award Payouts that vest pursuant to this Section 2.4 shall be payable as provided in Section 3.3. 2.5 Change in Control "Change in Control" means the occurrence of an event described in any one of the following clauses (a) through (f): (a) any "person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than (A) the Company or its affiliates, (B) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or its affiliates, and (C) any corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of the common stock, par value $0.625 per share, of the Company), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its affiliates) representing 25% or more of the combined voting power of the Company's then outstanding voting securities; (b) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the Effective Date, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company's stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the Effective Date or whose appointment, election or nomination for election was previously so approved or recommended; (c) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or parent entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving or parent entity outstanding immediately after such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as defined above), directly or indirectly, acquired 25% or more of the combined voting power of the Company's then outstanding securities (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its affiliates); (d) the stockholders of the Company approve a plan of complete liquidation of the Company or there is consummated an agreement for the sale or disposition by the Company of assets having an aggregate book value at the time of such sale or disposition of more than 75% of the total book value of the Company's assets on a consolidated basis (or any transaction having a similar effect), other than any such sale or disposition by the Company (including by way of spin-off or other distribution) to an entity, at least 50% of the combined voting power of the voting securities of which are owned immediately following such sale or disposition by stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale or disposition; (e) there is consummated the sale or other disposition by the Company, however effected, of at least two of the three primary business units of the Company, whether in a single transaction or in a series of transactions occurring within an 18-month period, and whether or not one or both of such business units constitute part of a larger enterprise at the time of the sale or other disposition; provided, however, that this clause (e) shall apply only to GranteesParticipants who are employed by the Company and shall not apply to GranteesParticipants who are employed by the Company's business units; and provided further, that the Board may, upon notice to the affected GranteesParticipants given at any time, terminate this clause (e) without the consent of such GranteesParticipants, except that any such notice shall not be effective to terminate this clause (e) if a Change in Control occurs pursuant to this clause (e) within 90 days after such notice is given; or (f) there is consummated the sale or other disposition, however effected, of one of the primary business units of the Company, or the sale or other disposition by the Company, however effected, of the Emery Worldwide Airlines, Inc. business unit, whether or not such business unit constitutes part of a larger enterprise at the time of the sale or other disposition; provided, however, that this , clause (f) shall apply only to GranteesParticipants (i) who immediately prior to such sale or other disposition, were employed by the business unit that is sold or otherwise disposed of and (ii) who are not employed by the Company or any of its Subsidiaries immediately following such sale or other disposition. As used in clauses (e) and (f) above: (i) "primary business units" means Con-Way Transportation Services, Inc., Menlo Worldwide Forwarding, Inc. and Menlo Logistics, Inc., and (ii) a "sale or other disposition" of a business unit includes: (A) a sale by the Company of the then outstanding shares of capital stock of the business unit having more than 50% of the then existing voting power of all outstanding securities of the business unit, whether by merger, consolidation or otherwise; (B) the sale of all or substantially all of the assets of the business unit; and (C) any other transaction or course of action (including, without limitation, a spin-off or other distribution) engaged in, directly or indirectly, by the Company or the business unit that has a substantially similar effect as the transactions of the type referred to in clause (A) or (B) above; it being the intent that a sale or other disposition of a business unit occurs even if (x) such business unit constitutes part of a larger enterprise at the time of the relevant sale or disposition transaction and (y) such sale or disposition transaction involves such larger enterprise (such as, by way of example and without limitation, when one or more business units are subsidiaries of a common parent and either (A) the common parent is spun-off or (B) there is consummated a sale of the stock or other equity interests in the common parent having more than 50% of the then existing voting power of all outstanding securities of the common parent). The foregoing notwithstanding, (1) a sale or other disposition of a business unit shall not be deemed to have occurred for purposes of clauses (e) and (f) above (x) except in the case of a transaction described in clause (B) above, so long as the Company or any of its Affiliates (as such term is defined in Rule 12b-2 under the Exchange Act), individually or collectively, own the then outstanding shares of capital stock of the business unit having 50% or more of the then existing voting power of all outstanding securities of the business unit, or (y) in the event of the sale of shares of capital stock of the business unit (or the sale of shares or other equity interests in any parent company of such business unit) to any trustee or other fiduciary holding securities under an employee benefit plan of the Company, the business unit or any other Affiliate of the Company, and (2) a sale or other disposition of a business unit shall not be deemed to have occurred for purposes of clause (f) above in the event of the sale or distribution of shares of capital stock (including, without limitation, a spin-off) of the business unit to shareholders of the Company, or the sale of assets of the business unit to any corporation or other entity owned, directly or indirectly, by the shareholders of the Company, in either case in substantially the same proportions as their ownership of stock in the Company. 3. Awards 3.1 Award Payouts Subject to Section 3.4 and the other terms and provisions of this Plan, a Participant shall be eligible to receive an Award Payout, payable as provided in Section 3.2, in an amount equal to the sum of such Participant's (i) Absolute Performance Payout and (ii) Relative Performance Payout. Establishment of Total Target Award. Not later than 90 days following the commencement of an Award Cycle, the Committee shall establish a Total Target Award or an Award Opportunity with respect to each Participant who is participating in such Award Cycle. Absolute Performance Component. Not later than 90 days following the commencement of an Award Cycle, the Committee shall establish the Absolute Performance Matrix for each Business Unit for that Award Cycle. As soon as practicable following the end of an Award Cycle, the Committee shall certify the Absolute Performance Payout Percentage for each Business Unit for such Award Cycle. the calculations with respect to the Company's Cumulative EBITDA and Average Pre-tax ROCE for such Award Cycle shall be performed by [the Company's outside auditors or such other party or parties as the Committee shall designate]. Within [45 days] following the end of an Award Cycle, the Company's achievement with respect to Cumulative EBITDA and Average Pre-tax ROCE, and the determination of each Participant's Absolute Performance Payout Percentage, shall be certified by the Committee. The Committee shall then determine the Participants' Absolute Performance Payouts. Relative Performance Component. Not later than 90 days following the commencement of an Award Cycle, the Committee shall establish the Relative Performance Table. As soon as practicable following the end of an Award Cycle, the Committee shall certify the Relative Performance Payout Percentage for such Award Cycle. the calculations with respect to the Company's TSR and the TSR of the component companies of the DJTA shall be performed by [the Company's outside auditors or such other party or parties as the Committee shall designate]. Within [45 days] following the end of an Award Cycle, the Company's TSR ranking against the TSR of the component companies of the DJTA, and the determination of each Participant's Relative Performance Payout Percentage, shall be certified by the Committee. The Committee shall then determine the Participants' Relative Performance Payout. For purposes of this Section 3.1, the following terms shall have the meanings hereinafter set forth: "Absolute Performance Matrix" means a table comprised of two axes, one axis showing Cumulative EBITDA targets for the applicable Business Unit(s) for an Award Cycle, and the second axis showing Average ROCE targets for the applicable Business Unit(s). No Absolute Performance Payout will be made for performance below the minimum Cumulative EDITDA and Average ROCE shown on the Absolute Performance Matrix. Each Absolute Performance Matrix shall have a point at and below which no Absolute Performance Payout will be made and a point beyond which no additional Absolute Performance Payout will be made (with the maximum payout pursuant to each Absolute Performance Matrix being 200% of a Participant's Absolute Performance Target Award). The intersection points on the Absolute Performance Matrix shall be expressed as percentages. An illustrative example of an Absolute Performance Matrix is shown in Appendix A annexed hereto. "Absolute Performance Payout" means the product of (a) a Participant's Absolute Performance Target Award and (b) the Absolute Performance Payout Percentage. "Absolute Performance Payout Percentage" means a percentage indicated on the Absolute Performance Matrix for an Award Cycle which reflects the actual Cumulative EBITDA and Average ROCE of the applicable Business Unit(s) for such Award Cycle. For purposes of determining a Participant's Absolute Performance Payout Percentage, straight-line interpolation shall be utilized to the extent necessary to reflect results that fall between the percentages indicated on the Absolute Performance Matrix. "Absolute Performance Target Award" means the product, rounded to the nearest whole Dollar, of (a) a Participant's Total Target Award and (b) the fraction 2/3number 0.6667. "Average ROCE" means, with respect to a Business Unit for an Award Cycle, the arithmetic average of Return on Capital Employed of such Business Unit as determined for each year of the Award Cycle. "Award Opportunity" means a percentage of a Participant's Beginning Base Salary, which percentage shall be established by the Committee in its discretion. "Beginning Base Salary" means a Participant's annual base salary as as in effect during the first year at the time of the commencement of an Award Cycle, after giving effect to any adjustment made to such Participant's annual base salary in such year in connection with the annual review and adjustment of executive salaries generally. "Capital Employed" means, with respect to a Business Unit for each year during an Award Cycle, a twelve-month average, determined as of the end of such year, of total assets minus current liabilities, plus short-term debt and current maturities of long-term debt. "Cumulative EBITDA" means the sum of the EBITDA of the applicable Business Unit(s) for each year in the Award Cycle. "DJTA Companies" means, for any Award Cycle, the Dow Jones Transportation Average, as reported in the Wall Street Journal as of [____].companies (other than the Company) that were included in the Dow Jones Transportation Average for the entirety of such Award Cycle. "EBITDA" means, with respect to any year in an Award Cycle, the applicable Business Unit's earnings before interest, taxes, depreciation and amortization, calculated in accordance with GAAP. "GAAP" means [United States] generally accepted accounting principles. "Relative Performance Target Award" means the product, rounded to the nearest whole Dollar, of (a) a Participant's Total Target Award and (b) the fraction 1/3number 0.3333. "Relative Performance Payout" means the product of (a) a Participant's Relative Performance Target Award and (b) the Relative Performance Payout Percentage. "Relative Performance Payout Percentage" means a percentage indicated on the Relative Performance Table for an Award Cycle, which reflects the Company's applicable Business Unit'spercentile ranking in TSR for such Award Cycle against the component companies of the DJTA Companies. For purposes of determining a Participant's Relative Performance Payout Percentage, straight-line interpolation shall be utilized to the extent necessary to reflect results that fall between the percentile rankings indicated on the Relative Performance Table. "Relative Performance Table" means a table determined by the Committee for an Award Cycle, pursuant to which the TSR of the Company applicable Business Unit(s) for such Award Cycle shall be percentile ranked against the TSR of the component companies of the DJTA Companies for such Award Cycle. Each Relative Performance Table shall have a point at and below which no Relative Performance Payout shall be made and a point beyond which no additional Relative Performance Payout shall be made (the maximum payout pursuant to each Relative Performance Table shall be 200% of a Participant's Relative Performance Target Award). An illustrative example of a Relative Performance Table is shown in Appendix A attached hereto. "Return on Capital Employed" means, with respect to a Business Unit for each year of an Award Cycle, income before income taxes and interest expense of such Business Unit for such year, divided by Capital Employed of such Business Unit for such year. "Total Shareholder Return" or "TSR" for any company means the percentage (expressed as a decimal) obtained by dividing (i) the sum of (a) the appreciation in the value of a share of common stock of such company during an Award Cycle, as measured by the difference between the market price of such share of stock at the beginning and end dates of such Award Cycle, plus (b) the dividends payable on such share of common stock during such Award Cycle, divided by (ii) the market price of such share of stock at the beginning date of such Award Cycle. For purposes of determining "Total Shareholder Return," (x) the term "market price" shall mean the average closing price of such share of stock for the 60 trading days immediately preceding the applicable date, and (y) appropriate adjustments shall be made to reflect stock splits, reverse stock splits, spinoffs, recapitalizations and other similar transactions to the extent that they materially alter the equity value of a share of common stock. "Total Target Award" means, with respect to a Participant for an Award Cycle, such Participant's Beginning Base Salary multiplied by such Participant's Award Opportunity. 3.2 Payment of Award Except as otherwise provided in Section 3.3, the Company shall pay a Participant's award for an Award Cycle to the Participant in a lump sum of cash within 60 days after the end of such Award Cycle, unless the Participant has made a valid election to defer payment under the CNF Inc. Deferred Compensation Plan for Executives. 3.3 Payments Upon Early Vesting In the event that, pursuant to Section 2.4, a Participant shall become vested in his or her right to receive an Award Payout prior to the end of an Award Cycle, then (i) the Award Cycle applicable to such Participant shall be deemed to have ended (A) in the case of a Change in Control, as of the end of the month immediately preceding such Change in Control and (B) in all other cases, as of the end of the calendar year in which such vesting occurs, (ii) the Award Payout shall be determined pursuant to Section 3.1 based upon the actual performance of the applicable Business Unit(s) and the Company for such Award Cycle, and (iii) such Award Payout shall be paid to such Participant within 60 days after the end of such Award Cycle or, in the event of a Participant's death, as provided in the next paragraph. In the event of a Participant's death, the Award Payout payable to the Participant for an Award Cycle shall be paid to the Participant's Beneficiary. "Beneficiary" means the person or persons designated by the Participant pursuant to a beneficiary designation form properly completed and delivered to the Corporate Secretary. If no such beneficiary designation is made, then the award shall be paid to the Participant's estate. Payment to the Beneficiary shall be made within 60 days after the end of the applicable Award Cycle; provided, however, that if the Participant had elected deferral of the Award Payout under the Company's Deferred Compensation Plan for Executives with payment in installments, the Committee may choose, in its sole discretion upon application by the Beneficiary, to make payment to the Beneficiary in accordance with the elected installment schedule as though the date of death was the date of retirement. 3.4 Adjustments Subject to the terms of the 1997 Plan, in the event that the Committee determines (i) that the Award Payout payable to one or more Participants for an Award Cycle has been materially affected as a result of events or circumstances that were unanticipated at the beginning of the Award Cycle and/or extraordinary in nature and (ii) that the goals of the Plan would be frustrated if adjustments were not made to such Award Payouts, then the Committee, in its sole discretion, may make such adjustments to such Award Payouts as it deems appropriate, which adjustments may have the effect of increasing or decreasing the amount of the Award Payouts [(to the extent permitted under Section 162(m) of the Internal Revenue Code of 1986, as amended)] otherwise payable pursuant to this Plan. 3.5 Special Award Cycles Notwithstanding any provision thereof to the contrary, the Committee may elect at any time and from time to time to designate employees to participate in special Award Cycles, which may be periods of one, two or three years. All designations and determinations required under the Plan with respect to such special Award Cycles (including, without limitation, those under Section 2.3 and 3.1) shall be made prior to or within 90 days after the commencement of the special Award Cycle. 4. Amendment; Termination 4.1 Amendment The Committee may amend the Plan at any time by notice to the Participants, except that no amendment shall reduce the award determined for an Award Cycle that has ended before the date of the Amendment. 4.2 Termination The Committee may terminate the Plan at any time. Notwithstanding the termination of the Plan, the Award Payouts for each Award Cycle then in progress shall be calculated, and be payable, following the completion of each such Award Cycle, in accordance with the provisions of Sections 3.1 through 3.4. 5. Claims Procedure 5.1 Submission of Claims Any person claiming an award or requesting an interpretation, ruling or information under the Plan shall present the request in writing to the Committee, which shall respond in writing. 5.2 Initial Denial Notice of an initial denial shall normally be given within 90 days of receipt of the claim or request or no later than 180 days if special circumstances require an extension of time. The written notice of denial shall state the following: (a) The reasons for the denial, with specific reference to the Plan provisions on which the denial is based. (b) A description of any additional materials or information required and an explanation of why it is necessary. 5.3 Review of Denied Claim Any person whose claim or request is denied or who has not received a response within the time period described above may request review by notice to the Committee. The original decision shall be reviewed by the Committee, which may, but shall not be required to, grant the claimant a hearing. On review, whether or not there is a hearing, the claimant may have representation, examine pertinent documents and submit issues and comments in writing. 5.4 Decision on Review The decision on review shall ordinarily be made within 60 days. If an extension of time is required for a hearing or other special circumstances, the claimant shall be so notified and the time limit shall be 120 days. The decision shall be in writing and shall state the reasons and the relevant plan provisions. All decisions on review shall be final and bind all parties concerned. 6. General Provisions 6.1 Attorneys Fees If suit or action is instituted to enforce any rights under this Plan, the prevailing party may recover from the other party reasonable attorneys' fees at trial and on any appeal. 6.2 Applicable Law This Plan shall be governed by and construed in accordance with the laws of the State of California, except as preempted by federal law. 6.3 Notice Any notice under this Plan shall be in writing and shall be effective when actually delivered or, if mailed, when deposited as first class mail postage prepaid. Mail to the Company shall be directed to 3240 Hillview Avenue, Palo Alto, CA 94304, or to such other address as the Company may specify by notice to all Participants. Mailed notices to a Participant shall be directed to the Participant's last known home address shown in the Company's records. Notices to the Committee shall be sent to the Company's address. 6.4 No Assignment or Alienation The rights of a Participant or Beneficiary under this Plan are personal. No interest of a Participant or Beneficiary may be directly or indirectly assigned, transferred, or encumbered. A Participant's or Beneficiary's rights to awards payable under this Plan are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, or encumbrance. Such rights shall not be subject to the debts, contracts, liabilities, engagement or torts of the Participant or Beneficiary. 6.5 Tax Withholding The Company shall make any required withholding of income taxes and of the employee's share of FICA and any other applicable payroll taxes from payments made under this Plan. If such withholding is required before the date of payment of amounts deferred under this Plan, the Company shall pay the required amount and withhold it from other compensation payable to the Participant. 6.6 Payment to Impaired Person The Committee may decide that because of the mental or physical condition of a person entitled to payments, or because of other relevant factors, it is in the best interest to make payments to others for the benefit of the person entitled to payment. In that event, the Committee may, in its discretion, direct that payments be made to any of the following: (a) To a parent or spouse or a child of legal age. (b) To a legal guardian. (c) To one furnishing maintenance, support, or hospitalization. EX-10 12 ex1011.txt 13 AMENDED AND RESTATED SEVERANCE AGREEMENT THIS AGREEMENT, originally dated December 9, 1998, is amended and restated in its entirety as of July 31, 2000. This Agreement is made by and between CNF Transportation Inc., a Delaware corporation (the "Company"), and John H. Williford (the "Executive"). WHEREAS, the Company considers it essential to the best interests of its stockholders to foster the continued employment of key management personnel; and WHEREAS, the Board recognizes that, as is the case with many publicly held corporations, the possibility of a Change in Control exists and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders; and WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's management, including the Executive, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change in Control; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Company and the Executive hereby agree as follows: 1. Defined Terms. The definitions of capitalized terms used in this Agreement are provided in the last Section hereof. 2. Term of Agreement. The Term of this Agreement shall commence on the date hereof and shall continue in effect through December 31, 2001; provided, however, that commencing on January 1, 2001, and each January 1 thereafter, the Term shall automatically be extended for one additional year unless, not later than September 30 of the preceding year, the Company or the Executive shall have given notice not to extend the Term; and further provided, however, that if a Change in Control shall have occurred during the Term, the Term shall expire no earlier than twenty_four (24) months beyond the month in which such Change in Control occurred. 3. Company's Covenants Summarized. In order to induce the Executive to remain in the employ of the Company and in consideration of the Executive's covenants set forth in Section 4 hereof, the Company agrees, under the conditions described herein, to pay the Executive the Severance Payments and the other payments and benefits described herein. Except as provided in Section 9.1 hereof, no Severance Payments shall be payable under this Agreement unless there shall have been (or, under the terms of the second paragraph of Section 6.1 hereof, there shall be deemed to have been) a termination of the Executive's employment with the Company following a Change in Control and during the Term. This Agreement shall not be construed as creating an express or implied contract of employment and, except as otherwise agreed in writing between the Executive and the Company, the Executive (i) shall not have any right to be retained in the employ of the Company, and (ii) shall remain subject to discharge to the same extent as if this Agreement had not been entered into by the Company and the Executive. 4. Executive's Covenants. The Executive agrees that, subject to the terms and conditions of this Agreement, in the event of a Potential Change in Control during the Term, the Executive will remain in the employ of the Company until the earliest of (i) a date which is six (6) months from the date of such Potential Change in Control, (ii) the date of a Change in Control, (iii) the date of termination by the Executive of the Executive's employment for Good Reason or by reason of death, Disability or Retirement or (iv) the termination by the Company of the Executive's employment for any reason. 5. Compensation Other Than Severance Payments. 5.1 Following a Change in Control and during the Term, during any period that the Executive fails to perform the Executive's full-time duties with the Company as a result of incapacity due to disability, including physical or mental illness, the Company shall pay the Executive's full salary to the Executive at the rate in effect at the commencement of any such period, together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period (other than any disability plan), until the Executive's employment is terminated by the Company for Disability. 5.2 If the Executive's employment shall be terminated for any reason following a Change in Control and during the Term, the Company shall pay the Executive's full salary to the Executive through the Date of Termination at the rate in effect immediately prior to the Date of Termination or, if higher, the rate in effect immediately prior to the Change in Control, together with all compensation and benefits payable to the Executive through the Date of Termination under the terms of the Company's compensation and benefit plans, programs or arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the Change in Control. 5.3 If the Executive's employment shall be terminated for any reason following a Change in Control and during the Term, the Company shall pay to the Executive the Executive's normal post_termination compensation and benefits as such payments become due (other than severance payments under any severance plan as in effect immediately prior to the Date of Termination). Such post_termination compensation and benefits shall be determined under, and paid in accordance with, the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the Change in Control. 6. Severance Payments. 6.1 If the Executive's employment is terminated following a Change in Control and during the Term, other than (A) by the Company for Cause, (B) by reason of death or Disability, or (C) by the Executive without Good Reason, then the Company shall pay the Executive the amounts, and provide the Executive the benefits, described in this Section 6.1 ("Severance Payments") and Section 6.2, in addition to any payments and benefits to which the Executive is entitled under Section 5 hereof; provided, however, that the Executive shall not be entitled to the Severance Payments unless and until the Executive (or, in the event of the Executive's death, the executor, personal representative or administrator of the Executive's estate) has signed a written waiver and release substantially in the form set forth on Exhibit A hereto. For purposes of this Agreement, the Executive's employment shall be deemed to have been terminated following a Change in Control by the Company without Cause or by the Executive with Good Reason, if (i) during the Term the Executive's employment is terminated by the Company without Cause following a Potential Change in Control but prior to a Change in Control (whether or not a Change in Control ever occurs) and such termination was at the request or direction of a Person who has entered into an agreement with the Company the consummation of which would constitute a Change in Control, (ii) during the Term the Executive terminates his employment for Good Reason following a Potential Change in Control but prior to a Change in Control (whether or not a Change in Control ever occurs) and the circumstance or event which constitutes Good Reason occurs at the request or direction of such Person or (iii) during the Term the Executive's employment is terminated by the Company without Cause or by the Executive for Good Reason and such termination or the circumstance or event which constitutes Good Reason is otherwise in connection with or in anticipation of a Change in Control (whether or not a Change in Control ever occurs). An Executive will not be considered to have been terminated by reason of the divestiture of a facility, sale or other disposition of a business or business unit, or the outsourcing of a business activity with which the Executive is affiliated, notwithstanding the fact that such divestiture, sale or outsourcing takes place within two years following a Change in Control, if the Executive is offered comparable employment by the successor company and such successor company agrees to assume the Company's obligations to the Executive under this Agreement. (A) In lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination and in lieu of any severance benefit otherwise payable to the Executive, the Company shall pay to the Executive a lump sum severance payment, in cash, equal to three times the sum of (i) the Executive's annual base salary as in effect immediately prior to the Date of Termination or, if higher, in effect immediately prior to the Change in Control and (ii) the highest of (1) the average annual bonus earned by the Executive pursuant to any annual bonus or incentive plan maintained by the Company in respect of the three fiscal years ending immediately prior to the fiscal year in which occurs the Date of Termination, (2) the average annual bonus earned by the Executive pursuant to any such plan in respect of the three fiscal years ending immediately prior to the fiscal year in which occurs the Change in Control or (3) the target annual bonus in effect for the Executive for the fiscal year in which occurs the Date of Termination. (B) For the thirty-six (36) month period immediately following the Date of Termination, the Company shall arrange to provide the Executive and his dependents life, disability and accident benefits substantially similar to those provided to the Executive and his dependents immediately prior to the Date of Termination or, if more favorable to the Executive, those provided to the Executive and his dependents immediately prior to the Change in Control, at no greater cost to the Executive than the cost to the Executive immediately prior to such Date of Termination or Change in Control; provided, however, that any across the board changes to life, disability or accident benefits similarly affecting all or substantially all employees of the Company and any entity in control of the Company shall not be deemed a breach of this Section 6.1(B). Benefits otherwise receivable by the Executive pursuant to this Section 6.1(B) shall be reduced to the extent benefits of the same type are received by or made available to the Executive during the thirty-six (36) month period following the Executive's termination of employment (and any such benefits received by or made available to the Executive shall be reported to the Company by the Executive); provided, however, that the Company shall reimburse the Executive for the excess, if any, of the cost of such benefits to the Executive over such cost immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control. If the Executive dies during the thirty- six (36) month period following the Date of Termination, life, disability and accident benefit coverage of the Executive's dependents shall continue for the remainder of the thirty-six (36) month period. (C) Notwithstanding any provision of any health or dental insurance plan or health or dental benefit plan to the contrary, the Company shall provide health and dental benefits to the Executive and his dependents as if the Executive, as of the Date of Termination, has retired (i) under the terms of such plan as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control and (ii) with age plus years of service totaling 85 or more. Benefits otherwise receivable by the Executive pursuant to this Section 6.1(C) shall be reduced to the extent benefits of the same type are received by or made available to the Executive following the Executive's termination of employment (and any such benefits received by or made available to the Executive shall be reported to the Company by the Executive); provided, however, that the Company shall reimburse the Executive for the excess, if any, of the cost of such benefits to the Executive over such cost immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control. If the Executive dies at a time when health and dental benefits are being provided under this Section 6.1(C) to the Executive's dependents, the Company shall continue to provide the dependents with health and dental benefits for as long as, and on the same basis as, such benefits are provided to dependents of retired employees who have retired with age plus years of service totaling 85 or more. (D) In addition to the retirement benefits to which the Executive is entitled under each Pension Plan or any successor plan thereto, the Company shall pay the Executive a lump sum amount, in cash, equal to the excess of (i) the actuarial equivalent of the aggregate retirement pension (taking into account any early retirement subsidies associated therewith and determined as a straight life annuity commencing at the date (but in no event earlier than the third anniversary of the Date of Termination) as of which the actuarial equivalent of such annuity is greatest) which the Executive would have accrued under the terms of all Pension Plans (without regard to any amendment to any Pension Plan made subsequent to a Change in Control and on or prior to the Date of Termination, which amendment adversely affects in any manner the computation of retirement benefits thereunder), determined as if the Executive (A) were fully vested thereunder, (B) had accumulated (after the Date of Termination) thirty-six (36) additional months of service credit thereunder, (C) had attained an age which is three years older than the age the Executive had attained as of the Date of Termination and (D) had been credited under each Pension Plan during such period with compensation equal to the Executive's annual amount taken into account under Section 6.1(A) hereof, over (ii) the actuarial equivalent of the aggregate retirement pension (taking into account any early retirement subsidies associated therewith and determined as a straight life annuity commencing at the date (but in no event earlier than the Date of Termination) as of which the actuarial equivalent of such annuity is greatest) which the Executive had accrued pursuant to the provisions of the Pension Plans as of the Date of Termination. For purposes of this Section 6.1(D), "actuarial equivalent" shall be determined using the same assumptions utilized under the applicable Pension Plan immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control. 6.2 (A) Whether or not the Executive becomes entitled to the Severance Payments, if any of the payments or benefits received or to be received by the Executive in connection with a Change in Control or the Executive's termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any Person whose actions result in a Change in Control or any Person affiliated with the Company or such Person) (such payments or benefits, excluding the Gross-Up Payment, being hereinafter referred to as the "Total Payments") will be subject to the Excise Tax, the Company shall pay to the Executive an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive, after deduction of any Excise Tax on the Total Payments and any federal, state and local income and employment taxes and Excise Tax upon the Gross- Up Payment, shall be equal to the Total Payments. (B) For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) all of the Total Payments shall be treated as "parachute payments" (within the meaning of Section 280G(b)(2) of the Code) unless, in the opinion of tax counsel ("Tax Counsel") reasonably acceptable to the Executive and selected by the accounting firm which was, immediately prior to the Change in Control, the Company's independent auditor (the "Auditor"), such payments or benefits (in whole or in part) should not constitute parachute payments, including by reason of Section 280G(b)(4)(A) of the Code, (ii) all "excess parachute payments" within the meaning of Section 280G(b)(l) of the Code shall be treated as subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered (within the meaning of Section 280G(b)(4)(B) of the Code) in excess of the Base Amount allocable to such reasonable compensation, or should otherwise not be subject to the Excise Tax and (iii) the value of any noncash benefits or any deferred payment or benefit shall be determined by the Auditor in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the Date of Termination (or if there is no Date of Termination, then the date on which the Gross-Up Payment is calculated for purposes of this Section 6.2), net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. (C) In the event that the Excise Tax is finally determined to be less than the amount taken into account hereunder in calculating the Gross-Up Payment, the Executive shall repay to the Company, within five (5) business days following the time that the amount of such reduction in the Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income and employment taxes imposed on the Gross-Up Payment being repaid by the Executive, to the extent that such repayment results in a reduction in the Excise Tax and a dollar-for-dollar reduction in the Executive's taxable income and wages for purposes of federal, state and local income and employment taxes), plus interest on the amount of such repayment at 120% of the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder in calculating the Gross-Up Payment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest, penalties or additions payable by the Executive with respect to such excess) within five (5) business days following the time that the amount of such excess is finally determined. The Executive and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Total Payments. 6.3 The payments provided in subsections (A), (C) and (D) of Section 6.1 hereof and in subsections (A) and (B) of Section 6.2 hereof shall be made not later than the fifth day following the Date of Termination; provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Company shall pay to the Executive on such day an estimate, as determined in good faith by the Company or, in the case of payments under Section 6.2 hereof, in accordance with Section 6.2 hereof, of the minimum amount of such payments to which the Executive is clearly entitled and shall pay the remainder of such payments (together with interest on the unpaid remainder (or on all such payments to the extent the Company fails to make such payments when due) at 120% of the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth (30th) day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Executive, payable on the fifth (5th) business day after demand by the Company (together with interest at 120% of the rate provided in Section 1274(b)(2)(B) of the Code). At the time that payments are made under this Agreement, the Company shall provide the Executive with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations including, without limitation, any opinions or other advice the Company has received from Tax Counsel, the Auditor or other advisors or consultants (and any such opinions or advice which are in writing shall be attached to the statement). 6.4 The Company also shall pay to the Executive all legal fees and expenses incurred by the Executive in seeking in good faith to obtain or enforce any benefit or right provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Code to any payment or benefit provided hereunder. Such payments shall be made within five (5) business days after delivery of the Executive's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 7. Termination Procedures and Compensation During Dispute. 7.1 Notice of Termination. After a Change in Control and during the Term, any purported termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three_quarters (3/4) of the entire membership of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in detail. 7.2 Date of Termination. "Date of Termination," with respect to any purported termination of the Executive's employment after a Change in Control and during the Term, shall mean (i) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such thirty (30) day period), and (ii) if the Executive's employment is terminated for any other reason, the date specified in the Notice of Termination (which, in the case of a termination by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days, respectively, from the date such Notice of Termination is given). 8. No Mitigation. The Company agrees that, if the Executive's employment with the Company terminates during the Term, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 hereof. Further, the amount of any payment or benefit provided for in this Agreement (other than to the extent provided in Section 6.1(B) and 6.1(C) hereof) shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise. 9. Successors; Binding Agreement. 9.1 In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive's employment for Good Reason after a Change in Control, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. 9.2 This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate. 10. Notices. All notices and other communications provided for in this Agreement (i) shall be in writing, (ii) shall be hand delivered, sent by overnight courier or by United States registered mail, return receipt requested and postage prepaid, addressed, in the case of the Executive, to the address inserted below the Executive's signature on the final page hereof and, if to the Company, to the address set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, and (iii) shall be effective only upon actual receipt. To the Company: CNF Transportation Inc. 3240 Hillview Avenue Palo Alto, CA 94304 Attention: General Counsel 11. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or of any lack of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement supersedes any other agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof which have been made by either party; provided, however, that this Agreement shall supersede any written agreement setting forth the terms and conditions of the Executive's employment with the Company only in the event that the Executive's employment with the Company is terminated on or following a Change in Control, by the Company other than for Cause or by the Executive for Good Reason. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and the Executive under this Agreement which by their nature may require either partial or total performance after the expiration of the Term (including, without limitation, those under Sections 6 and 7 hereof) shall survive such expiration. 12. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 13. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 14. Settlement of Disputes; Arbitration. 14.1 All claims by the Executive for benefits under this Agreement shall be directed to and determined by the Board and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive's claim has been denied. 14.2 Any further dispute or controversy arising under or in connection with this Agreement shall be finally settled exclusively by arbitration in Palo Alto, California, in accordance with the rules of the American Arbitration Association then in effect; provided, however, that the evidentiary standards set forth in this Agreement shall apply. Judgment may be entered on the arbitrator's award in any court having jurisdiction. 15. Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated below: (A) "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act. (B) "Auditor" shall have the meaning set forth in Section 6.2 hereof. (C) "Base Amount" shall have the meaning set forth in Section 280G(b)(3) of the Code. (D) "Beneficial Owner" shall have the meaning set forth in Rule 13d_3 under the Exchange Act. (E) "Board" shall mean the Board of Directors of the Company. (F) "Cause" for termination by the Company of the Executive's employment shall mean (i) the willful and continued failure by the Executive to substantially perform the Executive's duties with the Company (other than any such failure resulting from the Executive's incapacity due to disability, including physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination for Good Reason by the Executive pursuant to Section 7.1 hereof) after a written demand for substantial performance is delivered to the Executive by the Board, which demand specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive's duties, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of this definition, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's act, or failure to act, was in the best interest of the Company. In the event of a dispute concerning the application of this provision, no claim by the Company that Cause exists shall be given effect unless the Company establishes to the Board and, in the event of an arbitration as contemplated by Section 14.2, to the arbitrator, by clear and convincing evidence that Cause exists. (G) A "Change in Control" means the occurrence of any one of the following events: (I) any "person," as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (A) the Company or its Affiliates, (B) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or its Affiliates and (C) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the Common Stock), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its Affiliates) representing 25% or more of the combined voting power of the Company's then outstanding voting securities; (II) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the date hereof, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company's stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors as of the date hereof or whose appointment, election or nomination for election was previously so approved or recommended; (III) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or parent entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving or parent entity outstanding immediately afer such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as hereinabove defined), directly or indirectly, acquired 25% or more of the combined voting power of the Company's then outstanding securities (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its Affiliates); or (IV) the stockholders of the Company approve a plan of complete liquidation of the Company or there is consummated an agreement for the sale or disposition by the Company of assets having an aggregate book value at the time of such sale or disposition of more than 75% of the total book value of the Company's assets on a consolidated basis (or any transaction having a similar effect), other than any such sale or disposition by the Company (including by way of spin-off or other distribution) to an entity, at least 50% of the combined voting power of the voting securities of which are owned immediately following such sale or disposition by stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale or disposition; provided, however, that a Change in Control shall be deemed not to have occurred under this clause (IV) if, immediately prior to the consummation of any sale or disposition of a business unit that is taken into account in determining whether a Change in Control has occurred, the Executive is employed by, and is party to a severance agreement with, such business unit. (H) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (I) "Company" shall mean CNF Transportation Inc. and, except in determining under Section 15(G) hereof whether or not any Change in Control of the Company has occurred, shall include any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise. In addition, when used in the context of the Executive's employment, "Company" shall mean the Company or any of its subsidiaries. (J) "Common Stock" shall mean the common stock, par value $0.625 per share, of the Company. (K) "Date of Termination" shall have the meaning set forth in Section 7.2 hereof. (L) "Disability" shall be deemed the reason for the termination by the Company of the Executive's employment, if, as a result of the Executive's incapacity due to disability, including physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with the Company for a period of six (6) consecutive months, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties. (M) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. (N) "Excise Tax" shall mean any excise tax imposed under Section 4999 of the Code. (O) "Executive" shall mean the individual named in the first paragraph of this Agreement. (P) "Good Reason" for termination by the Executive of the Executive's employment shall mean the occurrence (without the Executive's express written consent) after any Change in Control and during the Term of any one of the following acts by the Company, or failures by the Company to act, unless such act or failure to act is corrected within 30 days of receipt by the Company of notice of the Executive's intent to terminate for Good Reason hereunder: (I) the failure of the successor company, following the Change in Control, to assume this Agreement and all obligations hereunder, as of the date of such Change in Control; (II) the assignment to the Executive of any duties inconsistent with the Executive's status as an executive of the Company or a substantial adverse alteration in the nature or status of the Executive's responsibilities from those in effect immediately prior to the Change in Control; (III) a reduction by the Company in the Executive's annual base salary (except for across- the-board salary reductions similarly affecting all executives of the Company and all executives of any Person in control of the Company) or incentive compensation opportunity (both short- term and long-term, valued in a manner consistent with the valuation methodology used by the Company prior to the Change in Control), each as in effect immediately prior to the Change in Control or as the same may thereafter be increased from time to time; (IV) the relocation of the Executive's principal place of employment to a location that results in an increase in the Executive's one way commute of at least 50 miles more than the Executive's one way commute immediately prior to the Change in Control, except for required travel on the Company's business to an extent substantially consistent with the Executive's business travel obligations immediately prior to the Change in Control; (V) the failure by the Company to pay to the Executive when due any portion of the Executive's current compensation; (VI) the failure by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of the Company's pension, savings, life insurance, medical, health and accident, or disability plans in which the Executive was participating immediately prior to the Change in Control (except for across the board changes similarly affecting all or substantially all employees of the Company and any entity in control of the Company), the taking of any other action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive immediately prior to the Change in Control, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled. The Executive's right to terminate the Executive's employment for Good Reason shall not be affected by the Executive's incapacity due to disability, including physical or mental illness. The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. Notwithstanding anything in this Agreement to the contrary, if the Executive's employment is terminated by the Executive for any reason during the one-month period commencing on the first anniversary of a Change in Control, such termination shall be deemed a termination of the Executive's employment for Good Reason. (Q) "Gross-Up Payment" shall have the meaning set forth in Section 6.2 hereof. (R) "Notice of Termination" shall have the meaning set forth in Section 7.1 hereof. (S) "Pension Plan" shall mean any tax-qualified, supplemental or excess benefit pension plan maintained by the Company and any other plan or agreement entered into between the Executive and the Company which is designed to provide the Executive with supplemental retirement benefits. (T) "Person" shall mean any person, as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (A) the Company or its Affiliates, (B) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or its Affiliates, and (C) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the Common Stock) (U) "Potential Change in Control" shall be deemed to have occurred if: (I) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control; (II) the Company or any Person publicly announces an intention to take or to consider taking actions, including but not limited to proxy contests or consent solicitations, which, if consummated, would constitute a Change in Control; (III) any Person becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 15% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company's then outstanding securities (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its affiliates); or (IV) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred. (V) "Retirement" shall be deemed the reason for the termination by the Executive of the Executive's employment if such employment is terminated in accordance with the Company's retirement policy, including early retirement, generally applicable to its salaried employees. (W) "Severance Payments" shall have the meaning set forth in Section 6.1 hereof. (X) "Tax Counsel" shall have the meaning set forth in Section 6.2 hereof. (Y) "Term" shall mean the period of time described in Section 2 hereof (including any extension, continuation or termination described therein). (Z) "Total Payments" shall mean those payments so described in Section 6.2 hereof. CNF TRANSPORTATION INC. By: /s/ Gregory L. Quesnel ----------------------------- Name: Gregory L. Quesnel Title: President and Chief Executive Officer EXECUTIVE Name: John H. Williford Address: 15 Neuman Lane Woodside, CA 94062 16chw2939 EXHIBIT A WAIVER AND RELEASE OF CLAIMS In consideration of, and subject to, the payment to be made to me by CNF Transportation Inc. (the "Company") of the "Severance Payments" (as defined in the Amended and Restated Severance Agreement, dated as of July 31, 2000, entered into between me and the Company (the "Agreement")), I hereby waive any claims I may have for employment or re-employment by the Company or any subsidiary of the Company after the date hereof, and I further agree to and do release and forever discharge the Company or any subsidiary of the Company, and their respective past and present officers, directors, shareholders, insurers, employees and agents from any and all claims and causes of action, known or unknown, arising out of or relating to my employment with the Company or any subsidiary of the Company, or the termination thereof, including, but not limited to, wrongful discharge, breach of contract, tort, fraud, the Civil Rights Acts, Age Discrimination in Employment Act, Employee Retirement Income Security Act of 1974, Americans with Disabilities Act, or any other federal, state or local legislation or common law relating to employment or discrimination in employment or otherwise. Notwithstanding the foregoing or any other provision hereof, nothing in this Waiver and Release of Claims shall adversely affect (i) my rights under the Agreement; (ii) my rights to benefits other than severance benefits under plans, programs and arrangements of the Company or any subsidiary or parent of the Company which are accrued but unpaid as of the date of my termination; or (iii) my rights to indemnification under any indemnification agreement, applicable law and the certificates of incorporation and bylaws of the Company and any subsidiary or parent of the Company, and my rights under any director's and officers' liability insurance policy covering me. I acknowledge that I have signed this Waiver and Release of Claims voluntarily, knowingly, of my own free will and without reservation or duress, and that no promises or representations have been made to me by any person to induce me to do so other than the promise of payment set forth in the first paragraph above and the Company's acknowledgment of my rights reserved under the second paragraph above. I understand that this release will be deemed to be an application for benefits under the Agreement and that my entitlement thereto shall be governed by the terms and conditions of the Agreement and any applicable plan. I expressly hereby consent to such terms and conditions. I acknowledge that I have been given not less than forty-five (45) days to review and consider this Waiver and Release of Claims (unless I have signed a written waiver of such review and consideration period), and that I have had the opportunity to consult with an attorney or other advisor of my choice and have been advised by the Company to do so if I choose. I may revoke this Waiver and Release of Claims seven days or less after its execution by providing written notice to the Company. I acknowledge that it is my intention and the intention of the Company in executing this Waiver and Release of Claims that the same shall be effective as a bar to each and every claim, demand and cause of action hereinabove specified. In furtherance of this intention, I hereby expressly waive any and all rights and benefits conferred upon me by the provisions of SECTION 1542 OF THE CALIFORNIA CIVIL CODE, to the extent applicable to me, and expressly I consent that this Waiver and Release of Claims shall be given full force and effect according to each and all of its express terms and provisions, including as well those related to unknown and unsuspected claims, demands and causes of action, if any, as well as those relating to any other claims, demands and causes of action hereinabove specified. SECTION 1542 provides: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR." I acknowledge that I may hereafter discover claims or facts in addition to or different from those which I now know or believe to exist with respect to the subject matter of this Waiver and Release of Claims and which, if known or suspected at the time of executing this Waiver and Release of Claims, may have materially affected this settlement. Finally, I acknowledge that I have read this Waiver and Release of Claims and understand all of its terms. /s/ John H. Williford ---------------------- Signature of Executive Print Name Date Signed EX-10 13 ex1012.txt Execution Copy 2 AMENDMENT NO.1 TO AMENDED AND RESTATED SEVERANCE AGREEMENT BY AND BETWEEN CNF INC. AND JOHN H. WILLIFORD Effective January 1, 2003 This Amendment No. 1 (this "Amendment") is made to the Amended and Restated Severance Agreement as of July 31, 2000 by and between CNF Inc. (formerly CNF Transportation Inc.), a Delaware corporation (the "Company"), and John H. Williford (the "Executive") (the "Severance Agreement"). WHEREAS, on July 31, 2000, the Company and the Executive entered into this Severance Agreement; WHEREAS, the Board of Directors of the Company has determined that it is in the best interests of the Company and of its stockholders to amend the Severance Agreement; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained in this Amendment, the Company and the Executive agree as follows (capitalized terms used without definition have the meanings given to those terms in the Severance Agreement): 1. Amendment to Severance Payment. The severance payment set forth in Section 6.1(A) of the Severance Agreement shall be amended in its entirety to read as follows: (A) In lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination and in lieu of any severance benefit otherwise payable to the Executive, the Company shall pay to the Executive a lump sum severance payment, in cash, equal to three times the sum of (i) the Executive's annual base salary as in effect immediately prior to the Date of Termination or, if higher, in effect immediately prior to the Change in Control and (ii) the average annual bonus earned by the Executive pursuant to any annual bonus or incentive plan maintained by the Company in respect of the three fiscal years ending immediately prior to the fiscal year in which occurs the Change in Control. 2. Amendment to Additional Retirement Benefits. Section 6.1(D) of the Severance Agreement shall be deleted. 3. Amendment to Definition of the Term "Good Reason". Section 15(P) of the Severance Agreement (definition of the term "Good Reason") shall be amended by deleting the following paragraph at the end of Section 15(P): "Notwithstanding anything in this Agreement to the contrary, if the Executive's employment is terminated by the Executive for any reason during the one-month period commencing on the first anniversary of a Change in Control, such termination shall be deemed a termination of the Executive's employment for Good Reason." 4. Name Chang. The name of the Company has been changed to "CNF Inc." and all references in the Severance Agreement to "CNF Transportation Inc." shall be changed to references to "CNF Inc." 5. Effective Date. The effective date of this Amendment shall be January 1, 2003. Except as expressly amended, the Severance Agreement remains unchanged and in full force and effect. CNF INC. By: /s/ Gregory L. Quesnel ----------------------------- Name: Gregory L. Quesnel Title: President and Chief Executive Officer EXECUTIVE By: /s/ John H. Williford ----------------------------- Name: John H. Williford Address: 15 Neuman Lane Woodside, CA 94062 EX-10 14 ex1013.txt 1 AMENDMENT NO. 2 TO AMENDED AND RESTATED SEVERANCE AGREEMENT BY AND BETWEEN CNF INC. AND JOHN H. WILLIFORD This Amendment No. 2 (this "Amendment") is made to the Amended and Restated Severance Agreement dated as of July 31, 2000, as amended by Amendment No. 1 to Amended and Restated Severance Agreement effective January 1, 2003 by and between CNF Inc., a Delaware corporation (the "Company"), and John H. Williford (the "Executive") (as so amended, the "Severance Agreement"). WHEREAS, the Company and the Executive entered into the Severance Agreement; WHEREAS, the Board of Directors of the Company has determined that it is in the best interests of the Company and of its stockholders to amend the Severance Agreement; NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Executive agree as follows (capitalized terms used without definition have the meanings given to those terms in the Severance Agreement): 1. Amendment to Section 6, "Severance Payments." Section 6 of the Severance Agreement shall be amended by adding the following new Section 6.1(D): "(D) In addition to the retirement benefits to which the Executive is entitled under each Pension Plan or any successor plan thereto, the Company shall pay the Executive a lump sum amount, in cash, equal to the excess of (i) the actuarial equivalent of the aggregate retirement pension (taking into account any early retirement subsidies associated therewith and determined as a straight life annuity commencing at the date (but in no event earlier than the third anniversary of the Date of Termination) as of which the actuarial equivalent of such annuity is greatest) which the Executive would have accrued under the terms of all Pension Plans (without regard to any amendment to any Pension Plan made subsequent to a Change in Control of the Company and on or prior to the Date of Termination, which amendment adversely affects in any manner the computation of retirement benefits thereunder), determined as if the Executive (A) were fully vested thereunder, (B) had accumulated (after the Date of Termination) thirty-six (36) additional months of service credit thereunder, (C) had attained an age which is three years older than the age the Executive had attained as of the Date of Termination and (D) had been credited under each Pension Plan during such period with compensation equal to the Executive's annual amount taken into account under Section 6.1(A) hereof, over (ii) the actuarial equivalent of the aggregate retirement pension (taking into account any early retirement subsidies associated therewith and determined as a straight life annuity commencing at the date (but in no event earlier than the Date of Termination) as of which the actuarial equivalent of such annuity is greatest) which the Executive had accrued pursuant to the provisions of the Pension Plans as of the Date of Termination. For purposes of this Section 6.1(D), "actuarial equivalent" shall be determined using the same assumptions utilized under the applicable Pension Plan immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control of the Company." 2. Effective Date. The effective date of this Amendment shall be January 22, 2004. Except as expressly amended, the Severance Agreement remains unchanged and in full force and effect. CNF INC. By: /s/ Gregory L. Quesnel ------------------------------------ Name: Gregory L. Quesnel Title: President and Chief Executive Officer EXECUTIVE By: /s/ John H. Williford ------------------------------------ Name: John H. Williford Address: 416 Raymundo Drive Woodside, CA 94062 EX-10 15 ex1014.txt 1 SEVERANCE AGREEMENT THIS AGREEMENT, dated as of August 25, 2003, is made by and between Menlo Worldwide, LLC (the "Company"), a wholly owned subsidiary of CNF Inc., a Delaware corporation ("CNF"), and John H. Williford (the "Executive"). WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's management, including the Executive, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change in Control of the Company; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Company and the Executive hereby agree as follows: 1. Defined Terms. The definitions of capitalized terms used in this Agreement are provided in the last Section hereof. 2. Term of Agreement. The Term of this Agreement shall commence on the date hereof and shall continue in effect through December 31, 2004 provided, however, that commencing on January 1, 2004 and each January 1 thereafter, the Term shall automatically be extended for one additional year unless, not later than September 30 of the preceding year, the Company or the Executive shall have given notice not to extend the Term; and further provided, however, that if a Change in Control of the Company shall have occurred during the Term, the Term shall expire no earlier than twenty-four (24) months beyond the month in which such Change in Control of the Company occurred. Notwithstanding anything in this Agreement to the contrary, unless a Change in Control of the Company has previously occurred, this Agreement shall terminate, and be of no further force or effect, upon the occurrence of a "Change in Control" of CNF (within the meaning of Section 15 of the severance agreement between the Executive and CNF dated as of July 31, 2000 (the "CNF Severance Agreement") as amended), provided that the CNF Severance Agreement remains in effect at the time of such Change in Control of CNF. 3. Company's Covenants Summarized. In order to induce the Executive to remain in the employ of the Company and in consideration of the Executive's covenants set forth in Section 4 hereof, the Company agrees, under the conditions described herein, to pay the Executive the Severance Payments and the other payments and benefits described herein. Except as provided in Section 9.1 hereof, no Severance Payments shall be payable under this Agreement unless there shall have been (or, under the terms of the second paragraph of Section 6.1 hereof, there shall be deemed to have been) a termination of the Executive's employment with the Company following a Change in Control of the Company and during the Term. This Agreement shall not be construed as creating an express or implied contract of employment and, except as otherwise agreed in writing between the Executive and the Company, the Executive (i) shall not have any right to be retained in the employ of the Company, and (ii) shall remain subject to discharge to the same extent as if this Agreement had not been entered into by the Company and the Executive. 4. Executive's Covenants. The Executive agrees that, subject to the terms and conditions of this Agreement, in the event of a Potential Change in Control of the Company during the Term, the Executive will remain in the employ of the Company until the earliest of (i) a date which is six (6) months from the date of such Potential Change in Control of the Company, (ii) the date of a Change in Control of the Company, (iii) the date of termination by the Executive of the Executive's employment for Good Reason or by reason of death, Disability or Retirement or (iv) the termination by the Company of the Executive's employment for any reason. 5. Compensation Other Than Severance Payments. 5.1 Following a Change in Control of the Company and during the Term, during any period that the Executive fails to perform the Executive's full-time duties with the Company as a result of incapacity due to disability, including physical or mental illness, the Company shall pay the Executive's full salary to the Executive at the rate in effect at the commencement of any such period, together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period (other than any disability plan), until the Executive's employment is terminated by the Company for Disability. 5.2 If the Executive's employment shall be terminated for any reason following a Change in Control of the Company and during the Term, the Company shall pay the Executive's full salary to the Executive through the Date of Termination at the rate in effect immediately prior to the Date of Termination or, if higher, the rate in effect immediately prior to the Change in Control of the Company, together with all compensation and benefits payable to the Executive through the Date of Termination under the terms of CNF's or the Company's compensation and benefit plans, programs or arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the Change in Control of the Company. 5.3 If the Executive's employment shall be terminated for any reason following a Change in Control of the Company and during the Term, the Company shall pay, or shall make satisfactory arrangements with CNF to pay, to the Executive the Executive's normal post-termination compensation and benefits as such payments become due (other than severance payments under any severance plan as in effect immediately prior to the Date of Termination). Such post-termination compensation and benefits shall be determined under, and paid in accordance with, the CNF's or Company's retirement, insurance and other compensation or benefit plans, programs and arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the Change in Control of the Company. 6. Severance Payments. 6.1 If the Executive's employment is terminated following a Change in Control of the Company and during the Term, other than (A) by the Company for Cause, (B) by reason of death or Disability, or (C) by the Executive without Good Reason, then the Company shall pay the Executive the amounts, and provide the Executive the benefits, described in this Section 6.1 ("Severance Payments") and Section 6.2, in addition to any payments and benefits to which the Executive is entitled under Section 5 hereof; provided, however, that the Executive shall not be entitled to the Severance Payments unless and until the Executive (or, in the event of the Executive's death, the executor, personal representative or administrator of the Executive's estate) has signed a written waiver and release substantially in the form set forth on Exhibit A hereto. For purposes of this Agreement, the Executive's employment shall be deemed to have been terminated following a Change in Control of the Company by the Company without Cause or by the Executive with Good Reason, if (i) during the Term the Executive's employment is terminated by the Company without Cause following a Potential Change in Control of the Company but prior to a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs) and such termination was at the request or direction of a Person who has entered into an agreement with the Company the consummation of which would constitute a Change in Control of the Company, (ii) during the Term the Executive terminates his employment for Good Reason following a Potential Change in Control of the Company but prior to a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs) and the circumstance or event which constitutes Good Reason occurs at the request or direction of such Person or (iii) during the Term the Executive's employment is terminated by the Company without Cause or by the Executive for Good Reason and such termination or the circumstance or event which constitutes Good Reason is otherwise in connection with or in anticipation of a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs). (A) In lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination and in lieu of any severance benefit otherwise payable to the Executive, the Company shall pay to the Executive a lump sum severance payment, in cash, equal to three times the sum of (i) the Executive's annual base salary as in effect immediately prior to the Date of Termination or, if higher, in effect immediately prior to the Change in Control and (ii) the average annual bonus earned by the Executive pursuant to any annual bonus or incentive plan maintained by the Company in respect of the three fiscal years ending immediately prior to the fiscal year in which occurs the Change in Control. (B) For the thirty-six (36) month period immediately following the Date of Termination, the Company shall arrange to provide the Executive and his dependents life, disability and accident benefits substantially similar to those provided to the Executive and his dependents immediately prior to the Date of Termination or, if more favorable to the Executive, those provided to the Executive and his dependents immediately prior to the Change in Control of the Company, at no greater cost to the Executive than the cost to the Executive immediately prior to such Date of Termination or Change in Control of the Company; provided, however, that any across the board changes to life, disability or accident benefits similarly affecting all or substantially all employees of the Company and any entity in control of the Company shall not be deemed a breach of this Section 6.1(B). Benefits otherwise receivable by the Executive pursuant to this Section 6.1(B) shall be reduced to the extent benefits of the same type are received by or made available to the Executive during the thirty-six (36) month period following the Executive's termination of employment (and any such benefits received by or made available to the Executive shall be reported to the Company by the Executive); provided, however, that the Company shall reimburse the Executive for the excess, if any, of the cost of such benefits to the Executive over such cost immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control of the Company. If the Executive dies during the thirty-six (36) month period following the Date of Termination, life, disability and accident benefit coverage of the Executive's dependents shall continue for the remainder of the thirty-six (36) month period. (C) Notwithstanding any provision of any health or dental insurance plan or health or dental benefit plan to the contrary, the Company shall provide health and dental benefits to the Executive and his dependents as if the Executive, as of the Date of Termination, has retired (i) under the terms of CNF's or the Company's plan as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control of the Company and (ii) with age plus years of service totaling 85 or more. Benefits otherwise receivable by the Executive pursuant to this Section 6.1(C) shall be reduced to the extent benefits of the same type are received by or made available to the Executive following the Executive's termination of employment (and any such benefits received by or made available to the Executive shall be reported to the Company by the Executive); provided, however, that the Company shall reimburse the Executive for the excess, if any, of the cost of such benefits to the Executive over such cost immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control of the Company. If the Executive dies at a time when health and dental benefits are being provided under this Section 6.1(C) to the Executive's dependents, the Company shall continue to provide the dependents with health and dental benefits for as long as, and on the same basis as, such benefits are provided to dependents of retired employees who have retired with age plus years of service totaling 85 or more. 6.2 (A) Whether or not the Executive becomes entitled to the Severance Payments, if any of the payments or benefits received or to be received by the Executive in connection with a Change in Control of the Company or the Executive's termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any Person whose actions result in a Change in Control of the Company or any Person affiliated with the Company or such Person) (such payments or benefits, excluding the Gross-Up Payment, being hereinafter referred to as the "Total Payments") will be subject to the Excise Tax, the Company shall pay to the Executive an additional amount (the "Gross- Up Payment") such that the net amount retained by the Executive, after deduction of any Excise Tax on the Total Payments and any federal, state and local income and employment taxes and Excise Tax upon the Gross-Up Payment, shall be equal to the Total Payments. (B) For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) all of the Total Payments shall be treated as "parachute payments" (within the meaning of Section 280G(b)(2) of the Code) unless, in the opinion of tax counsel ("Tax Counsel") reasonably acceptable to the Executive and selected by the accounting firm which was, immediately prior to the Change in Control of the Company, the Company's independent auditor (the "Auditor"), such payments or benefits (in whole or in part) should not constitute parachute payments, including by reason of Section 280G(b)(4)(A) of the Code, (ii) all "excess parachute payments" within the meaning of Section 280G(b)(l) of the Code shall be treated as subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered (within the meaning of Section 280G(b)(4)(B) of the Code) in excess of the Base Amount allocable to such reasonable compensation, or should otherwise not be subject to the Excise Tax and (iii) the value of any non- cash benefits or any deferred payment or benefit shall be determined by the Auditor in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the Date of Termination (or if there is no Date of Termination, then the date on which the Gross-Up Payment is calculated for purposes of this Section 6.2), net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. (C) In the event that the Excise Tax is finally determined to be less than the amount taken into account hereunder in calculating the Gross-Up Payment, the Executive shall repay to the Company, within five (5) business days following the time that the amount of such reduction in the Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income and employment taxes imposed on the Gross-Up Payment being repaid by the Executive, to the extent that such repayment results in a reduction in the Excise Tax and a dollar-for-dollar reduction in the Executive's taxable income and wages for purposes of federal, state and local income and employment taxes), plus interest on the amount of such repayment at 120% of the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder in calculating the Gross-Up Payment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest, penalties or additions payable by the Executive with respect to such excess) within five (5) business days following the time that the amount of such excess is finally determined. The Executive and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Total Payments. 6.3 The payments provided in subsections (A) and (C) of Section 6.1 hereof and in subsections (A) and (B) of Section 6.2 hereof shall be made not later than the fifth day following the Date of Termination; provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Company shall pay to the Executive on such day an estimate, as determined in good faith by the Company or, in the case of payments under Section 6.2 hereof, in accordance with Section 6.2 hereof, of the minimum amount of such payments to which the Executive is clearly entitled and shall pay the remainder of such payments (together with interest on the unpaid remainder (or on all such payments to the extent the Company fails to make such payments when due) at 120% of the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth (30th) day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Executive, payable on the fifth (5th) business day after demand by the Company (together with interest at 120% of the rate provided in Section 1274(b)(2)(B) of the Code). At the time that payments are made under this Agreement, the Company shall provide the Executive with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations including, without limitation, any opinions or other advice the Company has received from Tax Counsel, the Auditor or other advisors or consultants (and any such opinions or advice which are in writing shall be attached to the statement). 6.4 The Company also shall pay to the Executive all legal fees and expenses incurred by the Executive in seeking in good faith to obtain or enforce any benefit or right provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Code to any payment or benefit provided hereunder. Such payments shall be made within five (5) business days after delivery of the Executive's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 7. Termination Procedures and Compensation During Dispute. 7.1 Notice of Termination. After a Change in Control of the Company and during the Term, any purported termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in detail. 7.2 Date of Termination. "Date of Termination," with respect to any purported termination of the Executive's employment after a Change in Control of the Company and during the Term, shall mean (i) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full- time performance of the Executive's duties during such thirty (30) day period), and (ii) if the Executive's employment is terminated for any other reason, the date specified in the Notice of Termination (which, in the case of a termination by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days, respectively, from the date such Notice of Termination is given). 8. No Mitigation. The Company agrees that, if the Executive's employment with the Company terminates during the Term, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 hereof. Further, the amount of any payment or benefit provided for in this Agreement (other than to the extent provided in Section 6.1(B) and 6.1(C) hereof) shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise. 9. Successors; Binding Agreement. 9.1 In addition to any obligations imposed by law upon any successor to the Company, CNF and the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of CNF and the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive's employment for Good Reason after a Change in Control of the Company, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. 9.2 This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate. 10. Notices. All notices and other communications provided for in this Agreement (i) shall be in writing, (ii) shall be hand delivered, sent by overnight courier or by United States registered mail, return receipt requested and postage prepaid, addressed, in the case of the Executive, to the address inserted below the Executive's signature on the final page hereof and, if to the Company, to the address set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, and (iii) shall be effective only upon actual receipt. To the Company: Menlo Worldwide, LLC 1 Lagoon Drive, #400 Redwood City, CA 94065 Attention: Vice President - Finance 11. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or of any lack of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement supersedes any other agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof which have been made by either party; provided, however, that this Agreement shall supersede any written agreement setting forth the terms and conditions of the Executive's employment with the Company only in the event that the Executive's employment with the Company is terminated on or following a Change in Control of the Company, by the Company other than for Cause or by the Executive for Good Reason. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and the Executive under this Agreement which by their nature may require either partial or total performance after the expiration of the Term (including, without limitation, those under Sections 6 and 7 hereof) shall survive such expiration. 12. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 13. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 14. Settlement of Disputes; Arbitration. 14.1 All claims by the Executive for benefits under this Agreement shall be directed to and determined by the Board and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive's claim has been denied. 14.2 Any further dispute or controversy arising under or in connection with this Agreement shall be finally settled exclusively by arbitration in Redwood City, California, in accordance with the rules of the American Arbitration Association then in effect; provided, however, that the evidentiary standards set forth in this Agreement shall apply. Judgment may be entered on the arbitrator's award in any court having jurisdiction. 15. Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated below: (A) "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act. (B) "Auditor" shall have the meaning set forth in Section 6.2 hereof. (C) "Base Amount" shall have the meaning set forth in Section 280G(b)(3) of the Code. (D) "Board" shall mean the Board of Managers of the Company. (E) "Cause" for termination by the Company of the Executive's employment shall mean (i) the willful and continued failure by the Executive to substantially perform the Executive's duties with the Company (other than any such failure resulting from the Executive's incapacity due to disability, including physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination for Good Reason by the Executive pursuant to Section 7.1 hereof) after a written demand for substantial performance is delivered to the Executive by the Board, which demand specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive's duties, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of this definition, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's act, or failure to act, was in the best interest of the Company. In the event of a dispute concerning the application of this provision, no claim by the Company that Cause exists shall be given effect unless the Company establishes to the Board and, in the event of arbitration as contemplated by Section 14.2, to the arbitrator, by clear and convincing evidence that Cause exists. (F) A "Change in Control of the Company" means the occurrence of any one of the following events: (I) the sale by CNF of more than 50% of the then outstanding Common Interests or other equity interests of the Company, whether by merger, consolidation or otherwise; (II) the sale of all or substantially all of the assets of the Company; or (III) any other transaction or course of action engaged in, directly or indirectly, by the Company or CNF that has a substantially similar effect as the transactions of the type referred to in clause (I) or (II) above. The foregoing notwithstanding, a Change in Control of the Company shall not be deemed to have occurred (A) by reason of the occurrence of a "Change in Control" of CNF (within the meaning of Section 15 of the CNF Severance Agreement), (B) except in the case of a transaction described in clause (II) above, so long as CNF or any of its Affiliates, individually or collectively, own more than 50% of the Common Interests or other equity interests of the Company, (C) in the event of the sale of Common Interests or other equity interests of the Company to any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any other Affiliate of CNF, or (D) in the event of the sale or distribution of Common Interests or other equity interests of the Company to shareholders of CNF, or the sale of assets of the Company to any corporation or other entity owned, directly or indirectly, by the shareholders of CNF, in either case in substantially the same proportions as their ownership of stock in CNF. (G) "CNF" shall mean CNF Inc. and any successor to its business and/or assets. (H) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (I) "Company" shall mean Menlo Worldwide, LLC and, except in determining under Section 15(G) hereof whether or not any Change in Control of the Company has occurred, shall include any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise. In addition, when used in the context of the Executive's employment, "Company" shall mean the Company or any of its subsidiaries. (J) "Common Interest" has the meaning given in the Company's Limited Liability Company Agreement. (K) "Date of Termination" shall have the meaning set forth in Section 7.2 hereof. (L) "Disability" shall be deemed the reason for the termination by the Company of the Executive's employment, if, as a result of the Executive's incapacity due to disability, including physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with the Company for a period of six (6) consecutive months, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties. (M) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. (N) "Excise Tax" shall mean any excise tax imposed under Section 4999 of the Code. (O) "Executive" shall mean the individual named in the first paragraph of this Agreement. (P) "Good Reason" for termination by the Executive of the Executive's employment shall mean the occurrence (without the Executive's express written consent) after any Change in Control of the Company and during the Term of any one of the following acts by the Company, or failures by the Company to act, unless such act or failure to act is corrected within 30 days of receipt by the Company of notice of the Executive's intent to terminate for Good Reason hereunder: (I) the failure of the successor company, following the Change in Control of the Company, to assume this Agreement and all obligations hereunder, as of the date of such Change in Control of the Company; (II) the assignment to the Executive of any duties inconsistent with the Executive's status as an executive of the Company or a substantial adverse alteration in the nature or status of the Executive's responsibilities from those in effect immediately prior to the Change in Control of the Company; (III) a reduction by the Company in the Executive's annual base salary (except for across-the-board salary reductions similarly affecting all executives of the Company and all executives of any Person in control of the Company) or incentive compensation opportunity (both short-term and long- term, valued in a manner consistent with the valuation methodology used by the Company prior to the Change in Control of the Company), each as in effect immediately prior to the Change in Control of the Company or as the same may thereafter be increased from time to time; (IV) the relocation of the Executive's principal place of employment to a location that results in an increase in the Executive's one way commute of at least 50 miles more than the Executive's one way commute immediately prior to the Change in Control of the Company, except for required travel on the Company's business to an extent substantially consistent with the Executive's business travel obligations immediately prior to the Change in Control of the Company; (V) the failure by the Company to pay to the Executive when due any portion of the Executive's current compensation; (VI) the failure by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of CNF's or the Company's pension, savings, life insurance, medical, health and accident, or disability plans in which the Executive was participating immediately prior to the Change in Control of the Company (except for across the board changes similarly affecting all or substantially all employees of the Company and any entity in control of the Company), the taking of any other action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive immediately prior to the Change in Control of the Company, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled. The Executive's right to terminate the Executive's employment for Good Reason shall not be affected by the Executive's incapacity due to disability, including physical or mental illness. The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. (Q) "Gross-Up Payment" shall have the meaning set forth in Section 6.2 hereof. (R) "Notice of Termination" shall have the meaning set forth in Section 7.1 hereof. (S) "Pension Plan" shall mean any tax-qualified, supplemental or excess benefit pension plan maintained by CNF or the Company and any other plan or agreement entered into between the Executive and the Company which is designed to provide the Executive with supplemental retirement benefits. (T) "Person" shall mean any person, as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (A) the Company or its Affiliates, (B) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or its Affiliates, and (C) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the Common Stock). (U) "Potential Change in Control of the Company" shall be deemed to have occurred if: (I) CNF or the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control of the Company; or (II) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control of the Company has occurred. (V) "Retirement" shall be deemed the reason for the termination by the Executive of the Executive's employment if such employment is terminated in accordance with the Company's retirement policy, including early retirement, generally applicable to its salaried employees. (W) "Severance Payments" shall have the meaning set forth in Section 6.1 hereof. (X) "Tax Counsel" shall have the meaning set forth in Section 6.2 hereof. (Y) "Term" shall mean the period of time described in Section 2 hereof (including any extension, continuation or termination described therein). (Z) "Total Payments" shall mean those payments so described in Section 6.2 hereof. MENLO WORLDWIDE, LLC By: /s/ Gregory L. Quesnel ------------------------ Name: Gregory L. Quesnel Title: Chairman of the Board EXECUTIVE Name: John H. Williford Address: 416 Raymundo Drive Woodside, CA 94062 EXHIBIT A WAIVER AND RELEASE OF CLAIMS In consideration of, and subject to, the payment to be made to me by Menlo Worldwide, LLC (the "Company") of the "Severance Payments" (as defined in the Severance Agreement, dated as of August 25, 2003, entered into between me and the Company (the "Agreement")), I hereby waive any claims I may have for employment or re-employment by the Company or any subsidiary of the Company after the date hereof, and I further agree to and do release and forever discharge the Company or any subsidiary of the Company, and their respective past and present officers, directors, shareholders, insurers, employees and agents from any and all claims and causes of action, known or unknown, arising out of or relating to my employment with the Company or any subsidiary of the Company, or the termination thereof, including, but not limited to, wrongful discharge, breach of contract, tort, fraud, the Civil Rights Acts, Age Discrimination in Employment Act, Employee Retirement Income Security Act of 1974, Americans with Disabilities Act, or any other federal, state or local legislation or common law relating to employment or discrimination in employment or otherwise. Notwithstanding the foregoing or any other provision hereof, nothing in this Waiver and Release of Claims shall adversely affect (i) my rights under the Agreement; (ii) my rights to benefits other than severance benefits under plans, programs and arrangements of the Company or any subsidiary or parent of the Company which are accrued but unpaid as of the date of my termination; or (iii) my rights to indemnification under any indemnification agreement, applicable law and the certificates of incorporation and bylaws of the Company and any subsidiary or parent of the Company, and my rights under any director's and officers' liability insurance policy covering me. I acknowledge that I have signed this Waiver and Release of Claims voluntarily, knowingly, of my own free will and without reservation or duress, and that no promises or representations have been made to me by any person to induce me to do so other than the promise of payment set forth in the first paragraph above and the Company's acknowledgment of my rights reserved under the second paragraph above. I understand that this release will be deemed to be an application for benefits under the Agreement and that my entitlement thereto shall be governed by the terms and conditions of the Agreement and any applicable plan. I expressly hereby consent to such terms and conditions. I acknowledge that I have been given not less than forty-five (45) days to review and consider this Waiver and Release of Claims (unless I have signed a written waiver of such review and consideration period), and that I have had the opportunity to consult with an attorney or other advisor of my choice and have been advised by the Company to do so if I choose. I may revoke this Waiver and Release of Claims seven days or less after its execution by providing written notice to the Company. I acknowledge that it is my intention and the intention of the Company in executing this Waiver and Release of Claims that the same shall be effective as a bar to each and every claim, demand and cause of action hereinabove specified. In furtherance of this intention, I hereby expressly waive any and all rights and benefits conferred upon me by the provisions of SECTION 1542 OF THE CALIFORNIA CIVIL CODE, to the extent applicable to me, and expressly I consent that this Waiver and Release of Claims shall be given full force and effect according to each and all of its express terms and provisions, including as well those related to unknown and unsuspected claims, demands and causes of action, if any, as well as those relating to any other claims, demands and causes of action hereinabove specified. SECTION 1542 provides: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR." I acknowledge that I may hereafter discover claims or facts in addition to or different from those which I now know or believe to exist with respect to the subject matter of this Waiver and Release of Claims and which, if known or suspected at the time of executing this Waiver and Release of Claims, may have materially affected this settlement. Finally, I acknowledge that I have read this Waiver and Release of Claims and understand all of its terms. /s/ John H. Williford ---------------------- Signature of Executive Print Name Date Signed EX-10 16 ex1015.txt 1 AMENDMENT NO.1 TO SEVERANCE AGREEMENT BY AND BETWEEN MENLO WORLDWIDE, LLC AND JOHN H. WILLIFORD This Amendment No. 1 (this "Amendment") is made to the Severance Agreement dated as of August 25, 2003 by and between Menlo Worldwide, LLC (the "Company"), a Delaware limited liability company whose sole member is CNF Inc., a Delaware corporation, and John H. Williford (the "Executive") (the "Severance Agreement"). WHEREAS, the Company and the Executive entered into the Severance Agreement; WHEREAS, the Board of Members of the Company has determined that it is in the best interests of the Company and of its member to amend the Severance Agreement; NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Executive agree as follows (capitalized terms used without definition have the meanings given to those terms in the Severance Agreement): 1. Amendment to Section 6, "Severance Payments." Section 6 of the Severance Agreement shall be amended as follows: a)The following new Section 6.1(D) shall be added: "(D) In addition to the retirement benefits to which the Executive is entitled under each Pension Plan or any successor plan thereto, the Company shall pay the Executive a lump sum amount, in cash, equal to the excess of (i) the actuarial equivalent of the aggregate retirement pension (taking into account any early retirement subsidies associated therewith and determined as a straight life annuity commencing at the date (but in no event earlier than the third anniversary of the Date of Termination) as of which the actuarial equivalent of such annuity is greatest) which the Executive would have accrued under the terms of all Pension Plans (without regard to any amendment to any Pension Plan made subsequent to a Change in Control of the Company and on or prior to the Date of Termination, which amendment adversely affects in any manner the computation of retirement benefits thereunder), determined as if the Executive (A) were fully vested thereunder, (B) had accumulated (after the Date of Termination) thirty-six (36) additional months of service credit thereunder, (C) had attained an age which is three years older than the age the Executive had attained as of the Date of Termination and (D) had been credited under each Pension Plan during such period with compensation equal to the Executive's annual amount taken into account under Section 6.1(A) hereof, over (ii) the actuarial equivalent of the aggregate retirement pension (taking into account any early retirement subsidies associated therewith and determined as a straight life annuity commencing at the date (but in no event earlier than the Date of Termination) as of which the actuarial equivalent of such annuity is greatest) which the Executive had accrued pursuant to the provisions of the Pension Plans as of the Date of Termination. For purposes of this Section 6.1(D), "actuarial equivalent" shall be determined using the same assumptions utilized under the applicable Pension Plan immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control of the Company." b) The reference in the first sentence of Section 6.3 to "subsections (A) and (C) of Section 6.1" shall be amended so as to also refer to subsection (D), as follows: "subsections (A), (C) and (D) of Section 6.1." 2. Effective Date. The effective date of this Amendment shall be January 22, 2004. Except as expressly amended, the Severance Agreement remains unchanged and in full force and effect. MENLO WORLDWIDE, LLC. By: /s/ Gregory L. Quesnel -------------------------------------- Name: Gregory L. Quesnel Title: Chairman of the Board EXECUTIVE By: /s/ John H. Williford -------------------------------------- Name: John H. Williford Address: 416 Raymundo Drive Woodside, CA 94062 EX-10 17 ex1016.txt Schedule to Form of CNF Inc. 2001 Amended and Restated Severance Agreement As of the date hereof, each of the following officers at CNF is a party to a 2001 Amended and Restated Severance Agreement with CNF in the form attached: Date of Agreement Name of Officer August 21, 2000 James R. Allen August 21, 2000 David L. Slate August 21, 2000 Mark C. Thickpenny AMENDED AND RESTATED SEVERANCE AGREEMENT THIS AGREEMENT, originally dated as of DATE, as subsequently amended, is hereby amended and restated in its entirety as of DATE. This Agreement is made by and between CNF Inc., a Delaware corporation (the "Company"), and NAME (the "Executive"). WHEREAS, the Company considers it essential to the best interests of its stockholders to foster the continued employment of key management personnel; and WHEREAS, the Board recognizes that, as is the case with many publicly held corporations, the possibility of a Change in Control exists and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders; and WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's management, including the Executive, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change in Control; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Company and the Executive hereby agree as follows: 1. Defined Terms. The definitions of capitalized terms used in this Agreement are provided in the last Section hereof. 2. Term of Agreement. The Term of this Agreement shall commence on DATE (the "Effective Date") and shall continue in effect through December 31, 200X; provided, however, that commencing on January 1, 200X, and each January 1 thereafter, the Term shall automatically be extended for one additional year unless, not later than September 30 of the preceding year, the Company or the Executive shall have given notice not to extend the Term; and further provided, however, that if a Change in Control shall have occurred during the Term, the Term shall expire no earlier than twenty_four (24) months beyond the month in which such Change in Control occurred. 3. Company's Covenants Summarized. In order to induce the Executive to remain in the employ of the Company and in consideration of the Executive's covenants set forth in Section 4 hereof, the Company agrees, under the conditions described herein, to pay the Executive the Severance Payments and the other payments and benefits described herein. Except as provided in Section 9.1 hereof, no Severance Payments shall be payable under this Agreement unless there shall have been (or, under the terms of the second paragraph of Section 6.1 hereof, there shall be deemed to have been) a termination of the Executive's employment with the Company following a Change in Control and during the Term. This Agreement shall not be construed as creating an express or implied contract of employment and, except as otherwise agreed in writing between the Executive and the Company, the Executive (i) shall not have any right to be retained in the employ of the Company, and (ii) shall remain subject to discharge to the same extent as if this Agreement had not been entered into by the Company and the Executive. 4. Executive's Covenants. The Executive agrees that, subject to the terms and conditions of this Agreement, in the event of a Potential Change in Control during the Term, the Executive will remain in the employ of the Company until the earliest of (i) a date which is six (6) months from the date of such Potential Change in Control, (ii) the date of a Change in Control, (iii) the date of termination by the Executive of the Executive's employment for Good Reason or by reason of death, Disability or Retirement or (iv) the termination by the Company of the Executive's employment for any reason. 5. Compensation Other Than Severance Payments. 5.1 Following a Change in Control and during the Term, during any period that the Executive fails to perform the Executive's full-time duties with the Company as a result of incapacity due to disability, including physical or mental illness, the Company shall pay the Executive's full salary to the Executive at the rate in effect at the commencement of any such period, together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period (other than any disability plan), until the Executive's employment is terminated by the Company for Disability. 5.2 If the Executive's employment shall be terminated for any reason following a Change in Control and during the Term, the Company shall pay the Executive's full salary to the Executive through the Date of Termination at the rate in effect immediately prior to the Date of Termination or, if higher, the rate in effect immediately prior to the Change in Control, together with all compensation and benefits payable to the Executive through the Date of Termination under the terms of the Company's compensation and benefit plans, programs or arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the Change in Control. 5.3 If the Executive's employment shall be terminated for any reason following a Change in Control and during the Term, the Company shall pay to the Executive the Executive's normal post_termination compensation and benefits as such payments become due (other than severance payments under any severance plan as in effect immediately prior to the Date of Termination). Such post_termination compensation and benefits shall be determined under, and paid in accordance with, the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the Change in Control. 6. Severance Payments. 6.1 If the Executive's employment is terminated following a Change in Control and during the Term, other than (A) by the Company for Cause, (B) by reason of death or Disability, or (C) by the Executive without Good Reason, then the Company shall pay the Executive the amounts, and provide the Executive the benefits, described in this Section 6.1 ("Severance Payments") and Section 6.2, in addition to any payments and benefits to which the Executive is entitled under Section 5 hereof; provided, however, that the Executive shall not be entitled to the Severance Payments unless and until the Executive (or, in the event of the Executive's death, the executor, personal representative or administrator of the Executive's estate) has signed a written waiver and release substantially in the form set forth on Exhibit A hereto. For purposes of this Agreement, the Executive's employment shall be deemed to have been terminated following a Change in Control by the Company without Cause or by the Executive with Good Reason, if (i) during the Term the Executive's employment is terminated by the Company without Cause following a Potential Change in Control but prior to a Change in Control (whether or not a Change in Control ever occurs) and such termination was at the request or direction of a Person who has entered into an agreement with the Company the consummation of which would constitute a Change in Control, (ii) during the Term the Executive terminates his employment for Good Reason following a Potential Change in Control but prior to a Change in Control (whether or not a Change in Control ever occurs) and the circumstance or event which constitutes Good Reason occurs at the request or direction of such Person or (iii) during the Term the Executive's employment is terminated by the Company without Cause or by the Executive for Good Reason and such termination or the circumstance or event which constitutes Good Reason is otherwise in connection with or in anticipation of a Change in Control (whether or not a Change in Control ever occurs). An Executive will not be considered to have been terminated by reason of the divestiture of a facility, sale or other disposition of a business or business unit, or the outsourcing of a business activity with which the Executive is affiliated, notwithstanding the fact that such divestiture, sale or outsourcing takes place within two years following a Change in Control, if the Executive is offered comparable employment by the successor company and such successor company agrees to assume the Company's obligations to the Executive under this Agreement. (A) In lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination and in lieu of any severance benefit otherwise payable to the Executive, the Company shall pay to the Executive a lump sum severance payment, in cash, equal to two times the sum of (i) the Executive's annual base salary as in effect immediately prior to the Date of Termination or, if higher, in effect immediately prior to the Change in Control and (ii) the highest of (1) the average annual bonus earned by the Executive pursuant to any annual bonus or incentive plan maintained by the Company in respect of the three fiscal years ending immediately prior to the fiscal year in which occurs the Date of Termination, (2) the average annual bonus earned by the Executive pursuant to any such plan in respect of the three fiscal years ending immediately prior to the fiscal year in which occurs the Change in Control or (3) the target annual bonus in effect for the Executive for the fiscal year in which occurs the Date of Termination. (B) For the twenty-four (24) month period immediately following the Date of Termination, the Company shall arrange to provide the Executive and his dependents life, disability and accident benefits substantially similar to those provided to the Executive and his dependents immediately prior to the Date of Termination or, if more favorable to the Executive, those provided to the Executive and his dependents immediately prior to the Change in Control, at no greater cost to the Executive than the cost to the Executive immediately prior to such Date of Termination or Change in Control; provided, however, that any across the board changes to life, disability or accident benefits similarly affecting all or substantially all employees of the Company and any entity in control of the Company shall not be deemed a breach of this Section 6.1(B). Benefits otherwise receivable by the Executive pursuant to this Section 6.1(B) shall be reduced to the extent benefits of the same type are received by or made available to the Executive during the twenty-four (24) month period following the Executive's termination of employment (and any such benefits received by or made available to the Executive shall be reported to the Company by the Executive); provided, however, that the Company shall reimburse the Executive for the excess, if any, of the cost of such benefits to the Executive over such cost immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control. If the Executive dies during the twenty- four (24) month period following the Date of Termination, life, disability and accident benefit coverage of the Executive's dependents shall continue for the remainder of the twenty-four (24) month period. (C) For the twenty-four (24) month period immediately following the Date of Termination, the Company shall provide health and dental benefits to the Executive and his dependents under the terms of the Company's health and dental plan as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control. Benefits otherwise receivable by the Executive pursuant to this Section 6.1(C) shall be reduced to the extent benefits of the same type are received by or made available to the Executive following the Executive's termination of employment (and any such benefits received by or made available to the Executive shall be reported to the Company by the Executive); provided, however, that the Company shall reimburse the Executive for the excess, if any, of the cost of such benefits to the Executive over such cost immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control. If the Executive dies at a time when health and dental benefits are being provided under this Section 6.1(C) to the Executive's dependents, the Company shall continue to provide the dependents with health and dental benefits for the remainder of the twenty-four (24) month period on the same basis as if the Executive had survived throughout that period. (D) The Company shall provide outplacement services determined by the Company to be suitable to the Executive's position for a period of one (1) year following the Executive's Date of Termination. 6.2 (A) Whether or not the Executive becomes entitled to the Severance Payments, if any of the payments or benefits received or to be received by the Executive in connection with a Change in Control or the Executive's termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any Person whose actions result in a Change in Control or any Person affiliated with the Company or such Person) (such payments or benefits, excluding the Gross-Up Payment, being hereinafter referred to as the "Total Payments") will be subject to the Excise Tax, the Company shall pay to the Executive an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive, after deduction of any Excise Tax on the Total Payments and any federal, state and local income and employment taxes and Excise Tax upon the Gross- Up Payment, shall be equal to the Total Payments. (B) For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) all of the Total Payments shall be treated as "parachute payments" (within the meaning of Section 280G(b)(2) of the Code) unless, in the opinion of tax counsel ("Tax Counsel") reasonably acceptable to the Executive and selected by the accounting firm which was, immediately prior to the Change in Control, the Company's independent auditor (the "Auditor"), such payments or benefits (in whole or in part) should not constitute parachute payments, including by reason of Section 280G(b)(4)(A) of the Code, (ii) all "excess parachute payments" within the meaning of Section 280G(b)(l) of the Code shall be treated as subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered (within the meaning of Section 280G(b)(4)(B) of the Code) in excess of the Base Amount allocable to such reasonable compensation, or should otherwise not be subject to the Excise Tax and (iii) the value of any noncash benefits or any deferred payment or benefit shall be determined by the Auditor in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the Date of Termination (or if there is no Date of Termination, then the date on which the Gross-Up Payment is calculated for purposes of this Section 6.2), net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. (C) In the event that the Excise Tax is finally determined to be less than the amount taken into account hereunder in calculating the Gross-Up Payment, the Executive shall repay to the Company, within five (5) business days following the time that the amount of such reduction in the Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income and employment taxes imposed on the Gross-Up Payment being repaid by the Executive, to the extent that such repayment results in a reduction in the Excise Tax and a dollar-for-dollar reduction in the Executive's taxable income and wages for purposes of federal, state and local income and employment taxes), plus interest on the amount of such repayment at 120% of the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder in calculating the Gross-Up Payment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest, penalties or additions payable by the Executive with respect to such excess) within five (5) business days following the time that the amount of such excess is finally determined. The Executive and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Total Payments. 6.3 The payments provided in subsections (A) and (C) of Section 6.1 hereof and in subsections (A) and (B) of Section 6.2 hereof shall be made not later than the fifth day following the Date of Termination; provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Company shall pay to the Executive on such day an estimate, as determined in good faith by the Company or, in the case of payments under Section 6.2 hereof, in accordance with Section 6.2 hereof, of the minimum amount of such payments to which the Executive is clearly entitled and shall pay the remainder of such payments (together with interest on the unpaid remainder (or on all such payments to the extent the Company fails to make such payments when due) at 120% of the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth (30th) day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Executive, payable on the fifth (5th) business day after demand by the Company (together with interest at 120% of the rate provided in Section 1274(b)(2)(B) of the Code). At the time that payments are made under this Agreement, the Company shall provide the Executive with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations including, without limitation, any opinions or other advice the Company has received from Tax Counsel, the Auditor or other advisors or consultants (and any such opinions or advice which are in writing shall be attached to the statement). 6.4 The Company also shall pay to the Executive all legal fees and expenses incurred by the Executive in seeking in good faith to obtain or enforce any benefit or right provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Code to any payment or benefit provided hereunder. Such payments shall be made within five (5) business days after delivery of the Executive's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 7. Termination Procedures and Compensation During Dispute. 7.1 Notice of Termination. After a Change in Control and during the Term, any purported termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three_quarters (3/4) of the entire membership of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in detail. 7.2 Date of Termination. "Date of Termination," with respect to any purported termination of the Executive's employment after a Change in Control and during the Term, shall mean (i) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such thirty (30) day period), and (ii) if the Executive's employment is terminated for any other reason, the date specified in the Notice of Termination (which, in the case of a termination by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days, respectively, from the date such Notice of Termination is given). 8. No Mitigation. The Company agrees that, if the Executive's employment with the Company terminates during the Term, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 hereof. Further, the amount of any payment or benefit provided for in this Agreement (other than to the extent provided in Section 6.1(B) and 6.1(C) hereof) shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise. 9. Successors; Binding Agreement. 9.1 In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive's employment for Good Reason after a Change in Control, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. 9.2 This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate. 10. Notices. All notices and other communications provided for in this Agreement (i) shall be in writing, (ii) shall be hand delivered, sent by overnight courier or by United States registered mail, return receipt requested and postage prepaid, addressed, in the case of the Executive, to the address inserted below the Executive's signature on the final page hereof and, if to the Company, to the address set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, and (iii) shall be effective only upon actual receipt. To the Company: CNF Inc. 3240 Hillview Avenue Palo Alto, CA 94304 Attention: General Counsel 11. Miscellaneous. Except as otherwise expressly provided herein, no provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or of any lack of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement supersedes any other agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof which have been made by either party; provided, however, that this Agreement shall supersede any written agreement setting forth the terms and conditions of the Executive's employment with the Company only in the event that the Executive's employment with the Company is terminated on or following a Change in Control, by the Company other than for Cause or by the Executive for Good Reason. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and the Executive under this Agreement which by their nature may require either partial or total performance after the expiration of the Term (including, without limitation, those under Sections 6 and 7 hereof) shall survive such expiration. 12. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 13. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 14. Settlement of Disputes; Arbitration. 14.1 All claims by the Executive for benefits under this Agreement shall be directed to and determined by the Board and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive's claim has been denied. 14.2 Any further dispute or controversy arising under or in connection with this Agreement shall be finally settled exclusively by arbitration in Palo Alto, California, in accordance with the rules of the American Arbitration Association then in effect; provided, however, that the evidentiary standards set forth in this Agreement shall apply. Judgment may be entered on the arbitrator's award in any court having jurisdiction. 15. Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated below: (A) "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act. (B) "Auditor" shall have the meaning set forth in Section 6.2 hereof. (C) "Base Amount" shall have the meaning set forth in Section 280G(b)(3) of the Code. (D) "Beneficial Owner" shall have the meaning set forth in Rule 13d_3 under the Exchange Act. (E) "Board" shall mean the Board of Directors of the Company. (F) "Cause" for termination by the Company of the Executive's employment shall mean (i) the willful and continued failure by the Executive to substantially perform the Executive's duties with the Company (other than any such failure resulting from the Executive's incapacity due to disability, including physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination for Good Reason by the Executive pursuant to Section 7.1 hereof) after a written demand for substantial performance is delivered to the Executive by the Board, which demand specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive's duties, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of this definition, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's act, or failure to act, was in the best interest of the Company. In the event of a dispute concerning the application of this provision, no claim by the Company that Cause exists shall be given effect unless the Company establishes to the Board and, in the event of an arbitration as contemplated by Section 14.2, to the arbitrator, by clear and convincing evidence that Cause exists. (G) "Change in Control" means the occurrence of an event described in any one of the following clauses (1) through (5): (1) any "person," as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (A) the Company or its Affiliates, (B) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or its Affiliates, and (C) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the Common Stock), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its Affiliates) representing 25% or more of the combined voting power of the Company's then outstanding voting securities; (2) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the Effective Date, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company's stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the Effective Date or whose appointment, election or nomination for election was previously so approved or recommended; (3) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or parent entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving or parent entity outstanding immediately afer such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as hereinabove defined), directly or indirectly, acquired 25% or more of the combined voting power of the Company's then outstanding securities (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its Affiliates); (4) the stockholders of the Company approve a plan of complete liquidation of the Company or there is consummated an agreement for the sale or disposition by the Company of assets having an aggregate book value at the time of such sale or disposition of more than 75% of the total book value of the Company's assets on a consolidated basis (or any transaction having a similar effect), other than any such sale or disposition by the Company (including by way of spin-off or other distribution) to an entity, at least 50% of the combined voting power of the voting securities of which are owned immediately following such sale or disposition by stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale or disposition; provided, however, that a Change in Control shall be deemed not to have occurred under this clause (4) if, immediately prior to the consummation of any sale or disposition of a business unit that is taken into account in determining whether a Change in Control has occurred, the Executive is employed by, and is party to a severance agreement with, such business unit; or (5) there is consummated the sale or other disposition by the Company, however effected, of at least two of the three primary business units of the Company, whether in a single transaction or in a series of transactions occurring within an 18- month period, and whether or not one or both of such business units constitute part of a larger enterprise at the time of the sale or other disposition; provided, however, that the Board of Directors of the Company may, upon notice to the Executive given at any time, terminate this clause (5) without the consent of the Executive, except that any such notice shall not be effective to terminate this clause (5) if a Change in Control occurs pursuant to this clause (5) within ninety (90) days after such notice is given. As used in clause (5) above: (A) "primary business units" means Con-Way Transportation Services, Inc., Emery Air Freight Corporation and Menlo Logistics, Inc., and (B) a "sale" or other disposition of a business unit includes: (i) a sale by the Company of the then outstanding shares of capital stock of the business unit having more than 50% of the then existing voting power of all outstanding securities of the business unit, whether by merger, consolidation or otherwise; (ii) the sale of all or substantially all of the assets of the business unit; and (iii) any other transaction or course of action (including, without limitation, a spin-off or other distribution) engaged in, directly or indirectly, by the Company or the business unit that has a substantially similar effect as the transactions of the type referred to in clause (i) or (ii) above; it being the intent that a sale or other disposition of a business unit occurs even if (x) such business unit constitutes part of a larger enterprise at the time of the relevant sale or disposition transaction and (y) such sale or disposition transaction involves such larger enterprise (such as, by way of example and without limitation, when one or more business units are subsidiaries of a common parent and either (I) the common parent is spun-off or (II) there is consummated a sale of the stock or other equity interests in the common parent having more than 50% of the then existing voting power of all outstanding securities of the common parent). The foregoing notwithstanding, a sale or other disposition of a business unit shall not be deemed to have occurred for purposes of clause (5) above (x) except in the case of a transaction described in clause (ii) above, so long as the Company or any of its Affiliates (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended), individually or collectively, own the then outstanding shares of capital stock of the business unit having 50% or more of the then existing voting power of all outstanding securities of the business unit, or (y) in the event of the sale of shares of capital stock of the business unit (or the sale of shares or other equity interests in any parent company of such business unit) to any trustee or other fiduciary holding securities under an employee benefit plan of the Company, the business unit or any other Affiliate of the Company. (H) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (I) "Company" shall mean CNF Inc. and, except in determining under Section 15(G) hereof whether or not any Change in Control of the Company has occurred, shall include any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise. In addition, when used in the context of the Executive's employment, "Company" shall mean the Company or any of its subsidiaries. (J) "Common Stock" shall mean the common stock, par value $0.625 per share, of the Company. (K) "Date of Termination" shall have the meaning set forth in Section 7.2 hereof. (L) "Disability" shall be deemed the reason for the termination by the Company of the Executive's employment, if, as a result of the Executive's incapacity due to disability, including physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with the Company for a period of six (6) consecutive months, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties. (M) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. (N) "Excise Tax" shall mean any excise tax imposed under Section 4999 of the Code. (O) "Executive" shall mean the individual named in the first paragraph of this Agreement. (P) "Good Reason" for termination by the Executive of the Executive's employment shall mean the occurrence (without the Executive's express written consent) after any Change in Control and during the Term of any one of the following acts by the Company, or failures by the Company to act, unless such act or failure to act is corrected within 30 days of receipt by the Company of notice of the Executive's intent to terminate for Good Reason hereunder: (I) the failure of the successor company, following the Change in Control, to assume this Agreement and all obligations hereunder, as of the date of such Change in Control; (II) the assignment to the Executive of any duties inconsistent with the Executive's status as an executive of the Company or a substantial adverse alteration in the nature or status of the Executive's responsibilities from those in effect immediately prior to the Change in Control; (III) a reduction by the Company in the Executive's annual base salary (except for across- the-board salary reductions similarly affecting all executives of the Company and all executives of any Person in control of the Company) or incentive compensation opportunity (both short- term and long-term, valued in a manner consistent with the valuation methodology used by the Company prior to the Change in Control), each as in effect immediately prior to the Change in Control or as the same may thereafter be increased from time to time; (IV) the relocation of the Executive's principal place of employment to a location that results in an increase in the Executive's one way commute of at least 50 miles more than the Executive's one way commute immediately prior to the Change in Control, except for required travel on the Company's business to an extent substantially consistent with the Executive's business travel obligations immediately prior to the Change in Control; (V) the failure by the Company to pay to the Executive when due any portion of the Executive's current compensation; (VI) the failure by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of the Company's pension, savings, life insurance, medical, health and accident, or disability plans in which the Executive was participating immediately prior to the Change in Control (except for across the board changes similarly affecting all or substantially all employees of the Company and any entity in control of the Company), the taking of any other action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive immediately prior to the Change in Control, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled. The Executive's right to terminate the Executive's employment for Good Reason shall not be affected by the Executive's incapacity due to disability, including physical or mental illness. The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. (Q) "Gross-Up Payment" shall have the meaning set forth in Section 6.2 hereof. (R) "Notice of Termination" shall have the meaning set forth in Section 7.1 hereof. (S) "Pension Plan" shall mean any tax-qualified, supplemental or excess benefit pension plan maintained by the Company and any other plan or agreement entered into between the Executive and the Company which is designed to provide the Executive with supplemental retirement benefits. (T) "Person" shall mean any person, as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (A) the Company or its Affiliates, (B) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or its Affiliates, and (C) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the Common Stock) (U) "Potential Change in Control" shall be deemed to have occurred if: (I) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control; (II) the Company or any Person publicly announces an intention to take or to consider taking actions, including but not limited to proxy contests or consent solicitations, which, if consummated, would constitute a Change in Control; (III) any Person becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 15% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company's then outstanding securities (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its affiliates); or (IV) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred. (V) "Retirement" shall be deemed the reason for the termination by the Executive of the Executive's employment if such employment is terminated in accordance with the Company's retirement policy, including early retirement, generally applicable to its salaried employees. (W) "Severance Payments" shall have the meaning set forth in Section 6.1 hereof. (X) "Tax Counsel" shall have the meaning set forth in Section 6.2 hereof. (Y) "Term" shall mean the period of time described in Section 2 hereof (including any extension, continuation or termination described therein). (Z) "Total Payments" shall mean those payments so described in Section 6.2 hereof. CNF INC. 16chw2935 EXHIBIT A WAIVER AND RELEASE OF CLAIMS In consideration of, and subject to, the payment to be made to me by CNF Inc. (the "Company") of the "Severance Payments" (as defined in the Amended and Restated Severance Agreement, dated as ofDATE, entered into between me and the Company (the "Agreement")), I hereby waive any claims I may have for employment or re-employment by the Company or any subsidiary of the Company after the date hereof, and I further agree to and do release and forever discharge the Company or any subsidiary of the Company, and their respective past and present officers, directors, shareholders, insurers, employees and agents from any and all claims and causes of action, known or unknown, arising out of or relating to my employment with the Company or any subsidiary of the Company, or the termination thereof, including, but not limited to, wrongful discharge, breach of contract, tort, fraud, the Civil Rights Acts, Age Discrimination in Employment Act, Employee Retirement Income Security Act of 1974, Americans with Disabilities Act, or any other federal, state or local legislation or common law relating to employment or discrimination in employment or otherwise. Notwithstanding the foregoing or any other provision hereof, nothing in this Waiver and Release of Claims shall adversely affect (i) my rights under the Agreement; (ii) my rights to benefits other than severance benefits under plans, programs and arrangements of the Company or any subsidiary or parent of the Company which are accrued but unpaid as of the date of my termination; or (iii) my rights to indemnification under any indemnification agreement, applicable law and the certificates of incorporation and bylaws of the Company and any subsidiary or parent of the Company, and my rights under any director's and officers' liability insurance policy covering me. I acknowledge that I have signed this Waiver and Release of Claims voluntarily, knowingly, of my own free will and without reservation or duress, and that no promises or representations have been made to me by any person to induce me to do so other than the promise of payment set forth in the first paragraph above and the Company's acknowledgment of my rights reserved under the second paragraph above. I understand that this release will be deemed to be an application for benefits under the Agreement and that my entitlement thereto shall be governed by the terms and conditions of the Agreement and any applicable plan. I expressly hereby consent to such terms and conditions. I acknowledge that I have been given not less than forty-five (45) days to review and consider this Waiver and Release of Claims (unless I have signed a written waiver of such review and consideration period), and that I have had the opportunity to consult with an attorney or other advisor of my choice and have been advised by the Company to do so if I choose. I may revoke this Waiver and Release of Claims seven days or less after its execution by providing written notice to the Company. I acknowledge that it is my intention and the intention of the Company in executing this Waiver and Release of Claims that the same shall be effective as a bar to each and every claim, demand and cause of action hereinabove specified. In furtherance of this intention, I hereby expressly waive any and all rights and benefits conferred upon me by the provisions of SECTION 1542 OF THE CALIFORNIA CIVIL CODE, to the extent applicable to me, and expressly I consent that this Waiver and Release of Claims shall be given full force and effect according to each and all of its express terms and provisions, including as well those related to unknown and unsuspected claims, demands and causes of action, if any, as well as those relating to any other claims, demands and causes of action hereinabove specified. SECTION 1542 provides: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR." I acknowledge that I may hereafter discover claims or facts in addition to or different from those which I now know or believe to exist with respect to the subject matter of this Waiver and Release of Claims and which, if known or suspected at the time of executing this Waiver and Release of Claims, may have materially affected this settlement. Finally, I acknowledge that I have read this Waiver and Release of Claims and understand all of its terms. EX-10 18 ex1017.txt Schedule to Form of CNF Inc. Severance Agreement As of the date hereof, each of the following officers of subsidiaries of CNF is a party to a Severance Agreement with CNF in the form attached: Date of Agreement Name of Officer August 25, 2003 Robert L. Bianco, Jr. August 25, 2003 Edward G. Feizinger November 3, 2000 Eric W. Kirchner January 28, 2001 Gary D. Kowalski July 31, 2000 David S. McClimon July 31, 2000 Bryan M. Millican July 31, 2000 Douglas W. Stotlar October 9, 2000 Gerard Trimarco SEVERANCE AGREEMENT THIS AGREEMENT, dated as of DATE is made by and between CNF Inc., a Delaware corporation (the "Company"), and NAME (the "Executive"). WHEREAS, the Company considers it essential to the best interests of its stockholders to foster the continued employment of key management personnel; and WHEREAS, the Board recognizes that, as is the case with many publicly held corporations, the possibility of a Change in Control exists and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders; and WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's management, including the Executive, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change in Control; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Company and the Executive hereby agree as follows: 1. Defined Terms. The definitions of capitalized terms used in this Agreement are provided in the last Section hereof. 2. Term of Agreement. The Term of this Agreement shall commence on the date hereof and shall continue in effect through December 31, 200X; provided, however, that commencing on January 1, 200X, and each January 1 thereafter, the Term shall automatically be extended for one additional year unless, not later than September 30 of the preceding year, the Company or the Executive shall have given notice not to extend the Term; and further provided, however, that if a Change in Control shall have occurred during the Term, the Term shall expire no earlier than twenty-four (24) months beyond the month in which such Change in Control occurred. 3. Company's Covenants Summarized. In order to induce the Executive to remain in the employ of the Company and in consideration of the Executive's covenants set forth in Section 4 hereof, the Company agrees, under the conditions described herein, to pay the Executive the Severance Payments and the other payments and benefits described herein. Except as provided in Section 9.1 hereof, no Severance Payments shall be payable under this Agreement unless there shall have been (or, under the terms of the second paragraph of Section 6.1 hereof, there shall be deemed to have been) a termination of the Executive's employment with the Company following a Change in Control and during the Term. This Agreement shall not be construed as creating an express or implied contract of employment and, except as otherwise agreed in writing between the Executive and the Company, the Executive (i) shall not have any right to be retained in the employ of the Company, and (ii) shall remain subject to discharge to the same extent as if this Agreement had not been entered into by the Company and the Executive. 4. Executive's Covenants. The Executive agrees that, subject to the terms and conditions of this Agreement, in the event of a Potential Change in Control during the Term, the Executive will remain in the employ of the Company until the earliest of (i) a date which is six (6) months from the date of such Potential Change in Control, (ii) the date of a Change in Control, (iii) the date of termination by the Executive of the Executive's employment for Good Reason or by reason of death, Disability or Retirement or (iv) the termination by the Company of the Executive's employment for any reason. 5. Compensation Other Than Severance Payments. 5.1 Following a Change in Control and during the Term, during any period that the Executive fails to perform the Executive's full-time duties with the Company as a result of incapacity due to disability, including physical or mental illness, the Company shall pay the Executive's full salary to the Executive at the rate in effect at the commencement of any such period, together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period (other than any disability plan), until the Executive's employment is terminated by the Company for Disability. 5.2 If the Executive's employment shall be terminated for any reason following a Change in Control and during the Term, the Company shall pay the Executive's full salary to the Executive through the Date of Termination at the rate in effect immediately prior to the Date of Termination or, if higher, the rate in effect immediately prior to the Change in Control, together with all compensation and benefits payable to the Executive through the Date of Termination under the terms of the Company's compensation and benefit plans, programs or arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the Change in Control. 5.3 If the Executive's employment shall be terminated for any reason following a Change in Control and during the Term, the Company shall pay to the Executive the Executive's normal post-termination compensation and benefits as such payments become due (other than severance payments under any severance plan as in effect immediately prior to the Date of Termination). Such post-termination compensation and benefits shall be determined under, and paid in accordance with, the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the Change in Control. 6. Severance Payments. 6.1 If the Executive's employment is terminated following a Change in Control and during the Term, other than (A) by the Company for Cause, (B) by reason of death or Disability, or (C) by the Executive without Good Reason, then the Company shall pay the Executive the amounts, and provide the Executive the benefits, described in this Section 6.1 ("Severance Payments") and Section 6.2, in addition to any payments and benefits to which the Executive is entitled under Section 5 hereof; provided, however, that the Executive shall not be entitled to the Severance Payments unless and until the Executive (or, in the event of the Executive's death, the executor, personal representative or administrator of the Executive's estate) has signed a written waiver and release substantially in the form set forth on Exhibit A hereto. For purposes of this Agreement, the Executive's employment shall be deemed to have been terminated following a Change in Control by the Company without Cause or by the Executive with Good Reason, if (i) during the Term the Executive's employment is terminated by the Company without Cause following a Potential Change in Control but prior to a Change in Control (whether or not a Change in Control ever occurs) and such termination was at the request or direction of a Person who has entered into an agreement with the Company the consummation of which would constitute a Change in Control, (ii) during the Term the Executive terminates his employment for Good Reason following a Potential Change in Control but prior to a Change in Control (whether or not a Change in Control ever occurs) and the circumstance or event which constitutes Good Reason occurs at the request or direction of such Person or (iii) during the Term the Executive's employment is terminated by the Company without Cause or by the Executive for Good Reason and such termination or the circumstance or event which constitutes Good Reason is otherwise in connection with or in anticipation of a Change in Control (whether or not a Change in Control ever occurs). An Executive will not be considered to have been terminated by reason of the divestiture of a facility, sale or other disposition of a business or business unit, or the outsourcing of a business activity with which the Executive is affiliated, notwithstanding the fact that such divestiture, sale or outsourcing takes place within two years following a Change in Control, if the Executive is offered comparable employment by the successor company and such successor company agrees to assume the Company's obligations to the Executive under this Agreement. (A) In lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination and in lieu of any severance benefit otherwise payable to the Executive, the Company shall pay to the Executive a lump sum severance payment, in cash, equal to two times the sum of (i) the Executive's annual base salary as in effect immediately prior to the Date of Termination or, if higher, in effect immediately prior to the Change in Control and (ii) the highest of (1) the average annual bonus earned by the Executive pursuant to any annual bonus or incentive plan maintained by the Company in respect of the three fiscal years ending immediately prior to the fiscal year in which occurs the Date of Termination, (2) the average annual bonus earned by the Executive pursuant to any such plan in respect of the three fiscal years ending immediately prior to the fiscal year in which occurs the Change in Control or (3) the target annual bonus in effect for the Executive for the fiscal year in which occurs the Date of Termination. (B) For the twenty-four (24) month period immediately following the Date of Termination, the Company shall arrange to provide the Executive and his dependents life, disability and accident benefits substantially similar to those provided to the Executive and his dependents immediately prior to the Date of Termination or, if more favorable to the Executive, those provided to the Executive and his dependents immediately prior to the Change in Control, at no greater cost to the Executive than the cost to the Executive immediately prior to such Date of Termination or Change in Control; provided, however, that any across the board changes to life, disability or accident benefits similarly affecting all or substantially all employees of the Company and any entity in control of the Company shall not be deemed a breach of this Section 6.1(B). Benefits otherwise receivable by the Executive pursuant to this Section 6.1(B) shall be reduced to the extent benefits of the same type are received by or made available to the Executive during the twenty-four (24) month period following the Executive's termination of employment (and any such benefits received by or made available to the Executive shall be reported to the Company by the Executive); provided, however, that the Company shall reimburse the Executive for the excess, if any, of the cost of such benefits to the Executive over such cost immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control. If the Executive dies during the twenty- four (24) month period following the Date of Termination, life, disability and accident benefit coverage of the Executive's dependents shall continue for the remainder of the twenty-four (24) month period. (C) For the twenty-four (24) month period immediately following the Date of Termination, the Company shall provide health and dental benefits to the Executive and his dependents under the terms of the Company's health and dental plan as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control. Benefits otherwise receivable by the Executive pursuant to this Section 6.1(C) shall be reduced to the extent benefits of the same type are received by or made available to the Executive following the Executive's termination of employment (and any such benefits received by or made available to the Executive shall be reported to the Company by the Executive); provided, however, that the Company shall reimburse the Executive for the excess, if any, of the cost of such benefits to the Executive over such cost immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control. If the Executive dies at a time when health and dental benefits are being provided under this Section 6.1(C) to the Executive's dependents, the Company shall continue to provide the dependents with health and dental benefits for the remainder of the twenty-four (24) month period on the same basis as if the Executive had survived throughout that period. (D) The Company shall provide outplacement services determined by the Company to be suitable to the Executive's position for a period of one (1) year following the Executive's Date of Termination. 6.2 (A) Whether or not the Executive becomes entitled to the Severance Payments, if any of the payments or benefits received or to be received by the Executive in connection with a Change in Control or the Executive's termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any Person whose actions result in a Change in Control or any Person affiliated with the Company or such Person) (such payments or benefits, excluding the Gross-Up Payment, being hereinafter referred to as the "Total Payments") will be subject to the Excise Tax, the Company shall pay to the Executive an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive, after deduction of any Excise Tax on the Total Payments and any federal, state and local income and employment taxes and Excise Tax upon the Gross- Up Payment, shall be equal to the Total Payments. (B) For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) all of the Total Payments shall be treated as "parachute payments" (within the meaning of Section 280G(b)(2) of the Code) unless, in the opinion of tax counsel ("Tax Counsel") reasonably acceptable to the Executive and selected by the accounting firm which was, immediately prior to the Change in Control, the Company's independent auditor (the "Auditor"), such payments or benefits (in whole or in part) should not constitute parachute payments, including by reason of Section 280G(b)(4)(A) of the Code, (ii) all "excess parachute payments" within the meaning of Section 280G(b)(l) of the Code shall be treated as subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered (within the meaning of Section 280G(b)(4)(B) of the Code) in excess of the Base Amount allocable to such reasonable compensation, or should otherwise not be subject to the Excise Tax and (iii) the value of any non- cash benefits or any deferred payment or benefit shall be determined by the Auditor in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the Date of Termination (or if there is no Date of Termination, then the date on which the Gross-Up Payment is calculated for purposes of this Section 6.2), net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. (C) In the event that the Excise Tax is finally determined to be less than the amount taken into account hereunder in calculating the Gross-Up Payment, the Executive shall repay to the Company, within five (5) business days following the time that the amount of such reduction in the Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income and employment taxes imposed on the Gross-Up Payment being repaid by the Executive, to the extent that such repayment results in a reduction in the Excise Tax and a dollar-for-dollar reduction in the Executive's taxable income and wages for purposes of federal, state and local income and employment taxes), plus interest on the amount of such repayment at 120% of the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder in calculating the Gross-Up Payment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest, penalties or additions payable by the Executive with respect to such excess) within five (5) business days following the time that the amount of such excess is finally determined. The Executive and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Total Payments. 6.3 The payments provided in subsections (A) and (C) of Section 6.1 hereof and in subsections (A) and (B) of Section 6.2 hereof shall be made not later than the fifth day following the Date of Termination; provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Company shall pay to the Executive on such day an estimate, as determined in good faith by the Company or, in the case of payments under Section 6.2 hereof, in accordance with Section 6.2 hereof, of the minimum amount of such payments to which the Executive is clearly entitled and shall pay the remainder of such payments (together with interest on the unpaid remainder (or on all such payments to the extent the Company fails to make such payments when due) at 120% of the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth (30th) day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Executive, payable on the fifth (5th) business day after demand by the Company (together with interest at 120% of the rate provided in Section 1274(b)(2)(B) of the Code). At the time that payments are made under this Agreement, the Company shall provide the Executive with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations including, without limitation, any opinions or other advice the Company has received from Tax Counsel, the Auditor or other advisors or consultants (and any such opinions or advice which are in writing shall be attached to the statement). 6.4 The Company also shall pay to the Executive all legal fees and expenses incurred by the Executive in seeking in good faith to obtain or enforce any benefit or right provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Code to any payment or benefit provided hereunder. Such payments shall be made within five (5) business days after delivery of the Executive's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 7. Termination Procedures and Compensation During Dispute. 7.1 Notice of Termination. After a Change in Control and during the Term, any purported termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three- quarters (3/4) of the entire membership of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in detail. 7.2 Date of Termination. "Date of Termination," with respect to any purported termination of the Executive's employment after a Change in Control and during the Term, shall mean (i) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such thirty (30) day period), and (ii) if the Executive's employment is terminated for any other reason, the date specified in the Notice of Termination (which, in the case of a termination by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days, respectively, from the date such Notice of Termination is given). 8. No Mitigation. The Company agrees that, if the Executive's employment with the Company terminates during the Term, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 hereof. Further, the amount of any payment or benefit provided for in this Agreement (other than to the extent provided in Section 6.1(B) and 6.1(C) hereof) shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise. 9. Successors; Binding Agreement. 9.1 In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive's employment for Good Reason after a Change in Control, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. 9.2 This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate. 10. Notices. All notices and other communications provided for in this Agreement (i) shall be in writing, (ii) shall be hand delivered, sent by overnight courier or by United States registered mail, return receipt requested and postage prepaid, addressed, in the case of the Executive, to the address inserted below the Executive's signature on the final page hereof and, if to the Company, to the address set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, and (iii) shall be effective only upon actual receipt. To the Company: CNF Inc. 3240 Hillview Avenue Palo Alto, CA 94304 Attention: General Counsel 11. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or of any lack of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement supersedes any other agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof which have been made by either party; provided, however, that this Agreement shall supersede any written agreement setting forth the terms and conditions of the Executive's employment with the Company only in the event that the Executive's employment with the Company is terminated on or following a Change in Control, by the Company other than for Cause or by the Executive for Good Reason. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and the Executive under this Agreement which by their nature may require either partial or total performance after the expiration of the Term (including, without limitation, those under Sections 6 and 7 hereof) shall survive such expiration. 12. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 13. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 14. Settlement of Disputes; Arbitration. 14.1 All claims by the Executive for benefits under this Agreement shall be directed to and determined by the Board and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive's claim has been denied. 14.2 Any further dispute or controversy arising under or in connection with this Agreement shall be finally settled exclusively by arbitration in Palo Alto, California, in accordance with the rules of the American Arbitration Association then in effect; provided, however, that the evidentiary standards set forth in this Agreement shall apply. Judgment may be entered on the arbitrator's award in any court having jurisdiction. 15. Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated below: (A) "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act. (B) "Auditor" shall have the meaning set forth in Section 6.2 hereof. (C) "Base Amount" shall have the meaning set forth in Section 280G(b)(3) of the Code. (D) "Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under the Exchange Act. (E) "Board" shall mean the Board of Directors of the Company. (F) "Cause" for termination by the Company of the Executive's employment shall mean (i) the willful and continued failure by the Executive to substantially perform the Executive's duties with the Company (other than any such failure resulting from the Executive's incapacity due to disability, including physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination for Good Reason by the Executive pursuant to Section 7.1 hereof) after a written demand for substantial performance is delivered to the Executive by the Board, which demand specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive's duties, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of this definition, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's act, or failure to act, was in the best interest of the Company. In the event of a dispute concerning the application of this provision, no claim by the Company that Cause exists shall be given effect unless the Company establishes to the Board and, in the event of an arbitration as contemplated by Section 14.2, to the arbitrator, by clear and convincing evidence that Cause exists. (G) A "Change in Control" means the occurrence of any one of the following events: (I) any "person," as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (A) the Company or its Affiliates, (B) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or its Affiliates and (C) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the Common Stock), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its Affiliates) representing 25% or more of the combined voting power of the Company's then outstanding voting securities; (II) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the date hereof, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company's stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors as of the date hereof or whose appointment, election or nomination for election was previously so approved or recommended; (III) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or parent entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving or parent entity outstanding immediately after such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as hereinabove defined), directly or indirectly, acquired 25% or more of the combined voting power of the Company's then outstanding securities (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its Affiliates); or (IV) the stockholders of the Company approve a plan of complete liquidation of the Company or there is consummated an agreement for the sale or disposition by the Company of assets having an aggregate book value at the time of such sale or disposition of more than 75% of the total book value of the Company's assets on a consolidated basis (or any transaction having a similar effect), other than any such sale or disposition by the Company (including by way of spin-off or other distribution) to an entity, at least 50% of the combined voting power of the voting securities of which are owned immediately following such sale or disposition by stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale or disposition; provided, however, that a Change in Control shall be deemed not to have occurred under this clause (IV) if, immediately prior to the consummation of any sale or disposition of a business unit that is taken into account in determining whether a Change in Control has occurred, the Executive is employed by, and is party to a severance agreement with, such business unit. (H) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (I) "Company" shall mean CNF Inc. and, except in determining under Section 15(G) hereof whether or not any Change in Control of the Company has occurred, shall include any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise. In addition, when used in the context of the Executive's employment, "Company" shall mean the Company or any of its subsidiaries. (J) "Common Stock" shall mean the common stock, par value $0.625 per share, of the Company. (K) "Date of Termination" shall have the meaning set forth in Section 7.2 hereof. (L) "Disability" shall be deemed the reason for the termination by the Company of the Executive's employment, if, as a result of the Executive's incapacity due to disability, including physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with the Company for a period of six (6) consecutive months, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties. (M) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. (N) "Excise Tax" shall mean any excise tax imposed under Section 4999 of the Code. (O) "Executive" shall mean the individual named in the first paragraph of this Agreement. (P) "Good Reason" for termination by the Executive of the Executive's employment shall mean the occurrence (without the Executive's express written consent) after any Change in Control and during the Term of any one of the following acts by the Company, or failures by the Company to act, unless such act or failure to act is corrected within 30 days of receipt by the Company of notice of the Executive's intent to terminate for Good Reason hereunder: (I) the failure of the successor company, following the Change in Control, to assume this Agreement and all obligations hereunder, as of the date of such Change in Control; (II) the assignment to the Executive of any duties inconsistent with the Executive's status as an executive of the Company or a substantial adverse alteration in the nature or status of the Executive's responsibilities from those in effect immediately prior to the Change in Control; (III) a reduction by the Company in the Executive's annual base salary (except for across- the-board salary reductions similarly affecting all executives of the Company and all executives of any Person in control of the Company) or incentive compensation opportunity (both short- term and long-term, valued in a manner consistent with the valuation methodology used by the Company prior to the Change in Control), each as in effect immediately prior to the Change in Control or as the same may thereafter be increased from time to time; (IV) the relocation of the Executive's principal place of employment to a location that results in an increase in the Executive's one way commute of at least 50 miles more than the Executive's one way commute immediately prior to the Change in Control, except for required travel on the Company's business to an extent substantially consistent with the Executive's business travel obligations immediately prior to the Change in Control; (V) the failure by the Company to pay to the Executive when due any portion of the Executive's current compensation; (VI) the failure by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of the Company's pension, savings, life insurance, medical, health and accident, or disability plans in which the Executive was participating immediately prior to the Change in Control (except for across the board changes similarly affecting all or substantially all employees of the Company and any entity in control of the Company), the taking of any other action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive immediately prior to the Change in Control, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled. The Executive's right to terminate the Executive's employment for Good Reason shall not be affected by the Executive's incapacity due to disability, including physical or mental illness. The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. (Q) "Gross-Up Payment" shall have the meaning set forth in Section 6.2 hereof. (R) "Notice of Termination" shall have the meaning set forth in Section 7.1 hereof. (S) "Pension Plan" shall mean any tax-qualified, supplemental or excess benefit pension plan maintained by the Company and any other plan or agreement entered into between the Executive and the Company which is designed to provide the Executive with supplemental retirement benefits. (T) "Person" shall mean any person, as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (A) the Company or its Affiliates, (B) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or its Affiliates, and (C) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the Common Stock) (U) "Potential Change in Control" shall be deemed to have occurred if: (I) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control; (II) the Company or any Person publicly announces an intention to take or to consider taking actions, including but not limited to proxy contests or consent solicitations, which, if consummated, would constitute a Change in Control; (III) any Person becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 15% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company's then outstanding securities (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its affiliates); or (IV) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred. (V) "Retirement" shall be deemed the reason for the termination by the Executive of the Executive's employment if such employment is terminated in accordance with the Company's retirement policy, including early retirement, generally applicable to its salaried employees. (W) "Severance Payments" shall have the meaning set forth in Section 6.1 hereof. (X) "Tax Counsel" shall have the meaning set forth in Section 6.2 hereof. (Y) "Term" shall mean the period of time described in Section 2 hereof (including any extension, continuation or termination described therein). (Z) "Total Payments" shall mean those payments so described in Section 6.2 hereof. CNF INC. EXHIBIT A WAIVER AND RELEASE OF CLAIMS In consideration of, and subject to, the payment to be made to me by CNF Inc. (the "Company") of the "Severance Payments" (as defined in the Severance Agreement, dated as of DATE,entered into between me and the Company (the "Agreement")), I hereby waive any claims I may have for employment or re- employment by the Company or any subsidiary of the Company after the date hereof, and I further agree to and do release and forever discharge the Company or any subsidiary of the Company, and their respective past and present officers, directors, shareholders, insurers, employees and agents from any and all claims and causes of action, known or unknown, arising out of or relating to my employment with the Company or any subsidiary of the Company, or the termination thereof, including, but not limited to, wrongful discharge, breach of contract, tort, fraud, the Civil Rights Acts, Age Discrimination in Employment Act, Employee Retirement Income Security Act of 1974, Americans with Disabilities Act, or any other federal, state or local legislation or common law relating to employment or discrimination in employment or otherwise. Notwithstanding the foregoing or any other provision hereof, nothing in this Waiver and Release of Claims shall adversely affect (i) my rights under the Agreement; (ii) my rights to benefits other than severance benefits under plans, programs and arrangements of the Company or any subsidiary or parent of the Company which are accrued but unpaid as of the date of my termination; or (iii) my rights to indemnification under any indemnification agreement, applicable law and the certificates of incorporation and bylaws of the Company and any subsidiary or parent of the Company, and my rights under any director's and officers' liability insurance policy covering me. I acknowledge that I have signed this Waiver and Release of Claims voluntarily, knowingly, of my own free will and without reservation or duress, and that no promises or representations have been made to me by any person to induce me to do so other than the promise of payment set forth in the first paragraph above and the Company's acknowledgment of my rights reserved under the second paragraph above. I understand that this release will be deemed to be an application for benefits under the Agreement and that my entitlement thereto shall be governed by the terms and conditions of the Agreement and any applicable plan. I expressly hereby consent to such terms and conditions. I acknowledge that I have been given not less than forty-five (45) days to review and consider this Waiver and Release of Claims (unless I have signed a written waiver of such review and consideration period), and that I have had the opportunity to consult with an attorney or other advisor of my choice and have been advised by the Company to do so if I choose. I may revoke this Waiver and Release of Claims seven days or less after its execution by providing written notice to the Company. I acknowledge that it is my intention and the intention of the Company in executing this Waiver and Release of Claims that the same shall be effective as a bar to each and every claim, demand and cause of action hereinabove specified. In furtherance of this intention, I hereby expressly waive any and all rights and benefits conferred upon me by the provisions of SECTION 1542 OF THE CALIFORNIA CIVIL CODE, to the extent applicable to me, and expressly I consent that this Waiver and Release of Claims shall be given full force and effect according to each and all of its express terms and provisions, including as well those related to unknown and unsuspected claims, demands and causes of action, if any, as well as those relating to any other claims, demands and causes of action hereinabove specified. SECTION 1542 provides: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR." I acknowledge that I may hereafter discover claims or facts in addition to or different from those which I now know or believe to exist with respect to the subject matter of this Waiver and Release of Claims and which, if known or suspected at the time of executing this Waiver and Release of Claims, may have materially affected this settlement. Finally, I acknowledge that I have read this Waiver and Release of Claims and understand all of its terms. EX-10 19 ex1018.txt Schedule to Form of Con-Way Transportation Services, Inc. Severance Agreement As of the date hereof, each of the following officers at Con-Way Transportation Services ("CTS"), a subsidiary of CNF Inc., is a party to a Severance Agreement with CTS in the form attached: Date of Agreement Name of Officer July 31, 2000 David S. McClimon July 31, 2000 Bryan M. Millican July 31, 2000 Douglas W. Stotlar SEVERANCE AGREEMENT THIS AGREEMENT, dated as of July 31, 2000, is made by and between Con-Way Transportation Services, Inc. (the "Company"), wholly owned subsidiary of CNF Transportation Inc., a Delaware corporation ("CNF"), and (NAME) (the "Executive"). WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's management, including the Executive, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change in Control of the Company; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Company and the Executive hereby agree as follows: 1. Defined Terms. The definitions of capitalized terms used in this Agreement are provided in the last Section hereof. 2. Term of Agreement. The Term of this Agreement shall commence on the date hereof and shall continue in effect through December 31, 2001; provided, however, that commencing on January 1, 2001, and each January 1 thereafter, the Term shall automatically be extended for one additional year unless, not later than September 30 of the preceding year, the Company or the Executive shall have given notice not to extend the Term; and further provided, however, that if a Change in Control of the Company shall have occurred during the Term, the Term shall expire no earlier than twenty_four (24) months beyond the month in which such Change in Control of the Company occurred. Notwithstanding anything in this Agreement to the contrary, unless a Change in Control of the Company has previously occurred, this Agreement shall terminate, and be of no further force or effect, upon the occurrence of a "Change in Control" of CNF (within the meaning of Section 15 of the severance agreement between the Executive and CNF dated as of July 31, 2000 (the "CNF Severance Agreement")), provided that the CNF Severance Agreement remains in effect at the time of such Change in Control of CNF. 3. Company's Covenants Summarized. In order to induce the Executive to remain in the employ of the Company and in consideration of the Executive's covenants set forth in Section 4 hereof, the Company agrees, under the conditions described herein, to pay the Executive the Severance Payments and the other payments and benefits described herein. Except as provided in Section 9.1 hereof, no Severance Payments shall be payable under this Agreement unless there shall have been (or, under the terms of the second paragraph of Section 6.1 hereof, there shall be deemed to have been) a termination of the Executive's employment with the Company following a Change in Control of the Company and during the Term. This Agreement shall not be construed as creating an express or implied contract of employment and, except as otherwise agreed in writing between the Executive and the Company, the Executive (i) shall not have any right to be retained in the employ of the Company, and (ii) shall remain subject to discharge to the same extent as if this Agreement had not been entered into by the Company and the Executive. 4. Executive's Covenants. The Executive agrees that, subject to the terms and conditions of this Agreement, in the event of a Potential Change in Control of the Company during the Term, the Executive will remain in the employ of the Company until the earliest of (i) a date which is six (6) months from the date of such Potential Change in Control of the Company, (ii) the date of a Change in Control of the Company, (iii) the date of termination by the Executive of the Executive's employment for Good Reason or by reason of death, Disability or Retirement or (iv) the termination by the Company of the Executive's employment for any reason. 5. Compensation Other Than Severance Payments. 5.1 Following a Change in Control of the Company and during the Term, during any period that the Executive fails to perform the Executive's full-time duties with the Company as a result of incapacity due to disability, including physical or mental illness, the Company shall pay the Executive's full salary to the Executive at the rate in effect at the commencement of any such period, together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period (other than any disability plan), until the Executive's employment is terminated by the Company for Disability. 5.2 If the Executive's employment shall be terminated for any reason following a Change in Control of the Company and during the Term, the Company shall pay the Executive's full salary to the Executive through the Date of Termination at the rate in effect immediately prior to the Date of Termination or, if higher, the rate in effect immediately prior to the Change in Control of the Company, together with all compensation and benefits payable to the Executive through the Date of Termination under the terms of CNF's or the Company's compensation and benefit plans, programs or arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the Change in Control of the Company. 5.3 If the Executive's employment shall be terminated for any reason following a Change in Control of the Company and during the Term, the Company shall pay, or shall make satisfactory arrangements with CNF to pay, to the Executive the Executive's normal post_termination compensation and benefits as such payments become due (other than severance payments under any severance plan as in effect immediately prior to the Date of Termination). Such post_termination compensation and benefits shall be determined under, and paid in accordance with, CNF's or the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the Change in Control of the Company. 6. Severance Payments. 6.1 If the Executive's employment is terminated following a Change in Control of the Company and during the Term, other than (A) by the Company for Cause, (B) by reason of death or Disability, or (C) by the Executive without Good Reason, then the Company shall pay the Executive the amounts, and provide the Executive the benefits, described in this Section 6.1 ("Severance Payments") and Section 6.2, in addition to any payments and benefits to which the Executive is entitled under Section 5 hereof; provided, however, that the Executive shall not be entitled to the Severance Payments unless and until the Executive (or, in the event of the Executive's death, the executor, personal representative or administrator of the Executive's estate) has signed a written waiver and release substantially in the form set forth on Exhibit A hereto. For purposes of this Agreement, the Executive's employment shall be deemed to have been terminated following a Change in Control of the Company by the Company without Cause or by the Executive with Good Reason, if (i) during the Term the Executive's employment is terminated by the Company without Cause following a Potential Change in Control of the Company but prior to a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs) and such termination was at the request or direction of a Person who has entered into an agreement with the Company the consummation of which would constitute a Change in Control of the Company, (ii) during the Term the Executive terminates his employment for Good Reason following a Potential Change in Control of the Company but prior to a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs) and the circumstance or event which constitutes Good Reason occurs at the request or direction of such Person or (iii) during the Term the Executive's employment is terminated by the Company without Cause or by the Executive for Good Reason and such termination or the circumstance or event which constitutes Good Reason is otherwise in connection with or in anticipation of a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs). (A) In lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination and in lieu of any severance benefit otherwise payable to the Executive, the Company shall pay to the Executive a lump sum severance payment, in cash, equal to two times the sum of (i) the Executive's annual base salary as in effect immediately prior to the Date of Termination or, if higher, in effect immediately prior to the Change in Control of the Company and (ii) the highest of (1) the average annual bonus earned by the Executive pursuant to any annual bonus or incentive plan maintained by CNF or the Company in respect of the three fiscal years ending immediately prior to the fiscal year in which occurs the Date of Termination, (2) the average annual bonus earned by the Executive pursuant to any such plan in respect of the three fiscal years ending immediately prior to the fiscal year in which occurs the Change in Control of the Company or (3) the target annual bonus in effect for the Executive for the fiscal year in which occurs the Date of Termination. (B) For the twenty-four (24) month period immediately following the Date of Termination, the Company shall arrange to provide the Executive and his dependents life, disability and accident benefits substantially similar to those provided to the Executive and his dependents immediately prior to the Date of Termination or, if more favorable to the Executive, those provided to the Executive and his dependents immediately prior to the Change in Control of the Company, at no greater cost to the Executive than the cost to the Executive immediately prior to such Date of Termination or Change in Control of the Company; provided, however, that any across the board changes to life, disability or accident benefits similarly affecting all or substantially all employees of the Company and any entity in control of the Company shall not be deemed a breach of this Section 6.1(B). Benefits otherwise receivable by the Executive pursuant to this Section 6.1(B) shall be reduced to the extent benefits of the same type are received by or made available to the Executive during the twenty-four (24) month period following the Executive's termination of employment (and any such benefits received by or made available to the Executive shall be reported to the Company by the Executive); provided, however, that the Company shall reimburse the Executive for the excess, if any, of the cost of such benefits to the Executive over such cost immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control of the Company. If the Executive dies during the twenty-four (24) month period following the Date of Termination, life, disability and accident benefit coverage of the Executive's dependents shall continue for the remainder of the twenty-four (24) month period. (C) For the twenty-four (24) month period immediately following the Date of Termination, the Company shall provide health and dental benefits to the Executive and his dependents under the terms of CNF's or the Company's health and dental plan as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control of the Company. Benefits otherwise receivable by the Executive pursuant to this Section 6.1(C) shall be reduced to the extent benefits of the same type are received by or made available to the Executive following the Executive's termination of employment (and any such benefits received by or made available to the Executive shall be reported to the Company by the Executive); provided, however, that the Company shall reimburse the Executive for the excess, if any, of the cost of such benefits to the Executive over such cost immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control of the Company. If the Executive dies at a time when health and dental benefits are being provided under this Section 6.1(C) to the Executive's dependents, the Company shall continue to provide the dependents with health and dental benefits for the remainder of the twenty-four (24) month period on the same basis as if the Executive had survived throughout that period. (D) The Company shall provide outplacement services determined by the Company to be suitable to the Executive's position for a period of one (1) year following the Executive's Date of Termination. 6.2 (A) Whether or not the Executive becomes entitled to the Severance Payments, if any of the payments or benefits received or to be received by the Executive in connection with a Change in Control of the Company or the Executive's termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any Person whose actions result in a Change in Control of the Company or any Person affiliated with the Company or such Person) (such payments or benefits, excluding the Gross-Up Payment, being hereinafter referred to as the "Total Payments") will be subject to the Excise Tax, the Company shall pay to the Executive an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive, after deduction of any Excise Tax on the Total Payments and any federal, state and local income and employment taxes and Excise Tax upon the Gross-Up Payment, shall be equal to the Total Payments. (B) For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) all of the Total Payments shall be treated as "parachute payments" (within the meaning of Section 280G(b)(2) of the Code) unless, in the opinion of tax counsel ("Tax Counsel") reasonably acceptable to the Executive and selected by the accounting firm which was, immediately prior to the Change in Control of the Company, the Company's independent auditor (the "Auditor"), such payments or benefits (in whole or in part) should not constitute parachute payments, including by reason of Section 280G(b)(4)(A) of the Code, (ii) all "excess parachute payments" within the meaning of Section 280G(b)(l) of the Code shall be treated as subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered (within the meaning of Section 280G(b)(4)(B) of the Code) in excess of the Base Amount allocable to such reasonable compensation, or should otherwise not be subject to the Excise Tax and (iii) the value of any noncash benefits or any deferred payment or benefit shall be determined by the Auditor in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the Date of Termination (or if there is no Date of Termination, then the date on which the Gross-Up Payment is calculated for purposes of this Section 6.2), net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. (C) In the event that the Excise Tax is finally determined to be less than the amount taken into account hereunder in calculating the Gross-Up Payment, the Executive shall repay to the Company, within five (5) business days following the time that the amount of such reduction in the Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income and employment taxes imposed on the Gross-Up Payment being repaid by the Executive, to the extent that such repayment results in a reduction in the Excise Tax and a dollar-for-dollar reduction in the Executive's taxable income and wages for purposes of federal, state and local income and employment taxes), plus interest on the amount of such repayment at 120% of the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder in calculating the Gross-Up Payment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest, penalties or additions payable by the Executive with respect to such excess) within five (5) business days following the time that the amount of such excess is finally determined. The Executive and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Total Payments. 6.3 The payments provided in subsections (A) and (C) of Section 6.1 hereof and in subsections (A) and (B) of Section 6.2 hereof shall be made not later than the fifth day following the Date of Termination; provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Company shall pay to the Executive on such day an estimate, as determined in good faith by the Company or, in the case of payments under Section 6.2 hereof, in accordance with Section 6.2 hereof, of the minimum amount of such payments to which the Executive is clearly entitled and shall pay the remainder of such payments (together with interest on the unpaid remainder (or on all such payments to the extent the Company fails to make such payments when due) at 120% of the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth (30th) day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Executive, payable on the fifth (5th) business day after demand by the Company (together with interest at 120% of the rate provided in Section 1274(b)(2)(B) of the Code). At the time that payments are made under this Agreement, the Company shall provide the Executive with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations including, without limitation, any opinions or other advice the Company has received from Tax Counsel, the Auditor or other advisors or consultants (and any such opinions or advice which are in writing shall be attached to the statement). 6.4 The Company also shall pay to the Executive all legal fees and expenses incurred by the Executive in seeking in good faith to obtain or enforce any benefit or right provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Code to any payment or benefit provided hereunder. Such payments shall be made within five (5) business days after delivery of the Executive's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 7. Termination Procedures and Compensation During Dispute. 7.1 Notice of Termination. After a Change in Control of the Company and during the Term, any purported termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three_quarters (3/4) of the entire membership of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in detail. 7.2 Date of Termination. "Date of Termination," with respect to any purported termination of the Executive's employment after a Change in Control of the Company and during the Term, shall mean (i) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full- time performance of the Executive's duties during such thirty (30) day period), and (ii) if the Executive's employment is terminated for any other reason, the date specified in the Notice of Termination (which, in the case of a termination by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days, respectively, from the date such Notice of Termination is given). 8. No Mitigation. The Company agrees that, if the Executive's employment with the Company terminates during the Term, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 hereof. Further, the amount of any payment or benefit provided for in this Agreement (other than to the extent provided in Section 6.1(B) and 6.1(C) hereof) shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise. 9. Successors; Binding Agreement. 9.1 In addition to any obligations imposed by law upon any successor to the Company, CNF or the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of CNF and the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive's employment for Good Reason after a Change in Control of the Company, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. 9.2 This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate. 10. Notices. All notices and other communications provided for in this Agreement (i) shall be in writing, (ii) shall be hand delivered, sent by overnight courier or by United States registered mail, return receipt requested and postage prepaid, addressed, in the case of the Executive, to the address inserted below the Executive's signature on the final page hereof and, if to the Company, to the address set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, and (iii) shall be effective only upon actual receipt. To the Company: Con-Way Transportation Services, Inc. 110 Parkland Plaza Ann Arbor, MI 48103 Attention: Vice President and Corporate Counsel 11. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or of any lack of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement supersedes any other agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof which have been made by either party; provided, however, that this Agreement shall supersede any written agreement setting forth the terms and conditions of the Executive's employment with the Company only in the event that the Executive's employment with the Company is terminated on or following a Change in Control of the Company, by the Company other than for Cause or by the Executive for Good Reason. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Michigan. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and the Executive under this Agreement which by their nature may require either partial or total performance after the expiration of the Term (including, without limitation, those under Sections 6 and 7 hereof) shall survive such expiration. 12. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 13. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 14. Settlement of Disputes; Arbitration. 14.1 All claims by the Executive for benefits under this Agreement shall be directed to and determined by the Board and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive's claim has been denied. 14.2 Any further dispute or controversy arising under or in connection with this Agreement shall be finally settled exclusively by arbitration in Ann Arbor, Michigan, in accordance with the rules of the American Arbitration Association then in effect; provided, however, that the evidentiary standards set forth in this Agreement shall apply. Judgment may be entered on the arbitrator's award in any court having jurisdiction. 15. Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated below: (A) "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act. (B) "Auditor" shall have the meaning set forth in Section 6.2 hereof. (C) "Base Amount" shall have the meaning set forth in Section 280G(b)(3) of the Code. (D) "Board" shall mean the Board of Directors of the Company. (E) "Cause" for termination by the Company of the Executive's employment shall mean (i) the willful and continued failure by the Executive to substantially perform the Executive's duties with the Company (other than any such failure resulting from the Executive's incapacity due to disability, including physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination for Good Reason by the Executive pursuant to Section 7.1 hereof) after a written demand for substantial performance is delivered to the Executive by the Board, which demand specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive's duties, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of this definition, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's act, or failure to act, was in the best interest of the Company. In the event of a dispute concerning the application of this provision, no claim by the Company that Cause exists shall be given effect unless the Company establishes to the Board and, in the event of an arbitration as contemplated by Section 14.2, to the arbitrator, by clear and convincing evidence that Cause exists. (F) A "Change in Control of the Company" means the occurrence of any one of the following events: (I) a sale by CNF of the then outstanding shares of capital stock of the Company having more than 50% of the then existing voting power of all outstanding securities of the Company, whether by merger, consolidation or otherwise; (II) the sale of all or substantially all of the assets of the Company; or (III) any other transaction or course of action engaged in, directly or indirectly, by the Company or CNF that has a substantially similar effect as the transactions of the type referred to in clause (I) or (II) above. The foregoing notwithstanding, a Change in Control of the Company shall not be deemed to have occurred (A) by reason of the occurrence of a "Change in Control" of CNF (within the meaning of Section 15 of the CNF Severance Agreement), (B) except in the case of a transaction described in clause (II) above, so long as CNF or any of its Affiliates, individually or collectively, own the then outstanding shares of capital stock of the Company having 50% or more of the then existing voting power of all outstanding securities of the Company, (C) in the event of the sale of shares of capital stock of the Company to any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any other Affiliate of CNF, or (D) in the event of the sale or distribution of shares of capital stock of the Company to shareholders of CNF, or the sale of assets of the Company to any corporation or other entity owned, directly or indirectly, by the shareholders of CNF, in either case in substantially the same proportions as their ownership of stock in CNF. (G) "CNF" shall mean CNF Transportation Inc. and any successor to its business and/or assets. (H) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (I) "Company" shall mean Con-Way Transportation Services, Inc. and, except in determining under Section 15(G) hereof whether or not any Change in Control of the Company has occurred, shall include any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise. In addition, when used in the context of the Executive's employment, "Company" shall mean the Company or any of its subsidiaries. (J) "Common Stock" shall mean the common stock, par value $1.00 per share, of the Company. (K) "Date of Termination" shall have the meaning set forth in Section 7.2 hereof. (L) "Disability" shall be deemed the reason for the termination by the Company of the Executive's employment, if, as a result of the Executive's incapacity due to disability, including physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with the Company for a period of six (6) consecutive months, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties. (M) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. (N) "Excise Tax" shall mean any excise tax imposed under Section 4999 of the Code. (O) "Executive" shall mean the individual named in the first paragraph of this Agreement. (P) "Good Reason" for termination by the Executive of the Executive's employment shall mean the occurrence (without the Executive's express written consent) after any Change in Control of the Company and during the Term of any one of the following acts by the Company, or failures by the Company to act, unless such act or failure to act is corrected within 30 days of receipt by the Company of notice of the Executive's intent to terminate for Good Reason hereunder: (I) the failure of the successor company, following the Change in Control of the Company, to assume this Agreement and all obligations hereunder, as of the date of such Change in Control of the Company; (II) the assignment to the Executive of any duties inconsistent with the Executive's status as an executive of the Company or a substantial adverse alteration in the nature or status of the Executive's responsibilities from those in effect immediately prior to the Change in Control of the Company; (III) a reduction by the Company in the Executive's annual base salary (except for across- the-board salary reductions similarly affecting all executives of the Company and all executives of any Person in control of the Company) or incentive compensation opportunity (both short- term and long-term, valued in a manner consistent with the valuation methodology used by the Company prior to the Change in Control of the Company), each as in effect immediately prior to the Change in Control of the Company or as the same may thereafter be increased from time to time; (IV) the relocation of the Executive's principal place of employment to a location that results in an increase in the Executive's one way commute of at least 50 miles more than the Executive's one way commute immediately prior to the Change in Control of the Company, except for required travel on the Company's business to an extent substantially consistent with the Executive's business travel obligations immediately prior to the Change in Control of the Company; (V) the failure by the Company to pay to the Executive when due any portion of the Executive's current compensation; (VI) the failure by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of CNF's or the Company's pension, savings, life insurance, medical, health and accident, or disability plans in which the Executive was participating immediately prior to the Change in Control of the Company (except for across the board changes similarly affecting all or substantially all employees of the Company and any entity in control of the Company), the taking of any other action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive immediately prior to the Change in Control of the Company, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled. The Executive's right to terminate the Executive's employment for Good Reason shall not be affected by the Executive's incapacity due to disability, including physical or mental illness. The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. (Q) "Gross-Up Payment" shall have the meaning set forth in Section 6.2 hereof. (R) "Notice of Termination" shall have the meaning set forth in Section 7.1 hereof. (S) "Pension Plan" shall mean any tax-qualified, supplemental or excess benefit pension plan maintained by CNF or the Company and any other plan or agreement entered into between the Executive and the Company which is designed to provide the Executive with supplemental retirement benefits. (T) "Person" shall mean any person, as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (A) the Company or its Affiliates, (B) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or its Affiliates, and (C) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the Common Stock) (U) "Potential Change in Control of the Company" shall be deemed to have occurred if: (I) CNF or the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control of the Company; or (II) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control of the Company has occurred. (V) "Retirement" shall be deemed the reason for the termination by the Executive of the Executive's employment if such employment is terminated in accordance with the Company's retirement policy, including early retirement, generally applicable to its salaried employees. (W) "Severance Payments" shall have the meaning set forth in Section 6.1 hereof. (X) "Tax Counsel" shall have the meaning set forth in Section 6.2 hereof. (Y) "Term" shall mean the period of time described in Section 2 hereof (including any extension, continuation or termination described therein). (Z) "Total Payments" shall mean those payments so described in Section 6.2 hereof. EXHIBIT A WAIVER AND RELEASE OF CLAIMS In consideration of, and subject to, the payment to be made to me by Con-Way Transportation Services, Inc. (the "Company") of the "Severance Payments" (as defined in the Severance Agreement, dated as of DATE, entered into between me and the Company (the "Agreement")), I hereby waive any claims I may have for employment or re-employment by the Company or any subsidiary of the Company after the date hereof, and I further agree to and do release and forever discharge the Company or any subsidiary of the Company, and their respective past and present officers, directors, shareholders, insurers, employees and agents from any and all claims and causes of action, known or unknown, arising out of or relating to my employment with the Company or any subsidiary of the Company, or the termination thereof, including, but not limited to, wrongful discharge, breach of contract, tort, fraud, the Civil Rights Acts, Age Discrimination in Employment Act, Employee Retirement Income Security Act of 1974, Americans with Disabilities Act, or any other federal, state or local legislation or common law relating to employment or discrimination in employment or otherwise. Notwithstanding the foregoing or any other provision hereof, nothing in this Waiver and Release of Claims shall adversely affect (i) my rights under the Agreement; (ii) my rights to benefits other than severance benefits under plans, programs and arrangements of the Company or any subsidiary or parent of the Company which are accrued but unpaid as of the date of my termination; or (iii) my rights to indemnification under any indemnification agreement, applicable law and the certificates of incorporation and bylaws of the Company and any subsidiary or parent of the Company, and my rights under any director's and officers' liability insurance policy covering me. I acknowledge that I have signed this Waiver and Release of Claims voluntarily, knowingly, of my own free will and without reservation or duress, and that no promises or representations have been made to me by any person to induce me to do so other than the promise of payment set forth in the first paragraph above and the Company's acknowledgment of my rights reserved under the second paragraph above. I understand that this release will be deemed to be an application for benefits under the Agreement and that my entitlement thereto shall be governed by the terms and conditions of the Agreement and any applicable plan. I expressly hereby consent to such terms and conditions. I acknowledge that I have been given not less than forty-five (45) days to review and consider this Waiver and Release of Claims (unless I have signed a written waiver of such review and consideration period), and that I have had the opportunity to consult with an attorney or other advisor of my choice and have been advised by the Company to do so if I choose. I may revoke this Waiver and Release of Claims seven days or less after its execution by providing written notice to the Company. I acknowledge that it is my intention and the intention of the Company in executing this Waiver and Release of Claims that the same shall be effective as a bar to each and every claim, demand and cause of action hereinabove specified. In furtherance of this intention, I hereby expressly waive any and all rights and benefits conferred upon me by the provisions of SECTION 1542 OF THE CALIFORNIA CIVIL CODE, to the extent applicable to me, and expressly I consent that this Waiver and Release of Claims shall be given full force and effect according to each and all of its express terms and provisions, including as well those related to unknown and unsuspected claims, demands and causes of action, if any, as well as those relating to any other claims, demands and causes of action hereinabove specified. SECTION 1542 provides: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR." I acknowledge that I may hereafter discover claims or facts in addition to or different from those which I now know or believe to exist with respect to the subject matter of this Waiver and Release of Claims and which, if known or suspected at the time of executing this Waiver and Release of Claims, may have materially affected this settlement. Finally, I acknowledge that I have read this Waiver and Release of Claims and understand all of its terms. EX-10 20 ex1019.txt Schedule to Form of Menlo Worldwide Forwarding, Inc. Severance Agreement As of the date hereof, each of the following officers of Menlo Worldwide Forwarding, Inc. ("MWFI"), a subsidiary of CNF Inc., is a party to a Severance Agreement with MWFI in the form attached: Date of Agreement Name of Officer November 3, 2000 Eric W. Kirchner October 9, 2000 Gerard Trimarco SEVERANCE AGREEMENT THIS AGREEMENT, dated as of DATE, is made by and between Emery Air Freight Corporation (the "Company"), a wholly owned subsidiary of CNF Transportation Inc., a Delaware corporation ("CNF"), and NAME (the "Executive"). WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's management, including the Executive, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change in Control of the Company; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Company and the Executive hereby agree as follows: 1. Defined Terms. The definitions of capitalized terms used in this Agreement are provided in the last Section hereof. 2. Term of Agreement. The Term of this Agreement shall commence on the date hereof and shall continue in effect through December 31, 200X; provided, however, that commencing on January 1, 200X, and each January 1 thereafter, the Term shall automatically be extended for one additional year unless, not later than September 30 of the preceding year, the Company or the Executive shall have given notice not to extend the Term; and further provided, however, that if a Change in Control of the Company shall have occurred during the Term, the Term shall expire no earlier than twenty_four (24) months beyond the month in which such Change in Control of the Company occurred. Notwithstanding anything in this Agreement to the contrary, unless a Change in Control of the Company has previously occurred, this Agreement shall terminate, and be of no further force or effect, upon the occurrence of a "Change in Control" of CNF (within the meaning of Section 15 of the severance agreement between the Executive and CNF dated as of DATE (the "CNF Severance Agreement")), provided that the CNF Severance Agreement remains in effect at the time of such Change in Control of CNF. 3. Company's Covenants Summarized. In order to induce the Executive to remain in the employ of the Company and in consideration of the Executive's covenants set forth in Section 4 hereof, the Company agrees, under the conditions described herein, to pay the Executive the Severance Payments and the other payments and benefits described herein. Except as provided in Section 9.1 hereof, no Severance Payments shall be payable under this Agreement unless there shall have been (or, under the terms of the second paragraph of Section 6.1 hereof, there shall be deemed to have been) a termination of the Executive's employment with the Company following a Change in Control of the Company and during the Term. This Agreement shall not be construed as creating an express or implied contract of employment and, except as otherwise agreed in writing between the Executive and the Company, the Executive (i) shall not have any right to be retained in the employ of the Company, and (ii) shall remain subject to discharge to the same extent as if this Agreement had not been entered into by the Company and the Executive. 4. Executive's Covenants. The Executive agrees that, subject to the terms and conditions of this Agreement, in the event of a Potential Change in Control of the Company during the Term, the Executive will remain in the employ of the Company until the earliest of (i) a date which is six (6) months from the date of such Potential Change in Control of the Company, (ii) the date of a Change in Control of the Company, (iii) the date of termination by the Executive of the Executive's employment for Good Reason or by reason of death, Disability or Retirement or (iv) the termination by the Company of the Executive's employment for any reason. 5. Compensation Other Than Severance Payments. 5.1 Following a Change in Control of the Company and during the Term, during any period that the Executive fails to perform the Executive's full-time duties with the Company as a result of incapacity due to disability, including physical or mental illness, the Company shall pay the Executive's full salary to the Executive at the rate in effect at the commencement of any such period, together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period (other than any disability plan), until the Executive's employment is terminated by the Company for Disability. 5.2 If the Executive's employment shall be terminated for any reason following a Change in Control of the Company and during the Term, the Company shall pay the Executive's full salary to the Executive through the Date of Termination at the rate in effect immediately prior to the Date of Termination or, if higher, the rate in effect immediately prior to the Change in Control of the Company, together with all compensation and benefits payable to the Executive through the Date of Termination under the terms of CNF's or the Company's compensation and benefit plans, programs or arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the Change in Control of the Company. 5.3 If the Executive's employment shall be terminated for any reason following a Change in Control of the Company and during the Term, the Company shall pay, or shall make satisfactory arrangements with CNF to pay, to the Executive the Executive's normal post_termination compensation and benefits as such payments become due (other than severance payments under any severance plan as in effect immediately prior to the Date of Termination). Such post_termination compensation and benefits shall be determined under, and paid in accordance with, CNF's or the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the Change in Control of the Company. 6. Severance Payments. 6.1 If the Executive's employment is terminated following a Change in Control of the Company and during the Term, other than (A) by the Company for Cause, (B) by reason of death or Disability, or (C) by the Executive without Good Reason, then the Company shall pay the Executive the amounts, and provide the Executive the benefits, described in this Section 6.1 ("Severance Payments") and Section 6.2, in addition to any payments and benefits to which the Executive is entitled under Section 5 hereof; provided, however, that the Executive shall not be entitled to the Severance Payments unless and until the Executive (or, in the event of the Executive's death, the executor, personal representative or administrator of the Executive's estate) has signed a written waiver and release substantially in the form set forth on Exhibit A hereto. For purposes of this Agreement, the Executive's employment shall be deemed to have been terminated following a Change in Control of the Company by the Company without Cause or by the Executive with Good Reason, if (i) during the Term the Executive's employment is terminated by the Company without Cause following a Potential Change in Control of the Company but prior to a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs) and such termination was at the request or direction of a Person who has entered into an agreement with the Company the consummation of which would constitute a Change in Control of the Company, (ii) during the Term the Executive terminates his employment for Good Reason following a Potential Change in Control of the Company but prior to a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs) and the circumstance or event which constitutes Good Reason occurs at the request or direction of such Person or (iii) during the Term the Executive's employment is terminated by the Company without Cause or by the Executive for Good Reason and such termination or the circumstance or event which constitutes Good Reason is otherwise in connection with or in anticipation of a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs). (A) In lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination and in lieu of any severance benefit otherwise payable to the Executive, the Company shall pay to the Executive a lump sum severance payment, in cash, equal to two times the sum of (i) the Executive's annual base salary as in effect immediately prior to the Date of Termination or, if higher, in effect immediately prior to the Change in Control of the Company and (ii) the highest of (1) the average annual bonus earned by the Executive pursuant to any annual bonus or incentive plan maintained by CNF or the Company in respect of the three fiscal years ending immediately prior to the fiscal year in which occurs the Date of Termination, (2) the average annual bonus earned by the Executive pursuant to any such plan in respect of the three fiscal years ending immediately prior to the fiscal year in which occurs the Change in Control of the Company or (3) the target annual bonus in effect for the Executive for the fiscal year in which occurs the Date of Termination. (B) For the twenty-four (24) month period immediately following the Date of Termination, the Company shall arrange to provide the Executive and his dependents life, disability and accident benefits substantially similar to those provided to the Executive and his dependents immediately prior to the Date of Termination or, if more favorable to the Executive, those provided to the Executive and his dependents immediately prior to the Change in Control of the Company, at no greater cost to the Executive than the cost to the Executive immediately prior to such Date of Termination or Change in Control of the Company; provided, however, that any across the board changes to life, disability or accident benefits similarly affecting all or substantially all employees of the Company and any entity in control of the Company shall not be deemed a breach of this Section 6.1(B). Benefits otherwise receivable by the Executive pursuant to this Section 6.1(B) shall be reduced to the extent benefits of the same type are received by or made available to the Executive during the twenty-four (24) month period following the Executive's termination of employment (and any such benefits received by or made available to the Executive shall be reported to the Company by the Executive); provided, however, that the Company shall reimburse the Executive for the excess, if any, of the cost of such benefits to the Executive over such cost immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control of the Company. If the Executive dies during the twenty-four (24) month period following the Date of Termination, life, disability and accident benefit coverage of the Executive's dependents shall continue for the remainder of the twenty-four (24) month period. (C) For the twenty-four (24) month period immediately following the Date of Termination, the Company shall provide health and dental benefits to the Executive and his dependents under the terms of CNF's or the Company's health and dental plan as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control of the Company. Benefits otherwise receivable by the Executive pursuant to this Section 6.1(C) shall be reduced to the extent benefits of the same type are received by or made available to the Executive following the Executive's termination of employment (and any such benefits received by or made available to the Executive shall be reported to the Company by the Executive); provided, however, that the Company shall reimburse the Executive for the excess, if any, of the cost of such benefits to the Executive over such cost immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control of the Company. If the Executive dies at a time when health and dental benefits are being provided under this Section 6.1(C) to the Executive's dependents, the Company shall continue to provide the dependents with health and dental benefits for the remainder of the twenty-four (24) month period on the same basis as if the Executive had survived throughout that period. (D) The Company shall provide outplacement services determined by the Company to be suitable to the Executive's position for a period of one (1) year following the Executive's Date of Termination. 6.2 (A) Whether or not the Executive becomes entitled to the Severance Payments, if any of the payments or benefits received or to be received by the Executive in connection with a Change in Control of the Company or the Executive's termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any Person whose actions result in a Change in Control of the Company or any Person affiliated with the Company or such Person) (such payments or benefits, excluding the Gross-Up Payment, being hereinafter referred to as the "Total Payments") will be subject to the Excise Tax, the Company shall pay to the Executive an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive, after deduction of any Excise Tax on the Total Payments and any federal, state and local income and employment taxes and Excise Tax upon the Gross-Up Payment, shall be equal to the Total Payments. (B) For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) all of the Total Payments shall be treated as "parachute payments" (within the meaning of Section 280G(b)(2) of the Code) unless, in the opinion of tax counsel ("Tax Counsel") reasonably acceptable to the Executive and selected by the accounting firm which was, immediately prior to the Change in Control of the Company, the Company's independent auditor (the "Auditor"), such payments or benefits (in whole or in part) should not constitute parachute payments, including by reason of Section 280G(b)(4)(A) of the Code, (ii) all "excess parachute payments" within the meaning of Section 280G(b)(l) of the Code shall be treated as subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered (within the meaning of Section 280G(b)(4)(B) of the Code) in excess of the Base Amount allocable to such reasonable compensation, or should otherwise not be subject to the Excise Tax and (iii) the value of any noncash benefits or any deferred payment or benefit shall be determined by the Auditor in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the Date of Termination (or if there is no Date of Termination, then the date on which the Gross-Up Payment is calculated for purposes of this Section 6.2), net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. (C) In the event that the Excise Tax is finally determined to be less than the amount taken into account hereunder in calculating the Gross-Up Payment, the Executive shall repay to the Company, within five (5) business days following the time that the amount of such reduction in the Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income and employment taxes imposed on the Gross-Up Payment being repaid by the Executive, to the extent that such repayment results in a reduction in the Excise Tax and a dollar-for-dollar reduction in the Executive's taxable income and wages for purposes of federal, state and local income and employment taxes), plus interest on the amount of such repayment at 120% of the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder in calculating the Gross-Up Payment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest, penalties or additions payable by the Executive with respect to such excess) within five (5) business days following the time that the amount of such excess is finally determined. The Executive and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Total Payments. 6.3 The payments provided in subsections (A) and (C) of Section 6.1 hereof and in subsections (A) and (B) of Section 6.2 hereof shall be made not later than the fifth day following the Date of Termination; provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Company shall pay to the Executive on such day an estimate, as determined in good faith by the Company or, in the case of payments under Section 6.2 hereof, in accordance with Section 6.2 hereof, of the minimum amount of such payments to which the Executive is clearly entitled and shall pay the remainder of such payments (together with interest on the unpaid remainder (or on all such payments to the extent the Company fails to make such payments when due) at 120% of the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth (30th) day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Executive, payable on the fifth (5th) business day after demand by the Company (together with interest at 120% of the rate provided in Section 1274(b)(2)(B) of the Code). At the time that payments are made under this Agreement, the Company shall provide the Executive with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations including, without limitation, any opinions or other advice the Company has received from Tax Counsel, the Auditor or other advisors or consultants (and any such opinions or advice which are in writing shall be attached to the statement). 6.4 The Company also shall pay to the Executive all legal fees and expenses incurred by the Executive in seeking in good faith to obtain or enforce any benefit or right provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Code to any payment or benefit provided hereunder. Such payments shall be made within five (5) business days after delivery of the Executive's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 7. Termination Procedures and Compensation During Dispute. 7.1 Notice of Termination. After a Change in Control of the Company and during the Term, any purported termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three_quarters (3/4) of the entire membership of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in detail. 7.2 Date of Termination. "Date of Termination," with respect to any purported termination of the Executive's employment after a Change in Control of the Company and during the Term, shall mean (i) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full- time performance of the Executive's duties during such thirty (30) day period), and (ii) if the Executive's employment is terminated for any other reason, the date specified in the Notice of Termination (which, in the case of a termination by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days, respectively, from the date such Notice of Termination is given). 8. No Mitigation. The Company agrees that, if the Executive's employment with the Company terminates during the Term, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 hereof. Further, the amount of any payment or benefit provided for in this Agreement (other than to the extent provided in Section 6.1(B) and 6.1(C) hereof) shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise. 9. Successors; Binding Agreement. 9.1 In addition to any obligations imposed by law upon any successor to the Company, CNF or the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of CNF and the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive's employment for Good Reason after a Change in Control of the Company, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. 9.2 This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate. 10. Notices. All notices and other communications provided for in this Agreement (i) shall be in writing, (ii) shall be hand delivered, sent by overnight courier or by United States registered mail, return receipt requested and postage prepaid, addressed, in the case of the Executive, to the address inserted below the Executive's signature on the final page hereof and, if to the Company, to the address set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, and (iii) shall be effective only upon actual receipt. To the Company: Emery Air Freight Corporation One Lagoon Drive, Ste. 400 Redwood City, California 94065 Attention: Vice President and Corporate Counsel 11. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or of any lack of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement supersedes any other agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof which have been made by either party; provided, however, that this Agreement shall supersede any written agreement setting forth the terms and conditions of the Executive's employment with the Company only in the event that the Executive's employment with the Company is terminated on or following a Change in Control of the Company, by the Company other than for Cause or by the Executive for Good Reason. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and the Executive under this Agreement which by their nature may require either partial or total performance after the expiration of the Term (including, without limitation, those under Sections 6 and 7 hereof) shall survive such expiration. 12. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 13. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 14. Settlement of Disputes; Arbitration. 14.1 All claims by the Executive for benefits under this Agreement shall be directed to and determined by the Board and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive's claim has been denied. 14.2 Any further dispute or controversy arising under or in connection with this Agreement shall be finally settled exclusively by arbitration in Redwood City, California, in accordance with the rules of the American Arbitration Association then in effect; provided, however, that the evidentiary standards set forth in this Agreement shall apply. Judgment may be entered on the arbitrator's award in any court having jurisdiction. 15. Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated below: (A) "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act. (B) "Auditor" shall have the meaning set forth in Section 6.2 hereof. (C) "Base Amount" shall have the meaning set forth in Section 280G(b)(3) of the Code. (D) "Board" shall mean the Board of Directors of the Company. (E) "Cause" for termination by the Company of the Executive's employment shall mean (i) the willful and continued failure by the Executive to substantially perform the Executive's duties with the Company (other than any such failure resulting from the Executive's incapacity due to disability, including physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination for Good Reason by the Executive pursuant to Section 7.1 hereof) after a written demand for substantial performance is delivered to the Executive by the Board, which demand specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive's duties, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of this definition, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's act, or failure to act, was in the best interest of the Company. In the event of a dispute concerning the application of this provision, no claim by the Company that Cause exists shall be given effect unless the Company establishes to the Board and, in the event of an arbitration as contemplated by Section 14.2, to the arbitrator, by clear and convincing evidence that Cause exists. (F) A "Change in Control of the Company" means the occurrence of any one of the following events: (I) a sale by CNF of the then outstanding shares of capital stock of the Company having more than 50% of the then existing voting power of all outstanding securities of the Company, whether by merger, consolidation or otherwise; (II) the sale of all or substantially all of the assets of the Company; or (III) any other transaction or course of action engaged in, directly or indirectly, by the Company or CNF that has a substantially similar effect as the transactions of the type referred to in clause (I) or (II) above. The foregoing notwithstanding, a Change in Control of the Company shall not be deemed to have occurred (A) by reason of the occurrence of a "Change in Control" of CNF (within the meaning of Section 15 of the CNF Severance Agreement), (B) except in the case of a transaction described in clause (II) above, so long as CNF or any of its Affiliates, individually or collectively, own the then outstanding shares of capital stock of the Company having 50% or more of the then existing voting power of all outstanding securities of the Company, (C) in the event of the sale of shares of capital stock of the Company to any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any other Affiliate of CNF, or (D) in the event of the sale or distribution of shares of capital stock of the Company to shareholders of CNF, or the sale of assets of the Company to any corporation or other entity owned, directly or indirectly, by the shareholders of CNF, in either case in substantially the same proportions as their ownership of stock in CNF. (G) "CNF" shall mean CNF Transportation Inc. and any successor to its business and/or assets. (H) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (I) "Company" shall mean Emery Air Freight Corporation and, except in determining under Section 15(G) hereof whether or not any Change in Control of the Company has occurred, shall include any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise. In addition, when used in the context of the Executive's employment, "Company" shall mean the Company or any of its subsidiaries. (J) "Common Stock" shall mean the common stock, par value $1.00 per share, of the Company. (K) "Date of Termination" shall have the meaning set forth in Section 7.2 hereof. (L) "Disability" shall be deemed the reason for the termination by the Company of the Executive's employment, if, as a result of the Executive's incapacity due to disability, including physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with the Company for a period of six (6) consecutive months, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties. (M) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. (N) "Excise Tax" shall mean any excise tax imposed under Section 4999 of the Code. (O) "Executive" shall mean the individual named in the first paragraph of this Agreement. (P) "Good Reason" for termination by the Executive of the Executive's employment shall mean the occurrence (without the Executive's express written consent) after any Change in Control of the Company and during the Term of any one of the following acts by the Company, or failures by the Company to act, unless such act or failure to act is corrected within 30 days of receipt by the Company of notice of the Executive's intent to terminate for Good Reason hereunder: (I) the failure of the successor company, following the Change in Control of the Company, to assume this Agreement and all obligations hereunder, as of the date of such Change in Control of the Company; (II) the assignment to the Executive of any duties inconsistent with the Executive's status as an executive of the Company or a substantial adverse alteration in the nature or status of the Executive's responsibilities from those in effect immediately prior to the Change in Control of the Company; (III) a reduction by the Company in the Executive's annual base salary (except for across- the-board salary reductions similarly affecting all executives of the Company and all executives of any Person in control of the Company) or incentive compensation opportunity (both short- term and long-term, valued in a manner consistent with the valuation methodology used by the Company prior to the Change in Control of the Company), each as in effect immediately prior to the Change in Control of the Company or as the same may thereafter be increased from time to time; (IV) the relocation of the Executive's principal place of employment to a location that results in an increase in the Executive's one way commute of at least 50 miles more than the Executive's one way commute immediately prior to the Change in Control of the Company, except for required travel on the Company's business to an extent substantially consistent with the Executive's business travel obligations immediately prior to the Change in Control of the Company; (V) the failure by the Company to pay to the Executive when due any portion of the Executive's current compensation; (VI) the failure by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of CNF's or the Company's pension, savings, life insurance, medical, health and accident, or disability plans in which the Executive was participating immediately prior to the Change in Control of the Company (except for across the board changes similarly affecting all or substantially all employees of the Company and any entity in control of the Company), the taking of any other action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive immediately prior to the Change in Control of the Company, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled. The Executive's right to terminate the Executive's employment for Good Reason shall not be affected by the Executive's incapacity due to disability, including physical or mental illness. The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. (Q) "Gross-Up Payment" shall have the meaning set forth in Section 6.2 hereof. (R) "Notice of Termination" shall have the meaning set forth in Section 7.1 hereof. (S) "Pension Plan" shall mean any tax-qualified, supplemental or excess benefit pension plan maintained by CNF or the Company and any other plan or agreement entered into between the Executive and the Company which is designed to provide the Executive with supplemental retirement benefits. (T) "Person" shall mean any person, as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (A) the Company or its Affiliates, (B) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or its Affiliates, and (C) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the Common Stock) (U) "Potential Change in Control of the Company" shall be deemed to have occurred if: (I) CNF or the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control of the Company; or (II) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control of the Company has occurred. (V) "Retirement" shall be deemed the reason for the termination by the Executive of the Executive's employment if such employment is terminated in accordance with the Company's retirement policy, including early retirement, generally applicable to its salaried employees. (W) "Severance Payments" shall have the meaning set forth in Section 6.1 hereof. (X) "Tax Counsel" shall have the meaning set forth in Section 6.2 hereof. (Y) "Term" shall mean the period of time described in Section 2 hereof (including any extension, continuation or termination described therein). (Z) "Total Payments" shall mean those payments so described in Section 6.2 hereof. 17chw3189r EXHIBIT A WAIVER AND RELEASE OF CLAIMS In consideration of, and subject to, the payment to be made to me by Emery Air Freight Corporation (the "Company") of the "Severance Payments" (as defined in the Severance Agreement, dated as of DATE, entered into between me and the Company (the "Agreement")), I hereby waive any claims I may have for employment or re-employment by the Company or any subsidiary of the Company after the date hereof, and I further agree to and do release and forever discharge the Company or any subsidiary of the Company, and their respective past and present officers, directors, shareholders, insurers, employees and agents from any and all claims and causes of action, known or unknown, arising out of or relating to my employment with the Company or any subsidiary of the Company, or the termination thereof, including, but not limited to, wrongful discharge, breach of contract, tort, fraud, the Civil Rights Acts, Age Discrimination in Employment Act, Employee Retirement Income Security Act of 1974, Americans with Disabilities Act, or any other federal, state or local legislation or common law relating to employment or discrimination in employment or otherwise. Notwithstanding the foregoing or any other provision hereof, nothing in this Waiver and Release of Claims shall adversely affect (i) my rights under the Agreement; (ii) my rights to benefits other than severance benefits under plans, programs and arrangements of the Company or any subsidiary or parent of the Company which are accrued but unpaid as of the date of my termination; or (iii) my rights to indemnification under any indemnification agreement, applicable law and the certificates of incorporation and bylaws of the Company and any subsidiary or parent of the Company, and my rights under any director's and officers' liability insurance policy covering me. I acknowledge that I have signed this Waiver and Release of Claims voluntarily, knowingly, of my own free will and without reservation or duress, and that no promises or representations have been made to me by any person to induce me to do so other than the promise of payment set forth in the first paragraph above and the Company's acknowledgment of my rights reserved under the second paragraph above. I understand that this release will be deemed to be an application for benefits under the Agreement and that my entitlement thereto shall be governed by the terms and conditions of the Agreement and any applicable plan. I expressly hereby consent to such terms and conditions. I acknowledge that I have been given not less than forty-five (45) days to review and consider this Waiver and Release of Claims (unless I have signed a written waiver of such review and consideration period), and that I have had the opportunity to consult with an attorney or other advisor of my choice and have been advised by the Company to do so if I choose. I may revoke this Waiver and Release of Claims seven days or less after its execution by providing written notice to the Company. I acknowledge that it is my intention and the intention of the Company in executing this Waiver and Release of Claims that the same shall be effective as a bar to each and every claim, demand and cause of action hereinabove specified. In furtherance of this intention, I hereby expressly waive any and all rights and benefits conferred upon me by the provisions of SECTION 1542 OF THE CALIFORNIA CIVIL CODE, to the extent applicable to me, and expressly I consent that this Waiver and Release of Claims shall be given full force and effect according to each and all of its express terms and provisions, including as well those related to unknown and unsuspected claims, demands and causes of action, if any, as well as those relating to any other claims, demands and causes of action hereinabove specified. SECTION 1542 provides: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR." I acknowledge that I may hereafter discover claims or facts in addition to or different from those which I now know or believe to exist with respect to the subject matter of this Waiver and Release of Claims and which, if known or suspected at the time of executing this Waiver and Release of Claims, may have materially affected this settlement. Finally, I acknowledge that I have read this Waiver and Release of Claims and understand all of its terms. EX-10 21 ex1020.txt Schedule to Form of Menlo Logistics, Inc. Severance Agreement As of the date hereof, the following officer of Menlo Logistics, Inc. ("MLI"), a subsidiary of CNF Inc., is a party to a Severance Agreement with MLI in the form attached: Date of Agreement Name August 25, 2003 Robert L. Bianco, Jr. SEVERANCE AGREEMENT THIS AGREEMENT, dated as of DATE, is made by and between Menlo Logistics, Inc. (the "Company"), wholly owned subsidiary of CNF Inc., a Delaware corporation ("CNF"), and NAME (the "Executive"). WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's management, including the Executive, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change in Control of the Company; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Company and the Executive hereby agree as follows: 1. Defined Terms. The definitions of capitalized terms used in this Agreement are provided in the last Section hereof. 2. Term of Agreement. The Term of this Agreement shall commence on the date hereof and shall continue in effect through December 31, 200X; provided, however, that commencing on January 1, 200X, and each January 1 thereafter, the Term shall automatically be extended for one additional year unless, not later than September 30 of the preceding year, the Company or the Executive shall have given notice not to extend the Term; and further provided, however, that if a Change in Control of the Company shall have occurred during the Term, the Term shall expire no earlier than twenty-four (24) months beyond the month in which such Change in Control of the Company occurred. Notwithstanding anything in this Agreement to the contrary, unless a Change in Control of the Company has previously occurred, this Agreement shall terminate, and be of no further force or effect, upon the occurrence of a "Change in Control" of CNF (within the meaning of Section 15 of the severance agreement between the Executive and CNF dated as of DATE (the "CNF Severance Agreement")), provided that the CNF Severance Agreement remains in effect at the time of such Change in Control of CNF. 3. Company's Covenants Summarized. In order to induce the Executive to remain in the employ of the Company and in consideration of the Executive's covenants set forth in Section 4 hereof, the Company agrees, under the conditions described herein, to pay the Executive the Severance Payments and the other payments and benefits described herein. Except as provided in Section 9.1 hereof, no Severance Payments shall be payable under this Agreement unless there shall have been (or, under the terms of the second paragraph of Section 6.1 hereof, there shall be deemed to have been) a termination of the Executive's employment with the Company following a Change in Control of the Company and during the Term. This Agreement shall not be construed as creating an express or implied contract of employment and, except as otherwise agreed in writing between the Executive and the Company, the Executive (i) shall not have any right to be retained in the employ of the Company, and (ii) shall remain subject to discharge to the same extent as if this Agreement had not been entered into by the Company and the Executive. 4. Executive's Covenants. The Executive agrees that, subject to the terms and conditions of this Agreement, in the event of a Potential Change in Control of the Company during the Term, the Executive will remain in the employ of the Company until the earliest of (i) a date which is six (6) months from the date of such Potential Change in Control of the Company, (ii) the date of a Change in Control of the Company, (iii) the date of termination by the Executive of the Executive's employment for Good Reason or by reason of death, Disability or Retirement or (iv) the termination by the Company of the Executive's employment for any reason. 5. Compensation Other Than Severance Payments. 5.1 Following a Change in Control of the Company and during the Term, during any period that the Executive fails to perform the Executive's full-time duties with the Company as a result of incapacity due to disability, including physical or mental illness, the Company shall pay the Executive's full salary to the Executive at the rate in effect at the commencement of any such period, together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period (other than any disability plan), until the Executive's employment is terminated by the Company for Disability. 5.2 If the Executive's employment shall be terminated for any reason following a Change in Control of the Company and during the Term, the Company shall pay the Executive's full salary to the Executive through the Date of Termination at the rate in effect immediately prior to the Date of Termination or, if higher, the rate in effect immediately prior to the Change in Control of the Company, together with all compensation and benefits payable to the Executive through the Date of Termination under the terms of CNF's or the Company's compensation and benefit plans, programs or arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the Change in Control of the Company. 5.3 If the Executive's employment shall be terminated for any reason following a Change in Control of the Company and during the Term, the Company shall pay, or shall make satisfactory arrangements with CNF to pay, to the Executive the Executive's normal post- termination compensation and benefits as such payments become due (other than severance payments under any severance plan as in effect immediately prior to the Date of Termination). Such post-termination compensation and benefits shall be determined under, and paid in accordance with, CNF's or the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the Change in Control of the Company. 6. Severance Payments. 6.1 If the Executive's employment is terminated following a Change in Control of the Company and during the Term, other than (A) by the Company for Cause, (B) by reason of death or Disability, or (C) by the Executive without Good Reason, then the Company shall pay the Executive the amounts, and provide the Executive the benefits, described in this Section 6.1 ("Severance Payments") and Section 6.2, in addition to any payments and benefits to which the Executive is entitled under Section 5 hereof; provided, however, that the Executive shall not be entitled to the Severance Payments unless and until the Executive (or, in the event of the Executive's death, the executor, personal representative or administrator of the Executive's estate) has signed a written waiver and release substantially in the form set forth on Exhibit A hereto. For purposes of this Agreement, the Executive's employment shall be deemed to have been terminated following a Change in Control of the Company by the Company without Cause or by the Executive with Good Reason, if (i) during the Term the Executive's employment is terminated by the Company without Cause following a Potential Change in Control of the Company but prior to a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs) and such termination was at the request or direction of a Person who has entered into an agreement with the Company the consummation of which would constitute a Change in Control of the Company, (ii) during the Term the Executive terminates his employment for Good Reason following a Potential Change in Control of the Company but prior to a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs) and the circumstance or event which constitutes Good Reason occurs at the request or direction of such Person or (iii) during the Term the Executive's employment is terminated by the Company without Cause or by the Executive for Good Reason and such termination or the circumstance or event which constitutes Good Reason is otherwise in connection with or in anticipation of a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs). (A) In lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination and in lieu of any severance benefit otherwise payable to the Executive, the Company shall pay to the Executive a lump sum severance payment, in cash, equal to two times the sum of (i) the Executive's annual base salary as in effect immediately prior to the Date of Termination or, if higher, in effect immediately prior to the Change in Control of the Company and (ii) the highest of (1) the average annual bonus earned by the Executive pursuant to any annual bonus or incentive plan maintained by CNF or the Company in respect of the three fiscal years ending immediately prior to the fiscal year in which occurs the Date of Termination, (2) the average annual bonus earned by the Executive pursuant to any such plan in respect of the three fiscal years ending immediately prior to the fiscal year in which occurs the Change in Control of the Company or (3) the target annual bonus in effect for the Executive for the fiscal year in which occurs the Date of Termination. (B) For the twenty-four (24) month period immediately following the Date of Termination, the Company shall arrange to provide the Executive and his dependents life, disability and accident benefits substantially similar to those provided to the Executive and his dependents immediately prior to the Date of Termination or, if more favorable to the Executive, those provided to the Executive and his dependents immediately prior to the Change in Control of the Company, at no greater cost to the Executive than the cost to the Executive immediately prior to such Date of Termination or Change in Control of the Company; provided, however, that any across the board changes to life, disability or accident benefits similarly affecting all or substantially all employees of the Company and any entity in control of the Company shall not be deemed a breach of this Section 6.1(B). Benefits otherwise receivable by the Executive pursuant to this Section 6.1(B) shall be reduced to the extent benefits of the same type are received by or made available to the Executive during the twenty-four (24) month period following the Executive's termination of employment (and any such benefits received by or made available to the Executive shall be reported to the Company by the Executive); provided, however, that the Company shall reimburse the Executive for the excess, if any, of the cost of such benefits to the Executive over such cost immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control of the Company. If the Executive dies during the twenty-four (24) month period following the Date of Termination, life, disability and accident benefit coverage of the Executive's dependents shall continue for the remainder of the twenty-four (24) month period. (C) For the twenty-four (24) month period immediately following the Date of Termination, the Company shall provide health and dental benefits to the Executive and his dependents under the terms of CNF's or the Company's health and dental plan as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control of the Company. Benefits otherwise receivable by the Executive pursuant to this Section 6.1(C) shall be reduced to the extent benefits of the same type are received by or made available to the Executive following the Executive's termination of employment (and any such benefits received by or made available to the Executive shall be reported to the Company by the Executive); provided, however, that the Company shall reimburse the Executive for the excess, if any, of the cost of such benefits to the Executive over such cost immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control of the Company. If the Executive dies at a time when health and dental benefits are being provided under this Section 6.1(C) to the Executive's dependents, the Company shall continue to provide the dependents with health and dental benefits for the remainder of the twenty-four (24) month period on the same basis as if the Executive had survived throughout that period. (D) The Company shall provide outplacement services determined by the Company to be suitable to the Executive's position for a period of one (1) year following the Executive's Date of Termination. 6.2 (A) Whether or not the Executive becomes entitled to the Severance Payments, if any of the payments or benefits received or to be received by the Executive in connection with a Change in Control of the Company or the Executive's termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any Person whose actions result in a Change in Control of the Company or any Person affiliated with the Company or such Person) (such payments or benefits, excluding the Gross-Up Payment, being hereinafter referred to as the "Total Payments") will be subject to the Excise Tax, the Company shall pay to the Executive an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive, after deduction of any Excise Tax on the Total Payments and any federal, state and local income and employment taxes and Excise Tax upon the Gross-Up Payment, shall be equal to the Total Payments. (B) For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) all of the Total Payments shall be treated as "parachute payments" (within the meaning of Section 280G(b)(2) of the Code) unless, in the opinion of tax counsel ("Tax Counsel") reasonably acceptable to the Executive and selected by the accounting firm which was, immediately prior to the Change in Control of the Company, the Company's independent auditor (the "Auditor"), such payments or benefits (in whole or in part) should not constitute parachute payments, including by reason of Section 280G(b)(4)(A) of the Code, (ii) all "excess parachute payments" within the meaning of Section 280G(b)(l) of the Code shall be treated as subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered (within the meaning of Section 280G(b)(4)(B) of the Code) in excess of the Base Amount allocable to such reasonable compensation, or should otherwise not be subject to the Excise Tax and (iii) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Auditor in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the Date of Termination (or if there is no Date of Termination, then the date on which the Gross-Up Payment is calculated for purposes of this Section 6.2), net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. (C) In the event that the Excise Tax is finally determined to be less than the amount taken into account hereunder in calculating the Gross-Up Payment, the Executive shall repay to the Company, within five (5) business days following the time that the amount of such reduction in the Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income and employment taxes imposed on the Gross-Up Payment being repaid by the Executive, to the extent that such repayment results in a reduction in the Excise Tax and a dollar-for-dollar reduction in the Executive's taxable income and wages for purposes of federal, state and local income and employment taxes), plus interest on the amount of such repayment at 120% of the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder in calculating the Gross-Up Payment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest, penalties or additions payable by the Executive with respect to such excess) within five (5) business days following the time that the amount of such excess is finally determined. The Executive and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Total Payments. 6.3 The payments provided in subsections (A) and (C) of Section 6.1 hereof and in subsections (A) and (B) of Section 6.2 hereof shall be made not later than the fifth day following the Date of Termination; provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Company shall pay to the Executive on such day an estimate, as determined in good faith by the Company or, in the case of payments under Section 6.2 hereof, in accordance with Section 6.2 hereof, of the minimum amount of such payments to which the Executive is clearly entitled and shall pay the remainder of such payments (together with interest on the unpaid remainder (or on all such payments to the extent the Company fails to make such payments when due) at 120% of the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth (30th) day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Executive, payable on the fifth (5th) business day after demand by the Company (together with interest at 120% of the rate provided in Section 1274(b)(2)(B) of the Code). At the time that payments are made under this Agreement, the Company shall provide the Executive with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations including, without limitation, any opinions or other advice the Company has received from Tax Counsel, the Auditor or other advisors or consultants (and any such opinions or advice which are in writing shall be attached to the statement). 6.4 The Company also shall pay to the Executive all legal fees and expenses incurred by the Executive in seeking in good faith to obtain or enforce any benefit or right provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Code to any payment or benefit provided hereunder. Such payments shall be made within five (5) business days after delivery of the Executive's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 7. Termination Procedures and Compensation During Dispute. 7.1 Notice of Termination. After a Change in Control of the Company and during the Term, any purported termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in detail. 7.2 Date of Termination. "Date of Termination," with respect to any purported termination of the Executive's employment after a Change in Control of the Company and during the Term, shall mean (i) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full- time performance of the Executive's duties during such thirty (30) day period), and (ii) if the Executive's employment is terminated for any other reason, the date specified in the Notice of Termination (which, in the case of a termination by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days, respectively, from the date such Notice of Termination is given). 8. No Mitigation. The Company agrees that, if the Executive's employment with the Company terminates during the Term, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 hereof. Further, the amount of any payment or benefit provided for in this Agreement (other than to the extent provided in Section 6.1(B) and 6.1(C) hereof) shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise. 9. Successors; Binding Agreement. 9.1 In addition to any obligations imposed by law upon any successor to the Company, CNF or the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of CNF and the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive's employment for Good Reason after a Change in Control of the Company, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. 9.2 This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate. 10. Notices. All notices and other communications provided for in this Agreement (i) shall be in writing, (ii) shall be hand delivered, sent by overnight courier or by United States registered mail, return receipt requested and postage prepaid, addressed, in the case of the Executive, to the address inserted below the Executive's signature on the final page hereof and, if to the Company, to the address set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, and (iii) shall be effective only upon actual receipt. To the Company: Menlo Logistics, Inc. One Lagoon Drive, #300 Redwood City, CA 94086 Attention: Vice President and Corporate Counsel 11. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or of any lack of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement supersedes any other agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof which have been made by either party; provided, however, that this Agreement shall supersede any written agreement setting forth the terms and conditions of the Executive's employment with the Company only in the event that the Executive's employment with the Company is terminated on or following a Change in Control of the Company, by the Company other than for Cause or by the Executive for Good Reason. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and the Executive under this Agreement which by their nature may require either partial or total performance after the expiration of the Term (including, without limitation, those under Sections 6 and 7 hereof) shall survive such expiration. 12. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 13. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 14. Settlement of Disputes; Arbitration. 14.1 All claims by the Executive for benefits under this Agreement shall be directed to and determined by the Board and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive's claim has been denied. 14.2 Any further dispute or controversy arising under or in connection with this Agreement shall be finally settled exclusively by arbitration in Redwood City, California, in accordance with the rules of the American Arbitration Association then in effect; provided, however, that the evidentiary standards set forth in this Agreement shall apply. Judgment may be entered on the arbitrator's award in any court having jurisdiction. 15. Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated below: (A) "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act. (B) "Auditor" shall have the meaning set forth in Section 6.2 hereof. (C) "Base Amount" shall have the meaning set forth in Section 280G(b)(3) of the Code. (D) "Board" shall mean the Board of Directors of the Company. (E) "Cause" for termination by the Company of the Executive's employment shall mean (i) the willful and continued failure by the Executive to substantially perform the Executive's duties with the Company (other than any such failure resulting from the Executive's incapacity due to disability, including physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination for Good Reason by the Executive pursuant to Section 7.1 hereof) after a written demand for substantial performance is delivered to the Executive by the Board, which demand specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive's duties, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of this definition, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's act, or failure to act, was in the best interest of the Company. In the event of a dispute concerning the application of this provision, no claim by the Company that Cause exists shall be given effect unless the Company establishes to the Board and, in the event of an arbitration as contemplated by Section 14.2, to the arbitrator, by clear and convincing evidence that Cause exists. (F) A "Change in Control of the Company" means the occurrence of any one of the following events: (I) a sale by CNF of the then outstanding shares of capital stock of the Company having more than 50% of the then existing voting power of all outstanding securities of the Company, whether by merger, consolidation or otherwise; (II) the sale of all or substantially all of the assets of the Company; or (III) any other transaction or course of action engaged in, directly or indirectly, by the Company or CNF that has a substantially similar effect as the transactions of the type referred to in clause (I) or (II) above. The foregoing notwithstanding, a Change in Control of the Company shall not be deemed to have occurred (A) by reason of the occurrence of a "Change in Control" of CNF (within the meaning of Section 15 of the CNF Severance Agreement), (B) except in the case of a transaction described in clause (II) above, so long as CNF or any of its Affiliates, individually or collectively, own the then outstanding shares of capital stock of the Company having 50% or more of the then existing voting power of all outstanding securities of the Company, (C) in the event of the sale of shares of capital stock of the Company to any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any other Affiliate of CNF, or (D) in the event of the sale or distribution of shares of capital stock of the Company to shareholders of CNF, or the sale of assets of the Company to any corporation or other entity owned, directly or indirectly, by the shareholders of CNF, in either case in substantially the same proportions as their ownership of stock in CNF. (G) "CNF" shall mean CNF Inc. and any successor to its business and/or assets. (H) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (I) "Company" shall mean Menlo Logistics, Inc. and, except in determining under Section 15(G) hereof whether or not any Change in Control of the Company has occurred, shall include any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise. In addition, when used in the context of the Executive's employment, "Company" shall mean the Company or any of its subsidiaries. (J) "Common Stock" shall mean the common stock, with no par value per share, of the Company. (K) "Date of Termination" shall have the meaning set forth in Section 7.2 hereof. (L) "Disability" shall be deemed the reason for the termination by the Company of the Executive's employment, if, as a result of the Executive's incapacity due to disability, including physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with the Company for a period of six (6) consecutive months, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties. (M) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. (N) "Excise Tax" shall mean any excise tax imposed under Section 4999 of the Code. (O) "Executive" shall mean the individual named in the first paragraph of this Agreement. (P) "Good Reason" for termination by the Executive of the Executive's employment shall mean the occurrence (without the Executive's express written consent) after any Change in Control of the Company and during the Term of any one of the following acts by the Company, or failures by the Company to act, unless such act or failure to act is corrected within 30 days of receipt by the Company of notice of the Executive's intent to terminate for Good Reason hereunder: (I) the failure of the successor company, following the Change in Control of the Company, to assume this Agreement and all obligations hereunder, as of the date of such Change in Control of the Company; (II) the assignment to the Executive of any duties inconsistent with the Executive's status as an executive of the Company or a substantial adverse alteration in the nature or status of the Executive's responsibilities from those in effect immediately prior to the Change in Control of the Company; (III) a reduction by the Company in the Executive's annual base salary (except for across- the-board salary reductions similarly affecting all executives of the Company and all executives of any Person in control of the Company) or incentive compensation opportunity (both short- term and long-term, valued in a manner consistent with the valuation methodology used by the Company prior to the Change in Control of the Company), each as in effect immediately prior to the Change in Control of the Company or as the same may thereafter be increased from time to time; (IV) the relocation of the Executive's principal place of employment to a location that results in an increase in the Executive's one way commute of at least 50 miles more than the Executive's one way commute immediately prior to the Change in Control of the Company, except for required travel on the Company's business to an extent substantially consistent with the Executive's business travel obligations immediately prior to the Change in Control of the Company; (V) the failure by the Company to pay to the Executive when due any portion of the Executive's current compensation; (VI) the failure by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of CNF's or the Company's pension, savings, life insurance, medical, health and accident, or disability plans in which the Executive was participating immediately prior to the Change in Control of the Company (except for across the board changes similarly affecting all or substantially all employees of the Company and any entity in control of the Company), the taking of any other action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive immediately prior to the Change in Control of the Company, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled. The Executive's right to terminate the Executive's employment for Good Reason shall not be affected by the Executive's incapacity due to disability, including physical or mental illness. The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. (Q) "Gross-Up Payment" shall have the meaning set forth in Section 6.2 hereof. (R) "Notice of Termination" shall have the meaning set forth in Section 7.1 hereof. (S) "Pension Plan" shall mean any tax-qualified, supplemental or excess benefit pension plan maintained by CNF or the Company and any other plan or agreement entered into between the Executive and the Company which is designed to provide the Executive with supplemental retirement benefits. (T) "Person" shall mean any person, as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (A) the Company or its Affiliates, (B) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or its Affiliates, and (C) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the Common Stock) (U) "Potential Change in Control of the Company" shall be deemed to have occurred if: (I) CNF or the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control of the Company; or (II) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control of the Company has occurred. (V) "Retirement" shall be deemed the reason for the termination by the Executive of the Executive's employment if such employment is terminated in accordance with the Company's retirement policy, including early retirement, generally applicable to its salaried employees. (W) "Severance Payments" shall have the meaning set forth in Section 6.1 hereof. (X) "Tax Counsel" shall have the meaning set forth in Section 6.2 hereof. (Y) "Term" shall mean the period of time described in Section 2 hereof (including any extension, continuation or termination described therein). (Z) "Total Payments" shall mean those payments so described in Section 6.2 hereof. EXHIBIT A WAIVER AND RELEASE OF CLAIMS In consideration of, and subject to, the payment to be made to me by Menlo Logistics, Inc. (the "Company") of the "Severance Payments" (as defined in the Severance Agreement, dated as of DATE, entered into between me and the Company (the "Agreement")), I hereby waive any claims I may have for employment or re-employment by the Company or any subsidiary of the Company after the date hereof, and I further agree to and do release and forever discharge the Company or any subsidiary of the Company, and their respective past and present officers, directors, shareholders, insurers, employees and agents from any and all claims and causes of action, known or unknown, arising out of or relating to my employment with the Company or any subsidiary of the Company, or the termination thereof, including, but not limited to, wrongful discharge, breach of contract, tort, fraud, the Civil Rights Acts, Age Discrimination in Employment Act, Employee Retirement Income Security Act of 1974, Americans with Disabilities Act, or any other federal, state or local legislation or common law relating to employment or discrimination in employment or otherwise. Notwithstanding the foregoing or any other provision hereof, nothing in this Waiver and Release of Claims shall adversely affect (i) my rights under the Agreement; (ii) my rights to benefits other than severance benefits under plans, programs and arrangements of the Company or any subsidiary or parent of the Company which are accrued but unpaid as of the date of my termination; or (iii) my rights to indemnification under any indemnification agreement, applicable law and the certificates of incorporation and bylaws of the Company and any subsidiary or parent of the Company, and my rights under any director's and officers' liability insurance policy covering me. I acknowledge that I have signed this Waiver and Release of Claims voluntarily, knowingly, of my own free will and without reservation or duress, and that no promises or representations have been made to me by any person to induce me to do so other than the promise of payment set forth in the first paragraph above and the Company's acknowledgment of my rights reserved under the second paragraph above. I understand that this release will be deemed to be an application for benefits under the Agreement and that my entitlement thereto shall be governed by the terms and conditions of the Agreement and any applicable plan. I expressly hereby consent to such terms and conditions. I acknowledge that I have been given not less than forty-five (45) days to review and consider this Waiver and Release of Claims (unless I have signed a written waiver of such review and consideration period), and that I have had the opportunity to consult with an attorney or other advisor of my choice and have been advised by the Company to do so if I choose. I may revoke this Waiver and Release of Claims seven days or less after its execution by providing written notice to the Company. I acknowledge that it is my intention and the intention of the Company in executing this Waiver and Release of Claims that the same shall be effective as a bar to each and every claim, demand and cause of action hereinabove specified. In furtherance of this intention, I hereby expressly waive any and all rights and benefits conferred upon me by the provisions of SECTION 1542 OF THE CALIFORNIA CIVIL CODE, to the extent applicable to me, and expressly I consent that this Waiver and Release of Claims shall be given full force and effect according to each and all of its express terms and provisions, including as well those related to unknown and unsuspected claims, demands and causes of action, if any, as well as those relating to any other claims, demands and causes of action hereinabove specified. SECTION 1542 provides: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR." I acknowledge that I may hereafter discover claims or facts in addition to or different from those which I now know or believe to exist with respect to the subject matter of this Waiver and Release of Claims and which, if known or suspected at the time of executing this Waiver and Release of Claims, may have materially affected this settlement. Finally, I acknowledge that I have read this Waiver and Release of Claims and understand all of its terms. EX-10 22 ex1021.txt Schedule to Form of Menlo Worldwide, LLC Severance Agreement As of the date hereof, each of the following officers of Menlo Worldwide LLC ("MWW"), a subsidiary of CNF Inc., is a party to a Severance Agreement with MWW in the form attached: Date of Agreement Name of Officer August 25, 2003 Edward G. Feitzinger August 25, 2003 Gary D. Kowalski SEVERANCE AGREEMENT THIS AGREEMENT, dated as of DATE, is made by and between Menlo Worldwide, LLC (the "Company"), a wholly owned subsidiary of CNF Inc., a Delaware corporation ("CNF"), and NAME (the "Executive"). WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's management, including the Executive, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change in Control of the Company; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Company and the Executive hereby agree as follows: 1. Defined Terms. The definitions of capitalized terms used in this Agreement are provided in the last Section hereof. 2. Term of Agreement. The Term of this Agreement shall commence on the date hereof and shall continue in effect through December 31, 200X; provided, however, that commencing on January 1, 200X, and each January 1 thereafter, the Term shall automatically be extended for one additional year unless, not later than September 30 of the preceding year, the Company or the Executive shall have given notice not to extend the Term; and further provided, however, that if a Change in Control of the Company shall have occurred during the Term, the Term shall expire no earlier than twenty-four (24) months beyond the month in which such Change in Control of the Company occurred. Notwithstanding anything in this Agreement to the contrary, unless a Change in Control of the Company has previously occurred, this Agreement shall terminate, and be of no further force or effect, upon the occurrence of a "Change in Control" of CNF (within the meaning of Section 15 of the severance agreement between the Executive and CNF dated as of DATE (the "CNF Severance Agreement")), provided that the CNF Severance Agreement remains in effect at the time of such Change in Control of CNF. 3. Company's Covenants Summarized. In order to induce the Executive to remain in the employ of the Company and in consideration of the Executive's covenants set forth in Section 4 hereof, the Company agrees, under the conditions described herein, to pay the Executive the Severance Payments and the other payments and benefits described herein. Except as provided in Section 9.1 hereof, no Severance Payments shall be payable under this Agreement unless there shall have been (or, under the terms of the second paragraph of Section 6.1 hereof, there shall be deemed to have been) a termination of the Executive's employment with the Company following a Change in Control of the Company and during the Term. This Agreement shall not be construed as creating an express or implied contract of employment and, except as otherwise agreed in writing between the Executive and the Company, the Executive (i) shall not have any right to be retained in the employ of the Company, and (ii) shall remain subject to discharge to the same extent as if this Agreement had not been entered into by the Company and the Executive. 4. Executive's Covenants. The Executive agrees that, subject to the terms and conditions of this Agreement, in the event of a Potential Change in Control of the Company during the Term, the Executive will remain in the employ of the Company until the earliest of (i) a date which is six (6) months from the date of such Potential Change in Control of the Company, (ii) the date of a Change in Control of the Company, (iii) the date of termination by the Executive of the Executive's employment for Good Reason or by reason of death, Disability or Retirement or (iv) the termination by the Company of the Executive's employment for any reason. 5. Compensation Other Than Severance Payments. 5.1 Following a Change in Control of the Company and during the Term, during any period that the Executive fails to perform the Executive's full-time duties with the Company as a result of incapacity due to disability, including physical or mental illness, the Company shall pay the Executive's full salary to the Executive at the rate in effect at the commencement of any such period, together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period (other than any disability plan), until the Executive's employment is terminated by the Company for Disability. 5.2 If the Executive's employment shall be terminated for any reason following a Change in Control of the Company and during the Term, the Company shall pay the Executive's full salary to the Executive through the Date of Termination at the rate in effect immediately prior to the Date of Termination or, if higher, the rate in effect immediately prior to the Change in Control of the Company, together with all compensation and benefits payable to the Executive through the Date of Termination under the terms of CNF's or the Company's compensation and benefit plans, programs or arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the Change in Control of the Company. 5.3 If the Executive's employment shall be terminated for any reason following a Change in Control of the Company and during the Term, the Company shall pay, or shall make satisfactory arrangements with CNF to pay, to the Executive the Executive's normal post- termination compensation and benefits as such payments become due (other than severance payments under any severance plan as in effect immediately prior to the Date of Termination). Such post-termination compensation and benefits shall be determined under, and paid in accordance with, CNF's or the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the Change in Control of the Company. 6. Severance Payments. 6.1 If the Executive's employment is terminated following a Change in Control of the Company and during the Term, other than (A) by the Company for Cause, (B) by reason of death or Disability, or (C) by the Executive without Good Reason, then the Company shall pay the Executive the amounts, and provide the Executive the benefits, described in this Section 6.1 ("Severance Payments") and Section 6.2, in addition to any payments and benefits to which the Executive is entitled under Section 5 hereof; provided, however, that the Executive shall not be entitled to the Severance Payments unless and until the Executive (or, in the event of the Executive's death, the executor, personal representative or administrator of the Executive's estate) has signed a written waiver and release substantially in the form set forth on Exhibit A hereto. For purposes of this Agreement, the Executive's employment shall be deemed to have been terminated following a Change in Control of the Company by the Company without Cause or by the Executive with Good Reason, if (i) during the Term the Executive's employment is terminated by the Company without Cause following a Potential Change in Control of the Company but prior to a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs) and such termination was at the request or direction of a Person who has entered into an agreement with the Company the consummation of which would constitute a Change in Control of the Company, (ii) during the Term the Executive terminates his employment for Good Reason following a Potential Change in Control of the Company but prior to a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs) and the circumstance or event which constitutes Good Reason occurs at the request or direction of such Person or (iii) during the Term the Executive's employment is terminated by the Company without Cause or by the Executive for Good Reason and such termination or the circumstance or event which constitutes Good Reason is otherwise in connection with or in anticipation of a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs). (A) In lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination and in lieu of any severance benefit otherwise payable to the Executive, the Company shall pay to the Executive a lump sum severance payment, in cash, equal to two times the sum of (i) the Executive's annual base salary as in effect immediately prior to the Date of Termination or, if higher, in effect immediately prior to the Change in Control of the Company and (ii) the highest of (1) the average annual bonus earned by the Executive pursuant to any annual bonus or incentive plan maintained by CNF or the Company in respect of the three fiscal years ending immediately prior to the fiscal year in which occurs the Date of Termination, (2) the average annual bonus earned by the Executive pursuant to any such plan in respect of the three fiscal years ending immediately prior to the fiscal year in which occurs the Change in Control of the Company or (3) the target annual bonus in effect for the Executive for the fiscal year in which occurs the Date of Termination. (B) For the twenty-four (24) month period immediately following the Date of Termination, the Company shall arrange to provide the Executive and his dependents life, disability and accident benefits substantially similar to those provided to the Executive and his dependents immediately prior to the Date of Termination or, if more favorable to the Executive, those provided to the Executive and his dependents immediately prior to the Change in Control of the Company, at no greater cost to the Executive than the cost to the Executive immediately prior to such Date of Termination or Change in Control of the Company; provided, however, that any across the board changes to life, disability or accident benefits similarly affecting all or substantially all employees of the Company and any entity in control of the Company shall not be deemed a breach of this Section 6.1(B). Benefits otherwise receivable by the Executive pursuant to this Section 6.1(B) shall be reduced to the extent benefits of the same type are received by or made available to the Executive during the twenty-four (24) month period following the Executive's termination of employment (and any such benefits received by or made available to the Executive shall be reported to the Company by the Executive); provided, however, that the Company shall reimburse the Executive for the excess, if any, of the cost of such benefits to the Executive over such cost immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control of the Company. If the Executive dies during the twenty-four (24) month period following the Date of Termination, life, disability and accident benefit coverage of the Executive's dependents shall continue for the remainder of the twenty-four (24) month period. (C) For the twenty-four (24) month period immediately following the Date of Termination, the Company shall provide health and dental benefits to the Executive and his dependents under the terms of CNF's or the Company's health and dental plan as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control of the Company. Benefits otherwise receivable by the Executive pursuant to this Section 6.1(C) shall be reduced to the extent benefits of the same type are received by or made available to the Executive following the Executive's termination of employment (and any such benefits received by or made available to the Executive shall be reported to the Company by the Executive); provided, however, that the Company shall reimburse the Executive for the excess, if any, of the cost of such benefits to the Executive over such cost immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the Change in Control of the Company. If the Executive dies at a time when health and dental benefits are being provided under this Section 6.1(C) to the Executive's dependents, the Company shall continue to provide the dependents with health and dental benefits for the remainder of the twenty-four (24) month period on the same basis as if the Executive had survived throughout that period. (D) The Company shall provide outplacement services determined by the Company to be suitable to the Executive's position for a period of one (1) year following the Executive's Date of Termination. 6.2 (A) Whether or not the Executive becomes entitled to the Severance Payments, if any of the payments or benefits received or to be received by the Executive in connection with a Change in Control of the Company or the Executive's termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any Person whose actions result in a Change in Control of the Company or any Person affiliated with the Company or such Person) (such payments or benefits, excluding the Gross-Up Payment, being hereinafter referred to as the "Total Payments") will be subject to the Excise Tax, the Company shall pay to the Executive an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive, after deduction of any Excise Tax on the Total Payments and any federal, state and local income and employment taxes and Excise Tax upon the Gross-Up Payment, shall be equal to the Total Payments. (B) For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) all of the Total Payments shall be treated as "parachute payments" (within the meaning of Section 280G(b)(2) of the Code) unless, in the opinion of tax counsel ("Tax Counsel") reasonably acceptable to the Executive and selected by the accounting firm which was, immediately prior to the Change in Control of the Company, the Company's independent auditor (the "Auditor"), such payments or benefits (in whole or in part) should not constitute parachute payments, including by reason of Section 280G(b)(4)(A) of the Code, (ii) all "excess parachute payments" within the meaning of Section 280G(b)(l) of the Code shall be treated as subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered (within the meaning of Section 280G(b)(4)(B) of the Code) in excess of the Base Amount allocable to such reasonable compensation, or should otherwise not be subject to the Excise Tax and (iii) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Auditor in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the Date of Termination (or if there is no Date of Termination, then the date on which the Gross-Up Payment is calculated for purposes of this Section 6.2), net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. (C) In the event that the Excise Tax is finally determined to be less than the amount taken into account hereunder in calculating the Gross-Up Payment, the Executive shall repay to the Company, within five (5) business days following the time that the amount of such reduction in the Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income and employment taxes imposed on the Gross-Up Payment being repaid by the Executive, to the extent that such repayment results in a reduction in the Excise Tax and a dollar-for-dollar reduction in the Executive's taxable income and wages for purposes of federal, state and local income and employment taxes), plus interest on the amount of such repayment at 120% of the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder in calculating the Gross-Up Payment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest, penalties or additions payable by the Executive with respect to such excess) within five (5) business days following the time that the amount of such excess is finally determined. The Executive and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Total Payments. 6.3 The payments provided in subsections (A) and (C) of Section 6.1 hereof and in subsections (A) and (B) of Section 6.2 hereof shall be made not later than the fifth day following the Date of Termination; provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Company shall pay to the Executive on such day an estimate, as determined in good faith by the Company or, in the case of payments under Section 6.2 hereof, in accordance with Section 6.2 hereof, of the minimum amount of such payments to which the Executive is clearly entitled and shall pay the remainder of such payments (together with interest on the unpaid remainder (or on all such payments to the extent the Company fails to make such payments when due) at 120% of the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth (30th) day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Executive, payable on the fifth (5th) business day after demand by the Company (together with interest at 120% of the rate provided in Section 1274(b)(2)(B) of the Code). At the time that payments are made under this Agreement, the Company shall provide the Executive with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations including, without limitation, any opinions or other advice the Company has received from Tax Counsel, the Auditor or other advisors or consultants (and any such opinions or advice which are in writing shall be attached to the statement). 6.4 The Company also shall pay to the Executive all legal fees and expenses incurred by the Executive in seeking in good faith to obtain or enforce any benefit or right provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Code to any payment or benefit provided hereunder. Such payments shall be made within five (5) business days after delivery of the Executive's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 7. Termination Procedures and Compensation During Dispute. 7.1 Notice of Termination. After a Change in Control of the Company and during the Term, any purported termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in detail. 7.2 Date of Termination. "Date of Termination," with respect to any purported termination of the Executive's employment after a Change in Control of the Company and during the Term, shall mean (i) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full- time performance of the Executive's duties during such thirty (30) day period), and (ii) if the Executive's employment is terminated for any other reason, the date specified in the Notice of Termination (which, in the case of a termination by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days, respectively, from the date such Notice of Termination is given). 8. No Mitigation. The Company agrees that, if the Executive's employment with the Company terminates during the Term, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 hereof. Further, the amount of any payment or benefit provided for in this Agreement (other than to the extent provided in Section 6.1(B) and 6.1(C) hereof) shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise. 9. Successors; Binding Agreement. 9.1 In addition to any obligations imposed by law upon any successor to the Company, CNF or the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of CNF and the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive's employment for Good Reason after a Change in Control of the Company, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. 9.2 This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate. 10. Notices. All notices and other communications provided for in this Agreement (i) shall be in writing, (ii) shall be hand delivered, sent by overnight courier or by United States registered mail, return receipt requested and postage prepaid, addressed, in the case of the Executive, to the address inserted below the Executive's signature on the final page hereof and, if to the Company, to the address set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, and (iii) shall be effective only upon actual receipt. To the Company: Menlo Worldwide, LLC One Lagoon Drive, #400 Redwood City, CA 94065 Attention: President 11. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or of any lack of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement supersedes any other agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof which have been made by either party; provided, however, that this Agreement shall supersede any written agreement setting forth the terms and conditions of the Executive's employment with the Company only in the event that the Executive's employment with the Company is terminated on or following a Change in Control of the Company, by the Company other than for Cause or by the Executive for Good Reason. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and the Executive under this Agreement which by their nature may require either partial or total performance after the expiration of the Term (including, without limitation, those under Sections 6 and 7 hereof) shall survive such expiration. 12. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 13. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 14. Settlement of Disputes; Arbitration. 14.1 All claims by the Executive for benefits under this Agreement shall be directed to and determined by the Board and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive's claim has been denied. 14.2 Any further dispute or controversy arising under or in connection with this Agreement shall be finally settled exclusively by arbitration in Redwood City, California, in accordance with the rules of the American Arbitration Association then in effect; provided, however, that the evidentiary standards set forth in this Agreement shall apply. Judgment may be entered on the arbitrator's award in any court having jurisdiction. 15. Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated below: (A) "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act. (B) "Auditor" shall have the meaning set forth in Section 6.2 hereof. (C) "Base Amount" shall have the meaning set forth in Section 280G(b)(3) of the Code. (D) "Board" shall mean the Board of Managers of the Company. (E) "Cause" for termination by the Company of the Executive's employment shall mean (i) the willful and continued failure by the Executive to substantially perform the Executive's duties with the Company (other than any such failure resulting from the Executive's incapacity due to disability, including physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination for Good Reason by the Executive pursuant to Section 7.1 hereof) after a written demand for substantial performance is delivered to the Executive by the Board, which demand specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive's duties, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of this definition, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's act, or failure to act, was in the best interest of the Company. In the event of a dispute concerning the application of this provision, no claim by the Company that Cause exists shall be given effect unless the Company establishes to the Board and, in the event of an arbitration as contemplated by Section 14.2, to the arbitrator, by clear and convincing evidence that Cause exists. (F) A "Change in Control of the Company" means the occurrence of any one of the following events: (I) the sale by CNF of more than 50% of the then outstanding Common Interests or other equity interests of the Company, whether by merger, consolidation or otherwise; (II) the sale of all or substantially all of the assets of the Company; or (III) any other transaction or course of action engaged in, directly or indirectly, by the Company or CNF that has a substantially similar effect as the transactions of the type referred to in clause (I) or (II) above. The foregoing notwithstanding, a Change in Control of the Company shall not be deemed to have occurred (A) by reason of the occurrence of a "Change in Control" of CNF (within the meaning of Section 15 of the CNF Severance Agreement), (B) except in the case of a transaction described in clause (II) above, so long as CNF or any of its Affiliates, individually or collectively, own more than 50% of the outstanding Common Interests or other equity interests of the Company, (C) in the event of the sale of Common Interests or other equity interests of the Company to any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any other Affiliate of CNF, or (D) in the event of the sale or distribution of Common Interests or other equity interests of the Company to shareholders of CNF, or the sale of assets of the Company to any corporation or other entity owned, directly or indirectly, by the shareholders of CNF, in either case in substantially the same proportions as their ownership of stock in CNF. (G) "CNF" shall mean CNF Inc. and any successor to its business and/or assets. (H) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (I) "Company" shall mean Menlo Worldwide, LLC and, except in determining under Section 15(G) hereof whether or not any Change in Control of the Company has occurred, shall include any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise. In addition, when used in the context of the Executive's employment, "Company" shall mean the Company or any of its subsidiaries. (J) "Common Interest" has the meaning given in the Company's Limited Liability Company Agreement. (K) "Date of Termination" shall have the meaning set forth in Section 7.2 hereof. (L) "Disability" shall be deemed the reason for the termination by the Company of the Executive's employment, if, as a result of the Executive's incapacity due to disability, including physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with the Company for a period of six (6) consecutive months, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties. (M) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. (N) "Excise Tax" shall mean any excise tax imposed under Section 4999 of the Code. (O) "Executive" shall mean the individual named in the first paragraph of this Agreement. (P) "Good Reason" for termination by the Executive of the Executive's employment shall mean the occurrence (without the Executive's express written consent) after any Change in Control of the Company and during the Term of any one of the following acts by the Company, or failures by the Company to act, unless such act or failure to act is corrected within 30 days of receipt by the Company of notice of the Executive's intent to terminate for Good Reason hereunder: (I) the failure of the successor company, following the Change in Control of the Company, to assume this Agreement and all obligations hereunder, as of the date of such Change in Control of the Company; (II) the assignment to the Executive of any duties inconsistent with the Executive's status as an executive of the Company or a substantial adverse alteration in the nature or status of the Executive's responsibilities from those in effect immediately prior to the Change in Control of the Company; (III) a reduction by the Company in the Executive's annual base salary (except for across- the-board salary reductions similarly affecting all executives of the Company and all executives of any Person in control of the Company) or incentive compensation opportunity (both short- term and long-term, valued in a manner consistent with the valuation methodology used by the Company prior to the Change in Control of the Company), each as in effect immediately prior to the Change in Control of the Company or as the same may thereafter be increased from time to time; (IV) the relocation of the Executive's principal place of employment to a location that results in an increase in the Executive's one way commute of at least 50 miles more than the Executive's one way commute immediately prior to the Change in Control of the Company, except for required travel on the Company's business to an extent substantially consistent with the Executive's business travel obligations immediately prior to the Change in Control of the Company; (V) the failure by the Company to pay to the Executive when due any portion of the Executive's current compensation; (VI) the failure by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of CNF's or the Company's pension, savings, life insurance, medical, health and accident, or disability plans in which the Executive was participating immediately prior to the Change in Control of the Company (except for across the board changes similarly affecting all or substantially all employees of the Company and any entity in control of the Company), the taking of any other action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive immediately prior to the Change in Control of the Company, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled. The Executive's right to terminate the Executive's employment for Good Reason shall not be affected by the Executive's incapacity due to disability, including physical or mental illness. The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. (Q) "Gross-Up Payment" shall have the meaning set forth in Section 6.2 hereof. (R) "Notice of Termination" shall have the meaning set forth in Section 7.1 hereof. (S) "Pension Plan" shall mean any tax-qualified, supplemental or excess benefit pension plan maintained by CNF or the Company and any other plan or agreement entered into between the Executive and the Company which is designed to provide the Executive with supplemental retirement benefits. (T) "Person" shall mean any person, as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (A) the Company or its Affiliates, (B) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or its Affiliates, and (C) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the Common Stock) (U) "Potential Change in Control of the Company" shall be deemed to have occurred if: (I) CNF or the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control of the Company; or (II) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control of the Company has occurred. (V) "Retirement" shall be deemed the reason for the termination by the Executive of the Executive's employment if such employment is terminated in accordance with the Company's retirement policy, including early retirement, generally applicable to its salaried employees. (W) "Severance Payments" shall have the meaning set forth in Section 6.1 hereof. (X) "Tax Counsel" shall have the meaning set forth in Section 6.2 hereof. (Y) "Term" shall mean the period of time described in Section 2 hereof (including any extension, continuation or termination described therein). (Z) "Total Payments" shall mean those payments so described in Section 6.2 hereof. EXHIBIT A WAIVER AND RELEASE OF CLAIMS In consideration of, and subject to, the payment to be made to me by Menlo Worldwide, LLC (the "Company") of the "Severance Payments" (as defined in the Severance Agreement, dated as of DATE, entered into between me and the Company (the "Agreement")), I hereby waive any claims I may have for employment or re-employment by the Company or any subsidiary of the Company after the date hereof, and I further agree to and do release and forever discharge the Company or any subsidiary of the Company, and their respective past and present officers, directors, shareholders, insurers, employees and agents from any and all claims and causes of action, known or unknown, arising out of or relating to my employment with the Company or any subsidiary of the Company, or the termination thereof, including, but not limited to, wrongful discharge, breach of contract, tort, fraud, the Civil Rights Acts, Age Discrimination in Employment Act, Employee Retirement Income Security Act of 1974, Americans with Disabilities Act, or any other federal, state or local legislation or common law relating to employment or discrimination in employment or otherwise. Notwithstanding the foregoing or any other provision hereof, nothing in this Waiver and Release of Claims shall adversely affect (i) my rights under the Agreement; (ii) my rights to benefits other than severance benefits under plans, programs and arrangements of the Company or any subsidiary or parent of the Company which are accrued but unpaid as of the date of my termination; or (iii) my rights to indemnification under any indemnification agreement, applicable law and the certificates of incorporation and bylaws of the Company and any subsidiary or parent of the Company, and my rights under any director's and officers' liability insurance policy covering me. I acknowledge that I have signed this Waiver and Release of Claims voluntarily, knowingly, of my own free will and without reservation or duress, and that no promises or representations have been made to me by any person to induce me to do so other than the promise of payment set forth in the first paragraph above and the Company's acknowledgment of my rights reserved under the second paragraph above. I understand that this release will be deemed to be an application for benefits under the Agreement and that my entitlement thereto shall be governed by the terms and conditions of the Agreement and any applicable plan. I expressly hereby consent to such terms and conditions. I acknowledge that I have been given not less than forty-five (45) days to review and consider this Waiver and Release of Claims (unless I have signed a written waiver of such review and consideration period), and that I have had the opportunity to consult with an attorney or other advisor of my choice and have been advised by the Company to do so if I choose. I may revoke this Waiver and Release of Claims seven days or less after its execution by providing written notice to the Company. I acknowledge that it is my intention and the intention of the Company in executing this Waiver and Release of Claims that the same shall be effective as a bar to each and every claim, demand and cause of action hereinabove specified. In furtherance of this intention, I hereby expressly waive any and all rights and benefits conferred upon me by the provisions of SECTION 1542 OF THE CALIFORNIA CIVIL CODE, to the extent applicable to me, and expressly I consent that this Waiver and Release of Claims shall be given full force and effect according to each and all of its express terms and provisions, including as well those related to unknown and unsuspected claims, demands and causes of action, if any, as well as those relating to any other claims, demands and causes of action hereinabove specified. SECTION 1542 provides: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR." I acknowledge that I may hereafter discover claims or facts in addition to or different from those which I now know or believe to exist with respect to the subject matter of this Waiver and Release of Claims and which, if known or suspected at the time of executing this Waiver and Release of Claims, may have materially affected this settlement. Finally, I acknowledge that I have read this Waiver and Release of Claims and understand all of its terms. EX-10 23 ex1022.txt 1 CON-WAY TRANSPORTATION SERVICES, INC. EXECUTIVE SEVERANCE PLAN Con-Way Transportation Services, Inc. (the "Company") hereby adopts the Con-Way Transportation Services, Inc. Executive Severance Plan for the benefit of certain executives of the Company and its subsidiaries, on the terms and conditions hereinafter stated. SECTION 1. DEFINITIONS. As hereinafter used: 1.1 "Affiliate" means an affiliate of the Company, as defined in Rule 12b-2 promulgated under Section 12 of the Exchange Act. 1.2 "Board" means the Board of Directors of the Company or any successor thereto. 1.3 "Cause" for termination by the Employer of the Eligible Employee's employment shall mean (i) the willful and continued failure by the Eligible Employee to substantially perform the Eligible Employee's duties with the Employer (other than any such failure resulting from the Eligible Employee's incapacity due to disability, including physical or mental illness or any such actual or anticipated failure after the issuance by the Eligible Employee of a notice of intent to terminate employment for Good Reason pursuant to Section 1.13 hereof) after a written demand for substantial performance is delivered to the Eligible Employee by the Company's Chief Executive Officer and General Counsel, which demand specifically identifies the manner in which such Officers believe that the Eligible Employee has not substantially performed the Eligible Employee's duties, or (ii) the willful engaging by the Eligible Employee in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of this definition, no act, or failure to act, on the Eligible Employee's part shall be deemed "willful" unless done, or omitted to be done, by the Eligible Employee not in good faith and without reasonable belief that the Eligible Employee's act, or failure to act, was in the best interest of the Company. In the event of a dispute concerning the application of this provision, no claim by the Company or any Employer that Cause exists shall be given effect unless the Company establishes (i) to the Plan Administrator and (ii) in the event of an arbitration to resolve the dispute, to the arbitrator, by clear and convincing evidence that Cause exists. 1.4 "Change in Control of the Company" means the occurrence of any one of the following events: (I) a sale of the then outstanding shares of capital stock of the Company having more than 50% of the then existing voting power of all outstanding securities of the Company, whether by merger, consolidation or otherwise; (II) the sale of all or substantially all of the assets of the Company; or (III) any other transaction or course of action engaged in, directly or indirectly, by the Company or CNF that has a substantially similar effect as the transactions of the type referred to in clause (I) or (II) above. The foregoing notwithstanding, a Change in Control of the Company shall not be deemed to have occurred (A) by reason of the occurrence of a "Change in Control" of CNF (within the meaning of Section 1 of the CNF Amended and Restated Executive Severance Plan), (B) except in the case of a transaction described in clause (II) above, so long as CNF or any of its Affiliates (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended), individually or collectively, own the then outstanding shares of capital stock of the Company having 50% or more of the then existing voting power of all outstanding securities of the Company, (C) in the event of the sale of shares of capital stock of the Company to any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any other Affiliate of CNF, or (D) in the event of the sale or distribution of shares of capital stock of the Company to shareholders of CNF, or the sale of assets of the Company to any corporation or other entity owned, directly or indirectly, by the shareholders of CNF, in either case in substantially the same proportions as their ownership of stock in CNF. 1.5 "CNF" shall mean CNF Transportation Inc. and any successor to its business and/or assets. 1.6 "Code" means the Internal Revenue Code of 1986, as it may be amended from time to time. 1.7 "Common Stock" means the common stock, par value $1.00 per share, of the Company. 1.8 "Company" means Con-Way Transportation Services, Inc. or any successors thereto. 1.9 "Effective Date" means July 31, 2000. 1.10 "Eligible Employee" means an individual who, immediately prior to a Change in Control of the Company, (a) is not a party to an individual employment or severance agreement with the Company and (b) who occupies a position that has been classified as within the CNF Transportation Inc. executive level salary grade structure. An Eligible Employee becomes a "Severed Employee" once he or she incurs a Severance. 1.11 "Employer" means the Company or any of its subsidiaries. 1.12 "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. 1.13 "Good Reason" for termination by the Eligible Employee of the Eligible Employee's employment shall mean the occurrence (without the Eligible Employee's express written consent) after any Change in Control of the Company of any one of the following acts by the Company, or failures by the Company to act, unless such act or failure to act is corrected within 30 days of receipt by the Company of notice of the Eligible Employee's intent to terminate for Good Reason hereunder: (1) the failure of the successor company, following the Change in Control of the Company, to assume the Plan and all obligations thereunder, as of the date of such Change in Control of the Company; (2) the assignment to the Eligible Employee of any duties inconsistent with the Eligible Employee's status as an executive of the Company or a substantial adverse alteration in the nature or status of the Eligible Employee's responsibilities from those in effect immediately prior to the Change in Control of the Company; (3) a reduction by the Employer in the Eligible Employee's annual base salary or bonus opportunity, each as in effect immediately prior to the Change in Control of the Company or as the same may thereafter be increased from time to time; (4) the relocation of the Eligible Employee's principal place of employment to a location that results in an increase in the Eligible Employee's one way commute of at least 50 miles more than the Eligible Employee's one way commute immediately prior to the Change in Control of the Company, except for required travel on the Company's business to an extent substantially consistent with the Eligible Employee's business travel obligations immediately prior to the Change in Control of the Company; (5) the failure by the Company to pay to the Eligible Employee when due any portion of the Eligible Employee's current compensation; (6) the failure by the Company to continue to provide the Eligible Employee with benefits substantially similar to those enjoyed by the Eligible Employee under any of the Company's pension, savings, life insurance, medical, health and accident, or disability plans in which the Eligible Employee was participating immediately prior to the Change in Control of the Company (except for across the board changes similarly affecting all or substantially all employees of the Company and any entity in control of the Company), the taking of any other action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Eligible Employee of any material fringe benefit enjoyed by the Eligible Employee immediately prior to the Change in Control of the Company, or the failure by the Company to provide the Eligible Employee with the number of paid vacation days to which the Eligible Employee is entitled. The Eligible Employee's right to terminate the Eligible Employee's employment for Good Reason shall not be affected by the Eligible Employee's incapacity due to disability, including physical or mental illness. The Eligible Employee's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. 1.14 "Person" has the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include: (1) the Company or any of its subsidiaries; (2) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates; (3) an underwriter temporarily holding securities pursuant to an offering of such securities; or (4) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company. 1.15 "Plan" means the Con-Way Transportation Services, Inc. Executive Severance Plan, as set forth herein, as it may be amended from time to time. 1.16 "Plan Administrator" means, prior to a Change in Control of the Company, the person or persons appointed from time to time by the Board and following a Change in Control of the Company, a committee consisting of three persons, at least two of whom were directors or executive officers of the Company immediately prior to the Change in Control of the Company. 1.17 "Potential Change in Control of the Company" shall be deemed to have occurred if: (1) CNF or the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control of the Company; or (2) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control of the Company has occurred. 1.18 "Severance" means the termination of an Eligible Employee's employment with the Employer on or within one year immediately following the date of the Change in Control of the Company, (i) by the Employer other than for Cause, or (ii) by the Eligible Employee for Good Reason. For purposes of this Plan, an Eligible Employee's employment shall be deemed to have been terminated following a Change in Control of the Company by the Company without Cause or by the Eligible Employee with Good Reason, if (i) the Eligible Employee's employment is terminated by the Company without Cause following a Potential Change in Control of the Company but prior to a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs) and such termination was at the request or direction of a Person who has entered into an agreement with the Company the consummation of which would constitute a Change in Control of the Company, (ii) the Eligible Employee terminates his employment for Good Reason following a Potential Change in Control of the Company but prior to a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs) and the circumstance or event which constitutes Good Reason occurs at the request or direction of such Person; or (iii) the Eligible Employee's employment is terminated by the Company without Cause or by the Eligible Employee for Good Reason and such termination or the circumstance or event which constitutes Good Reason is otherwise in connection with or in anticipation of a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs). An Eligible Employee will not be considered to have incurred a Severance (i) if his or her employment is discontinued by reason of the Eligible Employee's death or disability, including a physical or mental condition causing such Eligible Employee's inability to substantially perform his or her duties with the Employer, including, without limitation, such condition entitling him or her to benefits under any sick pay or disability income policy or program of the Employer or (ii) by reason of the divestiture of a facility, sale of a business or business unit, or the outsourcing of a business activity with which the Eligible Employee is affiliated, notwithstanding the fact that such divestiture, sale or outsourcing constitutes, or takes place within one year following, a Change in Control of the Company, if the Eligible Employee is offered comparable employment by the successor company and such successor company agrees to assume the obligations of this Plan with respect to such Eligible Employee. 1.19 "Severance Benefits" means, at the Company's expense, (a) the continued participation by a Severed Employee and his dependents in all health and welfare benefits plans of the Company (to the extent such Severed Employee was participating in such plans prior to incurring a Severance) and (b) outplacement services determined by the Company to be suitable to the Severed Employee's position, in each case for a period of one year following such Severed Employee's Severance Date; provided, however, that benefits otherwise receivable by the Eligible Employee hereunder shall be reduced to the extent benefits of the same type are received by or made available to the Eligible Employee during the one- year period following the Eligible Employee's incurring a Severance (and any such benefits received by or made available to the Eligible Employee shall be reported to the Company by the Eligible Employee); provided, further, however, that the Company shall reimburse the Eligible Employee for the excess, if any, of the cost of such benefits to the Eligible Employee over such cost immediately prior to the Eligible Employee's incurring a Severance or, if more favorable to the Eligible Employee, immediately prior to the Change in Control of the Company. If the Severed Employee dies during the period of one year following the Severed Employee's Severance Date at a time when health and dental benefits are being provided under this Section 1.18 to the Severed Employee's dependents, the Company shall continue to provide such benefits to the dependents for the remainder of the one year period on the same basis as if the Severed Employee had survived throughout that period. 1.20 "Severance Date" means the date on or after the date of the Change in Control of the Company on which an Eligible Employee incurs a Severance. 1.21 "Severance Payment" means a payment, in lieu of any other severance payment or benefit pursuant to any other plan or agreement of the Company or any subsidiary thereof to which the Eligible Employee is otherwise entitled, of an amount equal to the sum of (a) the Severed Employee's annual base salary immediately prior to the time of Severance or, if higher, in effect immediately prior to the Change in Control of the Company and (b) the greater of (i) the Severed Employee's target bonus for the year in which the Severance occurred and (ii) the Severed Employee's actual or target bonus (whichever is greater) for the year in which the Change in Control of the Company occurred (in either case, determined as if such target bonus had been earned in full). SECTION 2. BENEFITS. 2.1 An Eligible Employee who incurs a Severance shall be entitled to receive (a) a Severance Payment and (b) Severance Benefits. 2.2 The Severance Payment shall be paid to an eligible Severed Employee in a cash lump sum, as soon as practicable following the Severance Date, but in no event later than 10 business days immediately following the expiration of the revocation period, if any, applicable to such Severed Employee's release, described in Section 2.4. 2.3 No Severed Employee shall be eligible to receive a Severance Payment or Severance Benefits under the Plan unless he or she (or, in the event of the death of the Severed Employee, the executor, personal representative or administrator of the Severed Employee's estate) first executes a written release substantially in the form attached as Exhibit A hereto. 2.4 In the event of a claim by an Eligible Employee as to the amount or timing of any distribution, such Eligible Employee shall present the reason for his or her claim in writing to the Plan Administrator. The Plan Administrator shall, within sixty (60) days after receipt of such written claim, send a written notification to the Eligible Employee as to its disposition. In the event the claim is wholly or partially denied, such written notification shall (a) state the specific reason or reasons for the denial, (b) make specific reference to pertinent Plan provisions on which the denial is based, (c) provide a description of any additional material or information necessary for the Eligible Employee to perfect the claim and an explanation of why such material or information is necessary, and (d) set forth the procedure by which the Eligible Employee may appeal the denial of his or her claim. In the event an Eligible Employee wishes to appeal the denial of his or her claim, he or she may request a review of such denial by making application in writing to the Plan Administrator within sixty (60) days after receipt of such denial. Such Eligible Employee (or his or her duly authorized legal representative) may, upon written request to the Plan Administrator, review any documents pertinent to his or her claim, and submit in writing issues and comments in support of his or her position. Within sixty (60) days after receipt of a written appeal (unless special circumstances, such as the need to hold a hearing, require an extension of time, but in no event more than one hundred twenty (120) days after such receipt), the Plan Administrator shall notify the Eligible Employee of the final decision. The final decision shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, and specific references to the pertinent Plan provisions on which the decision is based. 2.5 Any further dispute or controversy arising under or in connection with this Agreement which remains after the final decision of the Plan Administrator as contemplated by Section 2.4 shall be finally settled exclusively by arbitration in Ann Arbor, Michigan, in accordance with the rules of the American Arbitration Association then in effect; provided, however, that the evidentiary standards set forth in this Agreement shall apply; and provided further, that the arbitrator shall apply the applicable provisions of ERISA, and applicable regulations adopted thereunder, in such arbitration proceeding. Judgment may be entered on the arbitrator's award in any court having jurisdiction. 2.6 The Company shall pay to the Eligible Employee all legal fees and expenses incurred by the Eligible Employee in seeking in good faith to obtain or enforce any benefit or right provided by this Agreement. Such payments shall be made within five (5) business days after delivery of the Eligible Employee's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 2.7 The Company shall be entitled to withhold from amounts to be paid to the Severed Employee hereunder any federal, state or local withholding or other taxes or charges which it is from time to time required to withhold. 2.8 The Company agrees that, if the Eligible Employee's employment with the Company terminates during the one year period following a Change in Control of the Company, the Eligible Employee is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Eligible Employee hereunder. Further, the amount of any payment or benefit provided for in this Agreement shall not be reduced (except as provided in Section 1.19 hereof) by any compensation earned by the Eligible Employee as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Eligible Employee to the Company, or otherwise. SECTION 3. PLAN ADMINISTRATION. 3.1 The Plan shall be interpreted, administered and operated by the Plan Administrator, who shall have complete authority, in its sole discretion subject to the express provisions of the Plan, to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it, and to make all other determinations necessary or advisable for the administration of the Plan. 3.2 All questions of any character whatsoever arising in connection with the interpretation of the Plan or its administration or operation shall be submitted to and settled and determined by the Plan Administrator in an equitable and fair manner in accordance with the procedure for claims and appeals described in Section 2.3 Subject to the rights to arbitration provided in Section 2.5 hereof, any such settlement and determination shall be final and conclusive, and shall bind and may be relied upon by the Employer, each of the Eligible Employees and all other parties in interest. 3.3 The Plan Administrator may delegate any of its duties hereunder to such person or persons from time to time as it may designate. 3.4 The Plan Administrator is empowered, on behalf of the Plan, to engage accountants, legal counsel and such other personnel as it deems necessary or advisable to assist it in the performance of its duties under the Plan. The functions of any such persons engaged by the Plan Administrator shall be limited to the specified services and duties for which they are engaged, and such persons shall have no other duties, obligations or responsibilities under the Plan. Such persons shall exercise no discretionary authority or discretionary control respecting the management of the Plan. All reasonable expenses thereof shall be borne by the Employer. SECTION 4. PLAN MODIFICATION OR TERMINATION. The Plan may be amended or terminated by the Board or a duly appointed committee of the Board at any time; provided, however, that during the pendency of and within six (6) months following the cessation of a Potential Change in Control of the Company and within one year following a Change in Control of the Company, the Plan may not be terminated nor may any amendment be adopted which is in any manner adverse to the interests of Eligible Employees. Notwithstanding anything in this Plan to the contrary, unless a Change in Control of the Company has previously occurred, the Plan shall automatically terminate, and be of no further force or effect, upon the occurrence of a "Change in Control" of CNF (within the meaning of Section 1 of the CNF Amended and Restated Executive Severance Plan (the "CNF Severance Plan")), provided that the CNF Severance Plan remains in effect at the time of such Change in Control of CNF. SECTION 5. GENERAL PROVISIONS. 5.1 Except as otherwise provided herein or by law, no right or interest of any Eligible Employee under the Plan shall be assignable or transferable, in whole or in part, either directly or by operation of law or otherwise, including without limitation by execution, levy, garnishment, attachment, pledge or in any manner; no attempted assignment or transfer thereof shall be effective; and no right or interest of any Eligible Employee under the Plan shall be liable for, or subject to, any obligation or liability of such Eligible Employee. When a payment is due under this Plan to a Severed Employee who is unable to care for his or her affairs, payment may be made directly to his or her legal guardian or personal representative. 5.2 If the Company or any Affiliate is obligated pursuant to applicable law or by virtue of being a party to a contract (but not pursuant to any severance plan) to pay severance pay, a termination indemnity, notice pay or the like or if the Company or any Affiliate is obligated by law to provide advance notice of separation ("Notice Period"), then any Severance Payment hereunder shall be reduced by the amount of any such severance pay, termination indemnity, notice pay or the like, as applicable, and by the amount of any compensation received during any Notice Period. 5.3 Neither the establishment of the Plan, nor any modification thereof, nor the creation of any fund, trust or account, nor the payment of any benefits shall be construed as giving any Eligible Employee, or any person whomsoever, the right to be retained in the service of the Employer, and all Eligible Employees shall remain subject to discharge to the same extent as if the Plan had never been adopted. 5.4 If any provision of this Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and this Plan shall be construed and enforced as if such provisions had not been included. 5.5 This Plan shall be binding upon and shall inure to the benefit of and be enforceable by the Company and its successors and assigns, and by each Eligible Employee and by the personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees of each Eligible Employee. If any Eligible Employee shall die while any amount would still be payable to such Eligible Employee (other than amount which, by their terms, terminate upon the death of the Eligible Employee) if the Eligible Employee had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Plan to the executors, personal representatives or administrators of the Eligible Employee's estate. 5.6 The headings and captions herein are provided for reference and convenience only, shall not be considered part of the Plan, and shall not be employed in the construction of the Plan. 5.7 The Plan shall not be funded. No Eligible Employee shall have any right to, or interest in, any assets of any Employer which may be applied by the Employer to the payment of benefits or other rights under this Plan. 5.8 All notices and all other communications provided for in this Plan (i) shall be in writing, (ii) shall be hand delivered, sent by overnight courier or by United States registered mail, return receipt requested and postage prepaid, addressed, in the case of the Company, to 110 Parkland Plaza, Ann Arbor, MI 48103, Attention: Vice President and Corporate Counsel, and in the case of an Eligible Employee, to the last known address of such Eligible Employee, and (iii) shall be effective only upon actual receipt. 5.9 This Plan shall be construed and enforced according to the laws of the State of Michigan to the extent not preempted by federal law, which shall otherwise control. CON-WAY TRANSPORTATION SERVICES, INC. By: /s/Gerald L. Detter -------------------------------------------- Name: Gerald L. Detter Title: President and Chief Executive Officer Executed: July 31, 2000 EXHIBIT A WAIVER AND RELEASE OF CLAIMS In consideration of, and subject to, the payment to be made to me by Con-Way Transportation Services, Inc. (the "Company") of the "Severance Payment" (as defined in the Con-Way Transportation Services, Inc. Executive Severance Plan (the "Plan")), I hereby waive any claims I may have for employment or re-employment by the Company or any parent or subsidiary of the Company after the date hereof, and I further agree to and do release and forever discharge the Company or any subsidiary of the Company, and their respective past and present officers, directors, shareholders, insurers, employees and agents from any and all claims and causes of action, known or unknown, arising out of or relating to my employment with the Company or any subsidiary of the Company, or the termination thereof, including, but not limited to, wrongful discharge, breach of contract, tort, fraud, the Civil Rights Acts, Age Discrimination in Employment Act, Employee Retirement Income Security Act of 1974, Americans with Disabilities Act, or any other federal, state or local legislation or common law relating to employment or discrimination in employment or otherwise. Notwithstanding the foregoing or any other provision hereof, nothing in this Waiver and Release of Claims shall adversely affect (i) my rights under the Plan; (ii) my rights to benefits other than severance benefits under plans, programs and arrangements of the Company or any subsidiary or parent of the Company which are accrued but unpaid as of the date of my termination; or (iii) my rights to indemnification under any indemnification agreement, applicable law and the certificates of incorporation and bylaws of the Company and any subsidiary or parent of the Company, and my rights under any director's and officers' liability insurance policy covering me. I acknowledge that I have signed this Waiver and Release of Claims voluntarily, knowingly, of my own free will and without reservation or duress, and that no promises or representations have been made to me by any person to induce me to do so other than the promise of payment set forth in the first paragraph above and the Company's acknowledgment of my rights reserved under the second paragraph above. I understand that this release will be deemed to be an application for benefits under the Plan and that my entitlement thereto shall be governed by the terms and conditions of the Plan. I expressly hereby consent to such terms and conditions. I acknowledge that I have been given not less than forty-five (45) days to review and consider this Waiver and Release of Claims (unless I have signed a written waiver of such review and consideration period), and that I have had the opportunity to consult with an attorney or other advisor of my choice and have been advised by the Company to do so if I choose. I may revoke this Waiver and Release of Claims seven days or less after its execution by providing written notice to the Company. I acknowledge that it is my intention and the intention of the Company in executing this Waiver and Release of Claims that the same shall be effective as a bar to each and every claim, demand and cause of action hereinabove specified. In furtherance of this intention, I hereby expressly waive any and all rights and benefits conferred upon me by the provisions of SECTION 1542 OF THE CALIFORNIA CIVIL CODE, to the extent applicable to me, and expressly I consent that this Waiver and Release of Claims shall be given full force and effect according to each and all of its express terms and provisions, including as well those related to unknown and unsuspected claims, demands and causes of action, if any, as well as those relating to any other claims, demands and causes of action hereinabove specified. SECTION 1542 provides: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR." I acknowledge that I may hereafter discover claims or facts in addition to or different from those which I now know or believe to exist with respect to the subject matter of this Waiver and Release of Claims and which, if known or suspected at the time of executing this Waiver and Release of Claims, may have materially affected this settlement. Finally, I acknowledge that I have read this Waiver and Release of Claims and understand all of its terms. Gerald L. Detter --------------------- Signature of Employee Print Name Date Signed EX-10 24 ex1023.txt EMERY AIR FREIGHT CORPORATION EXECUTIVE SEVERANCE PLAN Emery Air Freight Corporation (the "Company") hereby adopts the Emery Air Freight Corporation Executive Severance Plan for the benefit of certain executives of the Company and its subsidiaries, on the terms and conditions hereinafter stated. SECTION 1. DEFINITIONS. As hereinafter used: 1.1 "Affiliate" means an affiliate of the Company, as defined in Rule 12b-2 promulgated under Section 12 of the Exchange Act. 1.2 "Board" means the Board of Directors of the Company or any successor thereto. 1.3 "Cause" for termination by the Employer of the Eligible Employee's employment shall mean (i) the willful and continued failure by the Eligible Employee to substantially perform the Eligible Employee's duties with the Employer (other than any such failure resulting from the Eligible Employee's incapacity due to disability, including physical or mental illness or any such actual or anticipated failure after the issuance by the Eligible Employee of a notice of intent to terminate employment for Good Reason pursuant to Section 1.13 hereof) after a written demand for substantial performance is delivered to the Eligible Employee by the Company's Chief Executive Officer and General Counsel, which demand specifically identifies the manner in which such Officers believe that the Eligible Employee has not substantially performed the Eligible Employee's duties, or (ii) the willful engaging by the Eligible Employee in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of this definition, no act, or failure to act, on the Eligible Employee's part shall be deemed "willful" unless done, or omitted to be done, by the Eligible Employee not in good faith and without reasonable belief that the Eligible Employee's act, or failure to act, was in the best interest of the Company. In the event of a dispute concerning the application of this provision, no claim by the Company or any Employer that Cause exists shall be given effect unless the Company establishes (i) to the Plan Administrator and (ii) in the event of an arbitration to resolve the dispute, to the arbitrator, by clear and convincing evidence that Cause exists. 1.4 "Change in Control of the Company" means the occurrence of any one of the following events: (I) a sale of the then outstanding shares of capital stock of the Company having more than 50% of the then existing voting power of all outstanding securities of the Company, whether by merger, consolidation or otherwise; (II) the sale of all or substantially all of the assets of the Company; or (III) any other transaction or course of action engaged in, directly or indirectly, by the Company or CNF that has a substantially similar effect as the transactions of the type referred to in clause (I) or (II) above. The foregoing notwithstanding, a Change in Control of the Company shall not be deemed to have occurred (A) by reason of the occurrence of a "Change in Control" of CNF (within the meaning of Section 1 of the CNF Amended and Restated Executive Severance Plan), (B) except in the case of a transaction described in clause (II) above, so long as CNF or any of its Affiliates (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended), individually or collectively, own the then outstanding shares of capital stock of the Company having 50% or more of the then existing voting power of all outstanding securities of the Company, (C) in the event of the sale of shares of capital stock of the Company to any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any other Affiliate of CNF, or (D) in the event of the sale or distribution of shares of capital stock of the Company to shareholders of CNF, or the sale of assets of the Company to any corporation or other entity owned, directly or indirectly, by the shareholders of CNF, in either case in substantially the same proportions as their ownership of stock in CNF. 1.5 "CNF" shall mean CNF Transportation Inc. and any successor to its business and/or assets. 1.6 "Code" means the Internal Revenue Code of 1986, as it may be amended from time to time. 1.7 "Common Stock" means the common stock, par value $1.00 per share, of the Company. 1.8 "Company" means Emery Air Freight Corporation or any successors thereto. 1.9 "Effective Date" means July 31, 2000. 1.10 "Eligible Employee" means an individual who, immediately prior to a Change in Control of the Company, (a) is not a party to an individual employment or severance agreement with the Company and (b) who occupies a position that has been classified as within the CNF Transportation Inc. executive level salary grade structure. An Eligible Employee becomes a "Severed Employee" once he or she incurs a Severance. 1.11 "Employer" means the Company or any of its subsidiaries. 1.12 "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. 1.13. "Good Reason" for termination by the Eligible Employee of the Eligible Employee's employment shall mean the occurrence (without the Eligible Employee's express written consent) after any Change in Control of the Company of any one of the following acts by the Company, or failures by the Company to act, unless such act or failure to act is corrected within 30 days of receipt by the Company of notice of the Eligible Employee's intent to terminate for Good Reason hereunder: (1) the failure of the successor company, following the Change in Control of the Company, to assume the Plan and all obligations thereunder, as of the date of such Change in Control of the Company; (2) the assignment to the Eligible Employee of any duties inconsistent with the Eligible Employee's status as an executive of the Company or a substantial adverse alteration in the nature or status of the Eligible Employee's responsibilities from those in effect immediately prior to the Change in Control of the Company; (3) a reduction by the Employer in the Eligible Employee's annual base salary or bonus opportunity, each as in effect immediately prior to the Change in Control of the Company or as the same may thereafter be increased from time to time; (4) the relocation of the Eligible Employee's principal place of employment to a location that results in an increase in the Eligible Employee's one way commute of at least 50 miles more than the Eligible Employee's one way commute immediately prior to the Change in Control of the Company, except for required travel on the Company's business to an extent substantially consistent with the Eligible Employee's business travel obligations immediately prior to the Change in Control of the Company; (5) the failure by the Company to pay to the Eligible Employee when due any portion of the Eligible Employee's current compensation; (6) the failure by the Company to continue to provide the Eligible Employee with benefits substantially similar to those enjoyed by the Eligible Employee under any of the Company's pension, savings, life insurance, medical, health and accident, or disability plans in which the Eligible Employee was participating immediately prior to the Change in Control of the Company (except for across the board changes similarly affecting all or substantially all employees of the Company and any entity in control of the Company), the taking of any other action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Eligible Employee of any material fringe benefit enjoyed by the Eligible Employee immediately prior to the Change in Control of the Company, or the failure by the Company to provide the Eligible Employee with the number of paid vacation days to which the Eligible Employee is entitled. The Eligible Employee's right to terminate the Eligible Employee's employment for Good Reason shall not be affected by the Eligible Employee's incapacity due to disability, including physical or mental illness. The Eligible Employee's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. 1.14 "Person" has the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include: (1) the Company or any of its subsidiaries; (2) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates; (3) an underwriter temporarily holding securities pursuant to an offering of such securities; or (4) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company. 1.15 "Plan" means the Emery Air Freight Corporation Executive Severance Plan, as set forth herein, as it may be amended from time to time. 1.16 "Plan Administrator" means, prior to a Change in Control of the Company, the person or persons appointed from time to time by the Board and following a Change in Control of the Company, a committee consisting of three persons, at least two of whom were directors or executive officers of the Company immediately prior to the Change in Control of the Company. 1.17 "Potential Change in Control of the Company" shall be deemed to have occurred if: (1) CNF or the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control of the Company; or (2) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control of the Company has occurred. 1.18 "Severance" means the termination of an Eligible Employee's employment with the Employer on or within one year immediately following the date of the Change in Control of the Company, (i) by the Employer other than for Cause, or (ii) by the Eligible Employee for Good Reason. For purposes of this Plan, an Eligible Employee's employment shall be deemed to have been terminated following a Change in Control of the Company by the Company without Cause or by the Eligible Employee with Good Reason, if (i) the Eligible Employee's employment is terminated by the Company without Cause following a Potential Change in Control of the Company but prior to a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs) and such termination was at the request or direction of a Person who has entered into an agreement with the Company the consummation of which would constitute a Change in Control of the Company, (ii) the Eligible Employee terminates his employment for Good Reason following a Potential Change in Control of the Company but prior to a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs) and the circumstance or event which constitutes Good Reason occurs at the request or direction of such Person; or (iii) the Eligible Employee's employment is terminated by the Company without Cause or by the Eligible Employee for Good Reason and such termination or the circumstance or event which constitutes Good Reason is otherwise in connection with or in anticipation of a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs). An Eligible Employee will not be considered to have incurred a Severance (i) if his or her employment is discontinued by reason of the Eligible Employee's death or disability, including a physical or mental condition causing such Eligible Employee's inability to substantially perform his or her duties with the Employer, including, without limitation, such condition entitling him or her to benefits under any sick pay or disability income policy or program of the Employer or (ii) by reason of the divestiture of a facility, sale of a business or business unit, or the outsourcing of a business activity with which the Eligible Employee is affiliated, notwithstanding the fact that such divestiture, sale or outsourcing constitutes, or takes place within one year following, a Change in Control of the Company, if the Eligible Employee is offered comparable employment by the successor company and such successor company agrees to assume the obligations of this Plan with respect to such Eligible Employee. 1.19 "Severance Benefits" means, at the Company's expense, (a) the continued participation by a Severed Employee and his dependents in all health and welfare benefits plans of the Company (to the extent such Severed Employee was participating in such plans prior to incurring a Severance) and (b) outplacement services determined by the Company to be suitable to the Severed Employee's position, in each case for a period of one year following such Severed Employee's Severance Date; provided, however, that benefits otherwise receivable by the Eligible Employee hereunder shall be reduced to the extent benefits of the same type are received by or made available to the Eligible Employee during the one- year period following the Eligible Employee's incurring a Severance (and any such benefits received by or made available to the Eligible Employee shall be reported to the Company by the Eligible Employee); provided, further, however, that the Company shall reimburse the Eligible Employee for the excess, if any, of the cost of such benefits to the Eligible Employee over such cost immediately prior to the Eligible Employee's incurring a Severance or, if more favorable to the Eligible Employee, immediately prior to the Change in Control of the Company. If the Severed Employee dies during the period of one year following the Severed Employee's Severance Date at a time when health and dental benefits are being provided under this Section 1.18 to the Severed Employee's dependents, the Company shall continue to provide such benefits to the dependents for the remainder of the one year period on the same basis as if the Severed Employee had survived throughout that period. 1.20 "Severance Date" means the date on or after the date of the Change in Control of the Company on which an Eligible Employee incurs a Severance. 1.21 "Severance Payment" means a payment, in lieu of any other severance payment or benefit pursuant to any other plan or agreement of the Company or any subsidiary thereof to which the Eligible Employee is otherwise entitled, of an amount equal to the sum of (a) the Severed Employee's annual base salary immediately prior to the time of Severance or, if higher, in effect immediately prior to the Change in Control of the Company and (b) the greater of (i) the Severed Employee's target bonus for the year in which the Severance occurred and (ii) the Severed Employee's actual or target bonus (whichever is greater) for the year in which the Change in Control of the Company occurred (in either case, determined as if such target bonus had been earned in full). SECTION 2. BENEFITS. 2.1An Eligible Employee who incurs a Severance shall be entitled to receive (a) a Severance Payment and (b) Severance Benefits. 2.2The Severance Payment shall be paid to an eligible Severed Employee in a cash lump sum, as soon as practicable following the Severance Date, but in no event later than 10 business days immediately following the expiration of the revocation period, if any, applicable to such Severed Employee's release, described in Section 2.4. 2.3No Severed Employee shall be eligible to receive a Severance Payment or Severance Benefits under the Plan unless he or she (or, in the event of the death of the Severed Employee, the executor, personal representative or administrator of the Severed Employee's estate) first executes a written release substantially in the form attached as Exhibit A hereto. 2.4In the event of a claim by an Eligible Employee as to the amount or timing of any distribution, such Eligible Employee shall present the reason for his or her claim in writing to the Plan Administrator. The Plan Administrator shall, within sixty (60) days after receipt of such written claim, send a written notification to the Eligible Employee as to its disposition. In the event the claim is wholly or partially denied, such written notification shall (a) state the specific reason or reasons for the denial, (b) make specific reference to pertinent Plan provisions on which the denial is based, (c) provide a description of any additional material or information necessary for the Eligible Employee to perfect the claim and an explanation of why such material or information is necessary, and (d) set forth the procedure by which the Eligible Employee may appeal the denial of his or her claim. In the event an Eligible Employee wishes to appeal the denial of his or her claim, he or she may request a review of such denial by making application in writing to the Plan Administrator within sixty (60) days after receipt of such denial. Such Eligible Employee (or his or her duly authorized legal representative) may, upon written request to the Plan Administrator, review any documents pertinent to his or her claim, and submit in writing issues and comments in support of his or her position. Within sixty (60) days after receipt of a written appeal (unless special circumstances, such as the need to hold a hearing, require an extension of time, but in no event more than one hundred twenty (120) days after such receipt), the Plan Administrator shall notify the Eligible Employee of the final decision. The final decision shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, and specific references to the pertinent Plan provisions on which the decision is based. 2.5Any further dispute or controversy arising under or in connection with this Agreement which remains after the final decision of the Plan Administrator as contemplated by Section 2.4 shall be finally settled exclusively by arbitration in Redwood City, California, in accordance with the rules of the American Arbitration Association then in effect; provided, however, that the evidentiary standards set forth in this Agreement shall apply; and provided further, that the arbitrator shall apply the applicable provisions of ERISA, and applicable regulations adopted thereunder, in such arbitration proceeding. Judgment may be entered on the arbitrator's award in any court having jurisdiction. 2.6The Company shall pay to the Eligible Employee all legal fees and expenses incurred by the Eligible Employee in seeking in good faith to obtain or enforce any benefit or right provided by this Agreement. Such payments shall be made within five (5) business days after delivery of the Eligible Employee's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 2.7The Company shall be entitled to withhold from amounts to be paid to the Severed Employee hereunder any federal, state or local withholding or other taxes or charges which it is from time to time required to withhold. 2.8The Company agrees that, if the Eligible Employee's employment with the Company terminates during the one year period following a Change in Control of the Company, the Eligible Employee is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Eligible Employee hereunder. Further, the amount of any payment or benefit provided for in this Agreement shall not be reduced (except as provided in Section 1.19 hereof) by any compensation earned by the Eligible Employee as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Eligible Employee to the Company, or otherwise. SECTION 3. PLAN ADMINISTRATION. 3.1The Plan shall be interpreted, administered and operated by the Plan Administrator, who shall have complete authority, in its sole discretion subject to the express provisions of the Plan, to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it, and to make all other determinations necessary or advisable for the administration of the Plan. 3.2All questions of any character whatsoever arising in connection with the interpretation of the Plan or its administration or operation shall be submitted to and settled and determined by the Plan Administrator in an equitable and fair manner in accordance with the procedure for claims and appeals described in Section 2.3. Subject to the rights to arbitration provided in Section 2.5 hereof, any such settlement and determination shall be final and conclusive, and shall bind and may be relied upon by the Employer, each of the Eligible Employees and all other parties in interest. 3.3The Plan Administrator may delegate any of its duties hereunder to such person or persons from time to time as it may designate. 3.4The Plan Administrator is empowered, on behalf of the Plan, to engage accountants, legal counsel and such other personnel as it deems necessary or advisable to assist it in the performance of its duties under the Plan. The functions of any such persons engaged by the Plan Administrator shall be limited to the specified services and duties for which they are engaged, and such persons shall have no other duties, obligations or responsibilities under the Plan. Such persons shall exercise no discretionary authority or discretionary control respecting the management of the Plan. All reasonable expenses thereof shall be borne by the Employer. SECTION 4. PLAN MODIFICATION OR TERMINATION. The Plan may be amended or terminated by the Board or a duly appointed committee of the Board at any time; provided, however, that during the pendency of and within six (6) months following the cessation of a Potential Change in Control of the Company and within one year following a Change in Control of the Company, the Plan may not be terminated nor may any amendment be adopted which is in any manner adverse to the interests of Eligible Employees. Notwithstanding anything in this Plan to the contrary, unless a Change in Control of the Company has previously occurred, the Plan shall automatically terminate, and be of no further force or effect, upon the occurrence of a "Change in Control" of CNF (within the meaning of Section 1 of the CNF Amended and Restated Executive Severance Plan (the "CNF Severance Plan")), provided that the CNF Severance Plan remains in effect at the time of such Change in Control of CNF. SECTION 5. GENERAL PROVISIONS. 5.1Except as otherwise provided herein or by law, no right or interest of any Eligible Employee under the Plan shall be assignable or transferable, in whole or in part, either directly or by operation of law or otherwise, including without limitation by execution, levy, garnishment, attachment, pledge or in any manner; no attempted assignment or transfer thereof shall be effective; and no right or interest of any Eligible Employee under the Plan shall be liable for, or subject to, any obligation or liability of such Eligible Employee. When a payment is due under this Plan to a Severed Employee who is unable to care for his or her affairs, payment may be made directly to his or her legal guardian or personal representative. 5.2If the Company or any Affiliate is obligated pursuant to applicable law or by virtue of being a party to a contract (but not pursuant to any severance plan) to pay severance pay, a termination indemnity, notice pay or the like or if the Company or any Affiliate is obligated by law to provide advance notice of separation ("Notice Period"), then any Severance Payment hereunder shall be reduced by the amount of any such severance pay, termination indemnity, notice pay or the like, as applicable, and by the amount of any compensation received during any Notice Period. 5.3Neither the establishment of the Plan, nor any modification thereof, nor the creation of any fund, trust or account, nor the payment of any benefits shall be construed as giving any Eligible Employee, or any person whomsoever, the right to be retained in the service of the Employer, and all Eligible Employees shall remain subject to discharge to the same extent as if the Plan had never been adopted. 5.4If any provision of this Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and this Plan shall be construed and enforced as if such provisions had not been included. 5.5This Plan shall be binding upon and shall inure to the benefit of and be enforceable by the Company and its successors and assigns, and by each Eligible Employee and by the personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees of each Eligible Employee. If any Eligible Employee shall die while any amount would still be payable to such Eligible Employee (other than amount which, by their terms, terminate upon the death of the Eligible Employee) if the Eligible Employee had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Plan to the executors, personal representatives or administrators of the Eligible Employee's estate. 5.6The headings and captions herein are provided for reference and convenience only, shall not be considered part of the Plan, and shall not be employed in the construction of the Plan. 5.7The Plan shall not be funded. No Eligible Employee shall have any right to, or interest in, any assets of any Employer which may be applied by the Employer to the payment of benefits or other rights under this Plan. 5.8All notices and all other communications provided for in this Plan (i) shall be in writing, (ii) shall be hand delivered, sent by overnight courier or by United States registered mail, return receipt requested and postage prepaid, addressed, in the case of the Company, to 1 Lagoon Drive, Ste. 400, Redwood City, CA 94065, Attention: Vice President and Corporate Counsel, and in the case of an Eligible Employee, to the last known address of such Eligible Employee, and (iii) shall be effective only upon actual receipt. 5.9This Plan shall be construed and enforced according to the laws of the State of California to the extent not preempted by federal law, which shall otherwise control. EXHIBIT A WAIVER AND RELEASE OF CLAIMS In consideration of, and subject to, the payment to be made to me by Emery Air Freight Corporation (the "Company") of the "Severance Payment" (as defined in the Emery Air Freight Corporation Executive Severance Plan (the "Plan")), I hereby waive any claims I may have for employment or re-employment by the Company or any parent or subsidiary of the Company after the date hereof, and I further agree to and do release and forever discharge the Company or any subsidiary of the Company, and their respective past and present officers, directors, shareholders, insurers, employees and agents from any and all claims and causes of action, known or unknown, arising out of or relating to my employment with the Company or any subsidiary of the Company, or the termination thereof, including, but not limited to, wrongful discharge, breach of contract, tort, fraud, the Civil Rights Acts, Age Discrimination in Employment Act, Employee Retirement Income Security Act of 1974, Americans with Disabilities Act, or any other federal, state or local legislation or common law relating to employment or discrimination in employment or otherwise. Notwithstanding the foregoing or any other provision hereof, nothing in this Waiver and Release of Claims shall adversely affect (i) my rights under the Plan; (ii) my rights to benefits other than severance benefits under plans, programs and arrangements of the Company or any subsidiary or parent of the Company which are accrued but unpaid as of the date of my termination; or (iii) my rights to indemnification under any indemnification agreement, applicable law and the certificates of incorporation and bylaws of the Company and any subsidiary or parent of the Company, and my rights under any director's and officers' liability insurance policy covering me. I acknowledge that I have signed this Waiver and Release of Claims voluntarily, knowingly, of my own free will and without reservation or duress, and that no promises or representations have been made to me by any person to induce me to do so other than the promise of payment set forth in the first paragraph above and the Company's acknowledgment of my rights reserved under the second paragraph above. I understand that this release will be deemed to be an application for benefits under the Plan and that my entitlement thereto shall be governed by the terms and conditions of the Plan. I expressly hereby consent to such terms and conditions. I acknowledge that I have been given not less than forty-five (45) days to review and consider this Waiver and Release of Claims (unless I have signed a written waiver of such review and consideration period), and that I have had the opportunity to consult with an attorney or other advisor of my choice and have been advised by the Company to do so if I choose. I may revoke this Waiver and Release of Claims seven days or less after its execution by providing written notice to the Company. I acknowledge that it is my intention and the intention of the Company in executing this Waiver and Release of Claims that the same shall be effective as a bar to each and every claim, demand and cause of action hereinabove specified. In furtherance of this intention, I hereby expressly waive any and all rights and benefits conferred upon me by the provisions of SECTION 1542 OF THE CALIFORNIA CIVIL CODE, to the extent applicable to me, and expressly I consent that this Waiver and Release of Claims shall be given full force and effect according to each and all of its express terms and provisions, including as well those related to unknown and unsuspected claims, demands and causes of action, if any, as well as those relating to any other claims, demands and causes of action hereinabove specified. SECTION 1542 provides: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR." I acknowledge that I may hereafter discover claims or facts in addition to or different from those which I now know or believe to exist with respect to the subject matter of this Waiver and Release of Claims and which, if known or suspected at the time of executing this Waiver and Release of Claims, may have materially affected this settlement. Finally, I acknowledge that I have read this Waiver and Release of Claims and understand all of its terms. EX-10 25 ex1024.txt MENLO LOGISTICS, INC. EXECUTIVE SEVERANCE PLAN Menlo Logistics, Inc. (the "Company") hereby adopts the Menlo Logistics, Inc. Executive Severance Plan for the benefit of certain executives of the Company and its subsidiaries, on the terms and conditions hereinafter stated. SECTION 1. DEFINITIONS. As hereinafter used: 1.1 "Affiliate" means an affiliate of the Company, as defined in Rule 12b-2 promulgated under Section 12 of the Exchange Act. 1.2 "Board" means the Board of Directors of the Company or any successor thereto. 1.3 "Cause" for termination by the Employer of the Eligible Employee's employment shall mean (i) the willful and continued failure by the Eligible Employee to substantially perform the Eligible Employee's duties with the Employer (other than any such failure resulting from the Eligible Employee's incapacity due to disability, including physical or mental illness or any such actual or anticipated failure after the issuance by the Eligible Employee of a notice of intent to terminate employment for Good Reason pursuant to Section 1.13 hereof) after a written demand for substantial performance is delivered to the Eligible Employee by the Company's Chief Executive Officer and General Counsel, which demand specifically identifies the manner in which such Officers believe that the Eligible Employee has not substantially performed the Eligible Employee's duties, or (ii) the willful engaging by the Eligible Employee in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of this definition, no act, or failure to act, on the Eligible Employee's part shall be deemed "willful" unless done, or omitted to be done, by the Eligible Employee not in good faith and without reasonable belief that the Eligible Employee's act, or failure to act, was in the best interest of the Company. In the event of a dispute concerning the application of this provision, no claim by the Company or any Employer that Cause exists shall be given effect unless the Company establishes (i) to the Plan Administrator and (ii) in the event of an arbitration to resolve the dispute, to the arbitrator, by clear and convincing evidence that Cause exists. 1.4 "Change in Control of the Company" means the occurrence of any one of the following events: (I) a sale of the then outstanding shares of capital stock of the Company having more than 50% of the then existing voting power of all outstanding securities of the Company, whether by merger, consolidation or otherwise; (II) the sale of all or substantially all of the assets of the Company; or (III) any other transaction or course of action engaged in, directly or indirectly, by the Company or CNF that has a substantially similar effect as the transactions of the type referred to in clause (I) or (II) above. The foregoing notwithstanding, a Change in Control of the Company shall not be deemed to have occurred (A) by reason of the occurrence of a "Change in Control" of CNF (within the meaning of Section 1 of the CNF Amended and Restated Executive Severance Plan), (B) except in the case of a transaction described in clause (II) above, so long as CNF or any of its Affiliates (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended), individually or collectively, own the then outstanding shares of capital stock of the Company having 50% or more of the then existing voting power of all outstanding securities of the Company, (C) in the event of the sale of shares of capital stock of the Company to any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any other Affiliate of CNF, or (D) in the event of the sale or distribution of shares of capital stock of the Company to shareholders of CNF, or the sale of assets of the Company to any corporation or other entity owned, directly or indirectly, by the shareholders of CNF, in either case in substantially the same proportions as their ownership of stock in CNF. 1.5 "CNF" shall mean CNF Transportation Inc. and any successor to its business and/or assets. 1.6 "Code" means the Internal Revenue Code of 1986, as it may be amended from time to time. 1.7 "Common Stock" means the common stock, no par value per share, of the Company. 1.8 "Company" means Menlo Logistics, Inc. or any successors thereto. 1.9 "Effective Date" means July 31, 2000. 1.10 "Eligible Employee" means an individual who, immediately prior to a Change in Control of the Company, (a) is not a party to an individual employment or severance agreement with the Company and (b) who occupies a position that has been classified as within the CNF Transportation Inc. executive level salary grade structure. An Eligible Employee becomes a "Severed Employee" once he or she incurs a Severance. 1.11 "Employer" means the Company or any of its subsidiaries. 1.12 "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. 1.13. "Good Reason" for termination by the Eligible Employee of the Eligible Employee's employment shall mean the occurrence (without the Eligible Employee's express written consent) after any Change in Control of the Company of any one of the following acts by the Company, or failures by the Company to act, unless such act or failure to act is corrected within 30 days of receipt by the Company of notice of the Eligible Employee's intent to terminate for Good Reason hereunder: (1) the failure of the successor company, following the Change in Control of the Company, to assume the Plan and all obligations thereunder, as of the date of such Change in Control of the Company; (2) the assignment to the Eligible Employee of any duties inconsistent with the Eligible Employee's status as an executive of the Company or a substantial adverse alteration in the nature or status of the Eligible Employee's responsibilities from those in effect immediately prior to the Change in Control of the Company; (3) a reduction by the Employer in the Eligible Employee's annual base salary or bonus opportunity, each as in effect immediately prior to the Change in Control of the Company or as the same may thereafter be increased from time to time; (4) the relocation of the Eligible Employee's principal place of employment to a location that results in an increase in the Eligible Employee's one way commute of at least 50 miles more than the Eligible Employee's one way commute immediately prior to the Change in Control of the Company, except for required travel on the Company's business to an extent substantially consistent with the Eligible Employee's business travel obligations immediately prior to the Change in Control of the Company; (5) the failure by the Company to pay to the Eligible Employee when due any portion of the Eligible Employee's current compensation; (6) the failure by the Company to continue to provide the Eligible Employee with benefits substantially similar to those enjoyed by the Eligible Employee under any of the Company's pension, savings, life insurance, medical, health and accident, or disability plans in which the Eligible Employee was participating immediately prior to the Change in Control of the Company (except for across the board changes similarly affecting all or substantially all employees of the Company and any entity in control of the Company), the taking of any other action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Eligible Employee of any material fringe benefit enjoyed by the Eligible Employee immediately prior to the Change in Control of the Company, or the failure by the Company to provide the Eligible Employee with the number of paid vacation days to which the Eligible Employee is entitled. The Eligible Employee's right to terminate the Eligible Employee's employment for Good Reason shall not be affected by the Eligible Employee's incapacity due to disability, including physical or mental illness. The Eligible Employee's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. 1.14 "Person" has the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include: (1) the Company or any of its subsidiaries; (2) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates; (3) an underwriter temporarily holding securities pursuant to an offering of such securities; or (4) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company. 1.15 "Plan" means the Menlo Logistics, Inc. Executive Severance Plan, as set forth herein, as it may be amended from time to time. 1.16 "Plan Administrator" means, prior to a Change in Control of the Company, the person or persons appointed from time to time by the Board and following a Change in Control of the Company, a committee consisting of three persons, at least two of whom were directors or executive officers of the Company immediately prior to the Change in Control of the Company. 1.17 "Potential Change in Control of the Company" shall be deemed to have occurred if: (1) CNF or the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control of the Company; or (2) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control of the Company has occurred. 1.18 "Severance" means the termination of an Eligible Employee's employment with the Employer on or within one year immediately following the date of the Change in Control of the Company, (i) by the Employer other than for Cause, or (ii) by the Eligible Employee for Good Reason. For purposes of this Plan, an Eligible Employee's employment shall be deemed to have been terminated following a Change in Control of the Company by the Company without Cause or by the Eligible Employee with Good Reason, if (i) the Eligible Employee's employment is terminated by the Company without Cause following a Potential Change in Control of the Company but prior to a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs) and such termination was at the request or direction of a Person who has entered into an agreement with the Company the consummation of which would constitute a Change in Control of the Company, (ii) the Eligible Employee terminates his employment for Good Reason following a Potential Change in Control of the Company but prior to a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs) and the circumstance or event which constitutes Good Reason occurs at the request or direction of such Person; or (iii) the Eligible Employee's employment is terminated by the Company without Cause or by the Eligible Employee for Good Reason and such termination or the circumstance or event which constitutes Good Reason is otherwise in connection with or in anticipation of a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs). An Eligible Employee will not be considered to have incurred a Severance (i) if his or her employment is discontinued by reason of the Eligible Employee's death or disability, including a physical or mental condition causing such Eligible Employee's inability to substantially perform his or her duties with the Employer, including, without limitation, such condition entitling him or her to benefits under any sick pay or disability income policy or program of the Employer or (ii) by reason of the divestiture of a facility, sale of a business or business unit, or the outsourcing of a business activity with which the Eligible Employee is affiliated, notwithstanding the fact that such divestiture, sale or outsourcing constitutes, or takes place within one year following, a Change in Control of the Company, if the Eligible Employee is offered comparable employment by the successor company and such successor company agrees to assume the obligations of this Plan with respect to such Eligible Employee. 1.19 "Severance Benefits" means, at the Company's expense, (a) the continued participation by a Severed Employee and his dependents in all health and welfare benefits plans of the Company (to the extent such Severed Employee was participating in such plans prior to incurring a Severance) and (b) outplacement services determined by the Company to be suitable to the Severed Employee's position, in each case for a period of one year following such Severed Employee's Severance Date; provided, however, that benefits otherwise receivable by the Eligible Employee hereunder shall be reduced to the extent benefits of the same type are received by or made available to the Eligible Employee during the one- year period following the Eligible Employee's incurring a Severance (and any such benefits received by or made available to the Eligible Employee shall be reported to the Company by the Eligible Employee); provided, further, however, that the Company shall reimburse the Eligible Employee for the excess, if any, of the cost of such benefits to the Eligible Employee over such cost immediately prior to the Eligible Employee's incurring a Severance or, if more favorable to the Eligible Employee, immediately prior to the Change in Control of the Company. If the Severed Employee dies during the period of one year following the Severed Employee's Severance Date at a time when health and dental benefits are being provided under this Section 1.18 to the Severed Employee's dependents, the Company shall continue to provide such benefits to the dependents for the remainder of the one year period on the same basis as if the Severed Employee had survived throughout that period. 1.20 "Severance Date" means the date on or after the date of the Change in Control of the Company on which an Eligible Employee incurs a Severance. 1.21 "Severance Payment" means a payment, in lieu of any other severance payment or benefit pursuant to any other plan or agreement of the Company or any subsidiary thereof to which the Eligible Employee is otherwise entitled, of an amount equal to the sum of (a) the Severed Employee's annual base salary immediately prior to the time of Severance or, if higher, in effect immediately prior to the Change in Control of the Company and (b) the greater of (i) the Severed Employee's target bonus for the year in which the Severance occurred and (ii) the Severed Employee's actual or target bonus (whichever is greater) for the year in which the Change in Control of the Company occurred (in either case, determined as if such target bonus had been earned in full). SECTION 2. BENEFITS. 2.1An Eligible Employee who incurs a Severance shall be entitled to receive (a) a Severance Payment and (b) Severance Benefits. 2.2The Severance Payment shall be paid to an eligible Severed Employee in a cash lump sum, as soon as practicable following the Severance Date, but in no event later than 10 business days immediately following the expiration of the revocation period, if any, applicable to such Severed Employee's release, described in Section 2.4. 2.3No Severed Employee shall be eligible to receive a Severance Payment or Severance Benefits under the Plan unless he or she (or, in the event of the death of the Severed Employee, the executor, personal representative or administrator of the Severed Employee's estate) first executes a written release substantially in the form attached as Exhibit A hereto. 2.4In the event of a claim by an Eligible Employee as to the amount or timing of any distribution, such Eligible Employee shall present the reason for his or her claim in writing to the Plan Administrator. The Plan Administrator shall, within sixty (60) days after receipt of such written claim, send a written notification to the Eligible Employee as to its disposition. In the event the claim is wholly or partially denied, such written notification shall (a) state the specific reason or reasons for the denial, (b) make specific reference to pertinent Plan provisions on which the denial is based, (c) provide a description of any additional material or information necessary for the Eligible Employee to perfect the claim and an explanation of why such material or information is necessary, and (d) set forth the procedure by which the Eligible Employee may appeal the denial of his or her claim. In the event an Eligible Employee wishes to appeal the denial of his or her claim, he or she may request a review of such denial by making application in writing to the Plan Administrator within sixty (60) days after receipt of such denial. Such Eligible Employee (or his or her duly authorized legal representative) may, upon written request to the Plan Administrator, review any documents pertinent to his or her claim, and submit in writing issues and comments in support of his or her position. Within sixty (60) days after receipt of a written appeal (unless special circumstances, such as the need to hold a hearing, require an extension of time, but in no event more than one hundred twenty (120) days after such receipt), the Plan Administrator shall notify the Eligible Employee of the final decision. The final decision shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, and specific references to the pertinent Plan provisions on which the decision is based. 2.5Any further dispute or controversy arising under or in connection with this Agreement which remains after the final decision of the Plan Administrator as contemplated by Section 2.4 shall be finally settled exclusively by arbitration in Redwood City, California, in accordance with the rules of the American Arbitration Association then in effect; provided, however, that the evidentiary standards set forth in this Agreement shall apply; and provided further, that the arbitrator shall apply the applicable provisions of ERISA, and applicable regulations adopted thereunder, in such arbitration proceeding. Judgment may be entered on the arbitrator's award in any court having jurisdiction. 2.6The Company shall pay to the Eligible Employee all legal fees and expenses incurred by the Eligible Employee in seeking in good faith to obtain or enforce any benefit or right provided by this Agreement. Such payments shall be made within five (5) business days after delivery of the Eligible Employee's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 2.7The Company shall be entitled to withhold from amounts to be paid to the Severed Employee hereunder any federal, state or local withholding or other taxes or charges which it is from time to time required to withhold. 2.8The Company agrees that, if the Eligible Employee's employment with the Company terminates during the one year period following a Change in Control of the Company, the Eligible Employee is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Eligible Employee hereunder. Further, the amount of any payment or benefit provided for in this Agreement shall not be reduced (except as provided in Section 1.19 hereof) by any compensation earned by the Eligible Employee as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Eligible Employee to the Company, or otherwise. SECTION 3. PLAN ADMINISTRATION. 3.1The Plan shall be interpreted, administered and operated by the Plan Administrator, who shall have complete authority, in its sole discretion subject to the express provisions of the Plan, to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it, and to make all other determinations necessary or advisable for the administration of the Plan. 3.2All questions of any character whatsoever arising in connection with the interpretation of the Plan or its administration or operation shall be submitted to and settled and determined by the Plan Administrator in an equitable and fair manner in accordance with the procedure for claims and appeals described in Section 2.3. Subject to the rights to arbitration provided in Section 2.5 hereof, any such settlement and determination shall be final and conclusive, and shall bind and may be relied upon by the Employer, each of the Eligible Employees and all other parties in interest. 3.3The Plan Administrator may delegate any of its duties hereunder to such person or persons from time to time as it may designate. 3.4The Plan Administrator is empowered, on behalf of the Plan, to engage accountants, legal counsel and such other personnel as it deems necessary or advisable to assist it in the performance of its duties under the Plan. The functions of any such persons engaged by the Plan Administrator shall be limited to the specified services and duties for which they are engaged, and such persons shall have no other duties, obligations or responsibilities under the Plan. Such persons shall exercise no discretionary authority or discretionary control respecting the management of the Plan. All reasonable expenses thereof shall be borne by the Employer. SECTION 4. PLAN MODIFICATION OR TERMINATION. The Plan may be amended or terminated by the Board or a duly appointed committee of the Board at any time; provided, however, that during the pendency of and within six (6) months following the cessation of a Potential Change in Control of the Company and within one year following a Change in Control of the Company, the Plan may not be terminated nor may any amendment be adopted which is in any manner adverse to the interests of Eligible Employees. Notwithstanding anything in this Plan to the contrary, unless a Change in Control of the Company has previously occurred, the Plan shall automatically terminate, and be of no further force or effect, upon the occurrence of a "Change in Control" of CNF (within the meaning of Section 1 of the CNF Amended and Restated Executive Severance Plan (the "CNF Severance Plan")), provided that the CNF Severance Plan remains in effect at the time of such Change in Control of CNF. SECTION 5. GENERAL PROVISIONS. 5.1Except as otherwise provided herein or by law, no right or interest of any Eligible Employee under the Plan shall be assignable or transferable, in whole or in part, either directly or by operation of law or otherwise, including without limitation by execution, levy, garnishment, attachment, pledge or in any manner; no attempted assignment or transfer thereof shall be effective; and no right or interest of any Eligible Employee under the Plan shall be liable for, or subject to, any obligation or liability of such Eligible Employee. When a payment is due under this Plan to a Severed Employee who is unable to care for his or her affairs, payment may be made directly to his or her legal guardian or personal representative. 5.2If the Company or any Affiliate is obligated pursuant to applicable law or by virtue of being a party to a contract (but not pursuant to any severance plan) to pay severance pay, a termination indemnity, notice pay or the like or if the Company or any Affiliate is obligated by law to provide advance notice of separation ("Notice Period"), then any Severance Payment hereunder shall be reduced by the amount of any such severance pay, termination indemnity, notice pay or the like, as applicable, and by the amount of any compensation received during any Notice Period. 5.3Neither the establishment of the Plan, nor any modification thereof, nor the creation of any fund, trust or account, nor the payment of any benefits shall be construed as giving any Eligible Employee, or any person whomsoever, the right to be retained in the service of the Employer, and all Eligible Employees shall remain subject to discharge to the same extent as if the Plan had never been adopted. 5.4If any provision of this Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and this Plan shall be construed and enforced as if such provisions had not been included. 5.5This Plan shall be binding upon and shall inure to the benefit of and be enforceable by the Company and its successors and assigns, and by each Eligible Employee and by the personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees of each Eligible Employee. If any Eligible Employee shall die while any amount would still be payable to such Eligible Employee (other than amount which, by their terms, terminate upon the death of the Eligible Employee) if the Eligible Employee had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Plan to the executors, personal representatives or administrators of the Eligible Employee's estate. 5.6The headings and captions herein are provided for reference and convenience only, shall not be considered part of the Plan, and shall not be employed in the construction of the Plan. 5.7The Plan shall not be funded. No Eligible Employee shall have any right to, or interest in, any assets of any Employer which may be applied by the Employer to the payment of benefits or other rights under this Plan. 5.8All notices and all other communications provided for in this Plan (i) shall be in writing, (ii) shall be hand delivered, sent by overnight courier or by United States registered mail, return receipt requested and postage prepaid, addressed, in the case of the Company, to One Lagoon Drive, Ste. 300, Redwood City, California 94065, Attention: Vice President and Corporate Counsel, and in the case of an Eligible Employee, to the last known address of such Eligible Employee, and (iii) shall be effective only upon actual receipt. 5.9This Plan shall be construed and enforced according to the laws of the State of California to the extent not preempted by federal law, which shall otherwise control. MENLO LOGISTICS, INC. By: /s/ John H. Williford ------------------------- Name: John H. Williford Title: President and Chief Executive Officer Executed: July 31, 2000 EXHIBIT A WAIVER AND RELEASE OF CLAIMS In consideration of, and subject to, the payment to be made to me by Menlo Logistics, Inc. (the "Company") of the "Severance Payment" (as defined in the Menlo Logistics, Inc. Executive Severance Plan (the "Plan")), I hereby waive any claims I may have for employment or re-employment by the Company or any parent or subsidiary of the Company after the date hereof, and I further agree to and do release and forever discharge the Company or any subsidiary of the Company, and their respective past and present officers, directors, shareholders, insurers, employees and agents from any and all claims and causes of action, known or unknown, arising out of or relating to my employment with the Company or any subsidiary of the Company, or the termination thereof, including, but not limited to, wrongful discharge, breach of contract, tort, fraud, the Civil Rights Acts, Age Discrimination in Employment Act, Employee Retirement Income Security Act of 1974, Americans with Disabilities Act, or any other federal, state or local legislation or common law relating to employment or discrimination in employment or otherwise. Notwithstanding the foregoing or any other provision hereof, nothing in this Waiver and Release of Claims shall adversely affect (i) my rights under the Plan; (ii) my rights to benefits other than severance benefits under plans, programs and arrangements of the Company or any subsidiary or parent of the Company which are accrued but unpaid as of the date of my termination; or (iii) my rights to indemnification under any indemnification agreement, applicable law and the certificates of incorporation and bylaws of the Company and any subsidiary or parent of the Company, and my rights under any director's and officers' liability insurance policy covering me. I acknowledge that I have signed this Waiver and Release of Claims voluntarily, knowingly, of my own free will and without reservation or duress, and that no promises or representations have been made to me by any person to induce me to do so other than the promise of payment set forth in the first paragraph above and the Company's acknowledgment of my rights reserved under the second paragraph above. I understand that this release will be deemed to be an application for benefits under the Plan and that my entitlement thereto shall be governed by the terms and conditions of the Plan. I expressly hereby consent to such terms and conditions. I acknowledge that I have been given not less than forty-five (45) days to review and consider this Waiver and Release of Claims (unless I have signed a written waiver of such review and consideration period), and that I have had the opportunity to consult with an attorney or other advisor of my choice and have been advised by the Company to do so if I choose. I may revoke this Waiver and Release of Claims seven days or less after its execution by providing written notice to the Company. I acknowledge that it is my intention and the intention of the Company in executing this Waiver and Release of Claims that the same shall be effective as a bar to each and every claim, demand and cause of action hereinabove specified. In furtherance of this intention, I hereby expressly waive any and all rights and benefits conferred upon me by the provisions of SECTION 1542 OF THE CALIFORNIA CIVIL CODE, to the extent applicable to me, and expressly I consent that this Waiver and Release of Claims shall be given full force and effect according to each and all of its express terms and provisions, including as well those related to unknown and unsuspected claims, demands and causes of action, if any, as well as those relating to any other claims, demands and causes of action hereinabove specified. SECTION 1542 provides: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR." I acknowledge that I may hereafter discover claims or facts in addition to or different from those which I now know or believe to exist with respect to the subject matter of this Waiver and Release of Claims and which, if known or suspected at the time of executing this Waiver and Release of Claims, may have materially affected this settlement. Finally, I acknowledge that I have read this Waiver and Release of Claims and understand all of its terms. /s/ John H. Williford ----------------------- Signature of Employee Print Name Date Signed EX-10 26 ex1025.txt MENLO WORLDWIDE, LLC EXECUTIVE SEVERANCE PLAN Menlo Worldwide, LLC (the "Company") hereby adopts the Menlo Worldwide, LLC Executive Severance Plan for the benefit of certain executives of the Company and its subsidiaries, on the terms and conditions hereinafter stated. SECTION 1. DEFINITIONS. As hereinafter used: 1.1 "Affiliate" means an affiliate of the Company, as defined in Rule 12b-2 promulgated under Section 12 of the Exchange Act. 1.2 "Board" means the Board of Managers of the Company or any successor thereto. 1.3 "Cause" for termination by the Employer of the Eligible Employee's employment shall mean (i) the willful and continued failure by the Eligible Employee to substantially perform the Eligible Employee's duties with the Employer (other than any such failure resulting from the Eligible Employee's incapacity due to disability, including physical or mental illness or any such actual or anticipated failure after the issuance by the Eligible Employee of a notice of intent to terminate employment for Good Reason pursuant to Section 1.13 hereof) after a written demand for substantial performance is delivered to the Eligible Employee by the Company's Chief Executive Officer, which demand specifically identifies the manner in which such Officers believe that the Eligible Employee has not substantially performed the Eligible Employee's duties, or (ii) the willful engaging by the Eligible Employee in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of this definition, no act, or failure to act, on the Eligible Employee's part shall be deemed "willful" unless done, or omitted to be done, by the Eligible Employee not in good faith and without reasonable belief that the Eligible Employee's act, or failure to act, was in the best interest of the Company. In the event of a dispute concerning the application of this provision, no claim by the Company or any Employer that Cause exists shall be given effect unless the Company establishes (i) to the Plan Administrator and (ii) in the event of an arbitration to resolve the dispute, to the arbitrator, by clear and convincing evidence that Cause exists. 1.4 "Change in Control of the Company" means the occurrence of any one of the following events: (I) the sale by CNF of more than 50% of the then outstanding Common Interests or other equity interests of the Company, whether by merger, consolidation or otherwise; (II) the sale of all or substantially all of the assets of the Company; or (III) any other transaction or course of action engaged in, directly or indirectly, by the Company or CNF that has a substantially similar effect as the transactions of the type referred to in clause (I) or (II) above. The foregoing notwithstanding, a Change in Control of the Company shall not be deemed to have occurred (A) by reason of the occurrence of a "Change in Control" of CNF (within the meaning of Section 1 of the CNF Amended and Restated Executive Severance Plan), (B) except in the case of a transaction described in clause (II) above, so long as CNF or any of its Affiliates, individually or collectively, own more than 50% of the outstanding Common Interests or other equity interests of the Company, (C) in the event of the sale of Common Interests or other equity interests of the Company to any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any other Affiliate of CNF, or (D) in the event of the sale or distribution of Common Interests or other equity interests of the Company to shareholders of CNF, or the sale of assets of the Company to any corporation or other entity owned, directly or indirectly, by the shareholders of CNF, in either case in substantially the same proportions as their ownership of stock in CNF. 1.5 "CNF" shall mean CNF Inc. and any successor to its business and/or assets. 1.6 "Code" means the Internal Revenue Code of 1986, as it may be amended from time to time. 1.7 "Common Interest" has the meaning given in the Company's Limited Liability Company Agreement. 1.8 "Company" means Menlo Worldwide, LLC or any successors thereto. 1.9 "Effective Date" means August 25, 2003. 1.10 "Eligible Employee" means an individual who, immediately prior to a Change in Control of the Company, (a) is not a party to an individual employment or severance agreement with the Company and (b) who occupies a position that has been classified as within the CNF Inc. executive level salary grade structure. An Eligible Employee becomes a "Severed Employee" once he or she incurs a Severance. 1.11 "Employer" means the Company excluding its subsidiaries. 1.12 "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. 1.13. "Good Reason" for termination by the Eligible Employee of the Eligible Employee's employment shall mean the occurrence (without the Eligible Employee's express written consent) after any Change in Control of the Company of any one of the following acts by the Company, or failures by the Company to act, unless such act or failure to act is corrected within 30 days of receipt by the Company of notice of the Eligible Employee's intent to terminate for Good Reason hereunder: (1) the failure of the successor company, following the Change in Control of the Company, to assume the Plan and all obligations thereunder, as of the date of such Change in Control of the Company; (2) the assignment to the Eligible Employee of any duties inconsistent with the Eligible Employee's status as an executive of the Company or a substantial adverse alteration in the nature or status of the Eligible Employee's responsibilities from those in effect immediately prior to the Change in Control of the Company; (3) a reduction by the Employer in the Eligible Employee's annual base salary or bonus opportunity, each as in effect immediately prior to the Change in Control of the Company or as the same may thereafter be increased from time to time; (4) the relocation of the Eligible Employee's principal place of employment to a location that results in an increase in the Eligible Employee's one way commute of at least 50 miles more than the Eligible Employee's one way commute immediately prior to the Change in Control of the Company, except for required travel on the Company's business to an extent substantially consistent with the Eligible Employee's business travel obligations immediately prior to the Change in Control of the Company; (5) the failure by the Company to pay to the Eligible Employee when due any portion of the Eligible Employee's current compensation; (6) the failure by the Company to continue to provide the Eligible Employee with benefits substantially similar to those enjoyed by the Eligible Employee under any of the Company's pension, savings, life insurance, medical, health and accident, or disability plans in which the Eligible Employee was participating immediately prior to the Change in Control of the Company (except for across the board changes similarly affecting all or substantially all employees of the Company and any entity in control of the Company), the taking of any other action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Eligible Employee of any material fringe benefit enjoyed by the Eligible Employee immediately prior to the Change in Control of the Company, or the failure by the Company to provide the Eligible Employee with the number of paid vacation days to which the Eligible Employee is entitled. The Eligible Employee's right to terminate the Eligible Employee's employment for Good Reason shall not be affected by the Eligible Employee's incapacity due to disability, including physical or mental illness. The Eligible Employee's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. 1.14 "Person" has the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include: (1) the Company or any of its subsidiaries; (2) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates; (3) an underwriter temporarily holding securities pursuant to an offering of such securities; or (4) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company. 1.15 "Plan" means the Menlo Worldwide, LLC Executive Severance Plan, as set forth herein, as it may be amended from time to time. 1.16 "Plan Administrator" means, prior to a Change in Control of the Company, the person or persons appointed from time to time by the Board and following a Change in Control of the Company, a committee consisting of three persons, at least two of whom were members of the Board or executive officers of the Company immediately prior to the Change in Control of the Company. 1.17 "Potential Change in Control of the Company" shall be deemed to have occurred if: (1) CNF or the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control of the Company; or (2) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control of the Company has occurred. 1.18 "Severance" means the termination of an Eligible Employee's employment with the Employer on or within one year immediately following the date of the Change in Control of the Company, (i) by the Employer other than for Cause, or (ii) by the Eligible Employee for Good Reason. For purposes of this Plan, an Eligible Employee's employment shall be deemed to have been terminated following a Change in Control of the Company by the Company without Cause or by the Eligible Employee with Good Reason, if (i) the Eligible Employee's employment is terminated by the Company without Cause following a Potential Change in Control of the Company but prior to a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs) and such termination was at the request or direction of a Person who has entered into an agreement with the Company the consummation of which would constitute a Change in Control of the Company, (ii) the Eligible Employee terminates his employment for Good Reason following a Potential Change in Control of the Company but prior to a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs) and the circumstance or event which constitutes Good Reason occurs at the request or direction of such Person; or (iii) the Eligible Employee's employment is terminated by the Company without Cause or by the Eligible Employee for Good Reason and such termination or the circumstance or event which constitutes Good Reason is otherwise in connection with or in anticipation of a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs). An Eligible Employee will not be considered to have incurred a Severance (i) if his or her employment is discontinued by reason of the Eligible Employee's death or disability, including a physical or mental condition causing such Eligible Employee's inability to substantially perform his or her duties with the Employer, including, without limitation, such condition entitling him or her to benefits under any sick pay or disability income policy or program of the Employer or (ii) by reason of the divestiture of a facility, sale of a business or business unit, or the outsourcing of a business activity with which the Eligible Employee is affiliated, notwithstanding the fact that such divestiture, sale or outsourcing constitutes, or takes place within one year following, a Change in Control of the Company, if the Eligible Employee is offered comparable employment by the successor company and such successor company agrees to assume the obligations of this Plan with respect to such Eligible Employee. 1.19 "Severance Benefits" means, at the Company's expense, (a) the continued participation by a Severed Employee and his dependents in all health and welfare benefits plans of the Company (to the extent such Severed Employee was participating in such plans prior to incurring a Severance) and (b) outplacement services determined by the Company to be suitable to the Severed Employee's position, in each case for a period of one year following such Severed Employee's Severance Date; provided, however, that benefits otherwise receivable by the Eligible Employee hereunder shall be reduced to the extent benefits of the same type are received by or made available to the Eligible Employee during the one- year period following the Eligible Employee's incurring a Severance (and any such benefits received by or made available to the Eligible Employee shall be reported to the Company by the Eligible Employee); provided, further, however, that the Company shall reimburse the Eligible Employee for the excess, if any, of the cost of such benefits to the Eligible Employee over such cost immediately prior to the Eligible Employee's incurring a Severance or, if more favorable to the Eligible Employee, immediately prior to the Change in Control of the Company. If the Severed Employee dies during the period of one year following the Severed Employee's Severance Date at a time when health and dental benefits are being provided under this Section 1.19 to the Severed Employee's dependents, the Company shall continue to provide such benefits to the dependents for the remainder of the one year period on the same basis as if the Severed Employee had survived throughout that period. 1.20 "Severance Date" means the date on or after the date of the Change in Control of the Company on which an Eligible Employee incurs a Severance. 1.21 "Severance Payment" means a payment, in lieu of any other severance payment or benefit pursuant to any other plan or agreement of the Company or any subsidiary thereof to which the Eligible Employee is otherwise entitled, of an amount equal to the sum of (a) the Severed Employee's annual base salary immediately prior to the time of Severance or, if higher, in effect immediately prior to the Change in Control of the Company and (b) the greater of (i) the Severed Employee's target bonus for the year in which the Severance occurred and (ii) the Severed Employee's actual or target bonus (whichever is greater) for the year in which the Change in Control of the Company occurred (in either case, determined as if such target bonus had been earned in full). SECTION 2. BENEFITS. 2.1 An Eligible Employee who incurs a Severance shall be entitled to receive (a) a Severance Payment and (b) Severance Benefits. 2.2 The Severance Payment shall be paid to an eligible Severed Employee in a cash lump sum, as soon as practicable following the Severance Date, but in no event later than 10 business days immediately following the expiration of the revocation period, if any, applicable to such Severed Employee's release, described in Section 2.4. 2.3 No Severed Employee shall be eligible to receive a Severance Payment or Severance Benefits under the Plan unless he or she (or, in the event of the death of the Severed Employee, the executor, personal representative or administrator of the Severed Employee's estate) first executes a written release substantially in the form attached as Exhibit A hereto. 2.4 In the event of a claim by an Eligible Employee as to the amount or timing of any distribution, such Eligible Employee shall present the reason for his or her claim in writing to the Plan Administrator. The Plan Administrator shall, within sixty (60) days after receipt of such written claim, send a written notification to the Eligible Employee as to its disposition. In the event the claim is wholly or partially denied, such written notification shall (a) state the specific reason or reasons for the denial, (b) make specific reference to pertinent Plan provisions on which the denial is based, (c) provide a description of any additional material or information necessary for the Eligible Employee to perfect the claim and an explanation of why such material or information is necessary, and (d) set forth the procedure by which the Eligible Employee may appeal the denial of his or her claim. In the event an Eligible Employee wishes to appeal the denial of his or her claim, he or she may request a review of such denial by making application in writing to the Plan Administrator within sixty (60) days after receipt of such denial. Such Eligible Employee (or his or her duly authorized legal representative) may, upon written request to the Plan Administrator, review any documents pertinent to his or her claim, and submit in writing issues and comments in support of his or her position. Within sixty (60) days after receipt of a written appeal (unless special circumstances, such as the need to hold a hearing, require an extension of time, but in no event more than one hundred twenty (120) days after such receipt), the Plan Administrator shall notify the Eligible Employee of the final decision. The final decision shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, and specific references to the pertinent Plan provisions on which the decision is based. 2.5 Any further dispute or controversy arising under or in connection with this Agreement which remains after the final decision of the Plan Administrator as contemplated by Section 2.4 shall be finally settled exclusively by arbitration in Redwood City, California, in accordance with the rules of the American Arbitration Association then in effect; provided, however, that the evidentiary standards set forth in this Agreement shall apply; and provided further, that the arbitrator shall apply the applicable provisions of ERISA, and applicable regulations adopted thereunder, in such arbitration proceeding. Judgment may be entered on the arbitrator's award in any court having jurisdiction. 2.6 The Company shall pay to the Eligible Employee all legal fees and expenses incurred by the Eligible Employee in seeking in good faith to obtain or enforce any benefit or right provided by this Agreement. Such payments shall be made within five (5) business days after delivery of the Eligible Employee's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 2.7 The Company shall be entitled to withhold from amounts to be paid to the Severed Employee hereunder any federal, state or local withholding or other taxes or charges which it is from time to time required to withhold. 2.8 The Company agrees that, if the Eligible Employee's employment with the Company terminates during the one year period following a Change in Control of the Company, the Eligible Employee is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Eligible Employee hereunder. Further, the amount of any payment or benefit provided for in this Agreement shall not be reduced (except as provided in Section 1.19 hereof) by any compensation earned by the Eligible Employee as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Eligible Employee to the Company, or otherwise. SECTION 3. PLAN ADMINISTRATION. 3.1 The Plan shall be interpreted, administered and operated by the Plan Administrator, who shall have complete authority, in its sole discretion subject to the express provisions of the Plan, to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it, and to make all other determinations necessary or advisable for the administration of the Plan. 3.2 All questions of any character whatsoever arising in connection with the interpretation of the Plan or its administration or operation shall be submitted to and settled and determined by the Plan Administrator in an equitable and fair manner in accordance with the procedure for claims and appeals described in Section 2.3. Subject to the rights to arbitration provided in Section 2.5 hereof, any such settlement and determination shall be final and conclusive, and shall bind and may be relied upon by the Employer, each of the Eligible Employees and all other parties in interest. 3.3 The Plan Administrator may delegate any of its duties hereunder to such person or persons from time to time as it may designate. 3.4 The Plan Administrator is empowered, on behalf of the Plan, to engage accountants, legal counsel and such other personnel as it deems necessary or advisable to assist it in the performance of its duties under the Plan. The functions of any such persons engaged by the Plan Administrator shall be limited to the specified services and duties for which they are engaged, and such persons shall have no other duties, obligations or responsibilities under the Plan. Such persons shall exercise no discretionary authority or discretionary control respecting the management of the Plan. All reasonable expenses thereof shall be borne by the Employer. SECTION 4. PLAN MODIFICATION OR TERMINATION. The Plan may be amended or terminated by the Board or a duly appointed committee of the Board at any time; provided, however, that during the pendency of and within six (6) months following the cessation of a Potential Change in Control of the Company and within one year following a Change in Control of the Company, the Plan may not be terminated nor may any amendment be adopted which is in any manner adverse to the interests of Eligible Employees. Notwithstanding anything in this Plan to the contrary, unless a Change in Control of the Company has previously occurred, the Plan shall automatically terminate, and be of no further force or effect, upon the occurrence of a "Change in Control" of CNF (within the meaning of Section 1 of the CNF Amended and Restated Executive Severance Plan (the "CNF Severance Plan")), provided that the CNF Severance Plan remains in effect at the time of such Change in Control of CNF. SECTION 5. GENERAL PROVISIONS. 5.1 Except as otherwise provided herein or by law, no right or interest of any Eligible Employee under the Plan shall be assignable or transferable, in whole or in part, either directly or by operation of law or otherwise, including without limitation by execution, levy, garnishment, attachment, pledge or in any manner; no attempted assignment or transfer thereof shall be effective; and no right or interest of any Eligible Employee under the Plan shall be liable for, or subject to, any obligation or liability of such Eligible Employee. When a payment is due under this Plan to a Severed Employee who is unable to care for his or her affairs, payment may be made directly to his or her legal guardian or personal representative. 5.2 If the Company or any Affiliate is obligated pursuant to applicable law or by virtue of being a party to a contract (but not pursuant to any severance plan) to pay severance pay, a termination indemnity, notice pay or the like or if the Company or any Affiliate is obligated by law to provide advance notice of separation ("Notice Period"), then any Severance Payment hereunder shall be reduced by the amount of any such severance pay, termination indemnity, notice pay or the like, as applicable, and by the amount of any compensation received during any Notice Period. 5.3 Neither the establishment of the Plan, nor any modification thereof, nor the creation of any fund, trust or account, nor the payment of any benefits shall be construed as giving any Eligible Employee, or any person whomsoever, the right to be retained in the service of the Employer, and all Eligible Employees shall remain subject to discharge to the same extent as if the Plan had never been adopted. 5.4 If any provision of this Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and this Plan shall be construed and enforced as if such provisions had not been included. 5.5 This Plan shall be binding upon and shall inure to the benefit of and be enforceable by the Company and its successors and assigns, and by each Eligible Employee and by the personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees of each Eligible Employee. If any Eligible Employee shall die while any amount would still be payable to such Eligible Employee (other than amount which, by their terms, terminate upon the death of the Eligible Employee) if the Eligible Employee had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Plan to the executors, personal representatives or administrators of the Eligible Employee's estate. 5.6 The headings and captions herein are provided for reference and convenience only, shall not be considered part of the Plan, and shall not be employed in the construction of the Plan. 5.7 The Plan shall not be funded. No Eligible Employee shall have any right to, or interest in, any assets of any Employer which may be applied by the Employer to the payment of benefits or other rights under this Plan. 5.8 All notices and all other communications provided for in this Plan (i) shall be in writing, (ii) shall be hand delivered, sent by overnight courier or by United States registered mail, return receipt requested and postage prepaid, addressed, in the case of the Company, to One Lagoon Drive, Ste. 400, Redwood City, California 94065, Attention: President, and in the case of an Eligible Employee, to the last known address of such Eligible Employee, and (iii) shall be effective only upon actual receipt. 5.9 This Plan shall be construed and enforced according to the laws of the State of California to the extent not preempted by federal law, which shall otherwise control. MENLO WORLDWIDE, LLC By: /s/ John H. Williford -------------------------------- Name: John H. Williford Title: President and Chief Executive Officer Executed: August 25, 2003 EXHIBIT A WAIVER AND RELEASE OF CLAIMS In consideration of, and subject to, the payment to be made to me by Menlo Worldwide, LLC (the "Company") of the "Severance Payment" (as defined in the Menlo Worldwide, LLC Executive Severance Plan (the "Plan")), I hereby waive any claims I may have for employment or re-employment by the Company or any parent or subsidiary of the Company after the date hereof, and I further agree to and do release and forever discharge the Company or any subsidiary of the Company, and their respective past and present officers, directors, shareholders, insurers, employees and agents from any and all claims and causes of action, known or unknown, arising out of or relating to my employment with the Company or any subsidiary of the Company, or the termination thereof, including, but not limited to, wrongful discharge, breach of contract, tort, fraud, the Civil Rights Acts, Age Discrimination in Employment Act, Employee Retirement Income Security Act of 1974, Americans with Disabilities Act, or any other federal, state or local legislation or common law relating to employment or discrimination in employment or otherwise. Notwithstanding the foregoing or any other provision hereof, nothing in this Waiver and Release of Claims shall adversely affect (i) my rights under the Plan; (ii) my rights to benefits other than severance benefits under plans, programs and arrangements of the Company or any subsidiary or parent of the Company which are accrued but unpaid as of the date of my termination; or (iii) my rights to indemnification under any indemnification agreement, applicable law and the certificates of incorporation and bylaws of the Company and any subsidiary or parent of the Company, and my rights under any director's and officers' liability insurance policy covering me. I acknowledge that I have signed this Waiver and Release of Claims voluntarily, knowingly, of my own free will and without reservation or duress, and that no promises or representations have been made to me by any person to induce me to do so other than the promise of payment set forth in the first paragraph above and the Company's acknowledgment of my rights reserved under the second paragraph above. I understand that this release will be deemed to be an application for benefits under the Plan and that my entitlement thereto shall be governed by the terms and conditions of the Plan. I expressly hereby consent to such terms and conditions. I acknowledge that I have been given not less than forty-five (45) days to review and consider this Waiver and Release of Claims (unless I have signed a written waiver of such review and consideration period), and that I have had the opportunity to consult with an attorney or other advisor of my choice and have been advised by the Company to do so if I choose. I may revoke this Waiver and Release of Claims seven days or less after its execution by providing written notice to the Company. I acknowledge that it is my intention and the intention of the Company in executing this Waiver and Release of Claims that the same shall be effective as a bar to each and every claim, demand and cause of action hereinabove specified. In furtherance of this intention, I hereby expressly waive any and all rights and benefits conferred upon me by the provisions of SECTION 1542 OF THE CALIFORNIA CIVIL CODE, to the extent applicable to me, and expressly I consent that this Waiver and Release of Claims shall be given full force and effect according to each and all of its express terms and provisions, including as well those related to unknown and unsuspected claims, demands and causes of action, if any, as well as those relating to any other claims, demands and causes of action hereinabove specified. SECTION 1542 provides: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR." I acknowledge that I may hereafter discover claims or facts in addition to or different from those which I now know or believe to exist with respect to the subject matter of this Waiver and Release of Claims and which, if known or suspected at the time of executing this Waiver and Release of Claims, may have materially affected this settlement. Finally, I acknowledge that I have read this Waiver and Release of Claims and understand all of its terms. Signature of Employee Print Name Date Signed EX-10 27 ex1026.txt MENLO WORLDWIDE SERVICES, LLC EXECUTIVE SEVERANCE PLAN Menlo Worldwide Services, LLC (the "Company") hereby adopts the Menlo Worldwide Services, LLC Executive Severance Plan for the benefit of certain executives of the Company and its subsidiaries, on the terms and conditions hereinafter stated. SECTION 1. DEFINITIONS. As hereinafter used: 1.1 "Affiliate" means an affiliate of the Company, as defined in Rule 12b-2 promulgated under Section 12 of the Exchange Act. 1.2 "Board" means the Board of Managers of the Company or any successor thereto. 1.3 "Cause" for termination by the Employer of the Eligible Employee's employment shall mean (i) the willful and continued failure by the Eligible Employee to substantially perform the Eligible Employee's duties with the Employer (other than any such failure resulting from the Eligible Employee's incapacity due to disability, including physical or mental illness or any such actual or anticipated failure after the issuance by the Eligible Employee of a notice of intent to terminate employment for Good Reason pursuant to Section 1.13 hereof) after a written demand for substantial performance is delivered to the Eligible Employee by the Chairman of the Board of the Company, which demand specifically identifies the manner in which such Officers believe that the Eligible Employee has not substantially performed the Eligible Employee's duties, or (ii) the willful engaging by the Eligible Employee in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of this definition, no act, or failure to act, on the Eligible Employee's part shall be deemed "willful" unless done, or omitted to be done, by the Eligible Employee not in good faith and without reasonable belief that the Eligible Employee's act, or failure to act, was in the best interest of the Company. In the event of a dispute concerning the application of this provision, no claim by the Company or any Employer that Cause exists shall be given effect unless the Company establishes (i) to the Plan Administrator and (ii) in the event of an arbitration to resolve the dispute, to the arbitrator, by clear and convincing evidence that Cause exists. 1.4 "Change in Control of the Company" means the occurrence of any one of the following events: (I) the sale by CNF of more than 50% of the then outstanding Common Interests or other equity interests of the Company, whether by merger, consolidation or otherwise; (II) the sale of all or substantially all of the assets of the Company; or (III) any other transaction or course of action engaged in, directly or indirectly, by the Company or CNF that has a substantially similar effect as the transactions of the type referred to in clause (I) or (II) above. The foregoing notwithstanding, a Change in Control of the Company shall not be deemed to have occurred (A) by reason of the occurrence of a "Change in Control" of CNF (within the meaning of Section 1 of the CNF Amended and Restated Executive Severance Plan), (B) except in the case of a transaction described in clause (II) above, so long as CNF or any of its Affiliates, individually or collectively, own more than 50% of the outstanding Common Interests or other equity interests of the Company, (C) in the event of the sale of Common Interests or other equity interests of the Company to any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any other Affiliate of CNF, or (D) in the event of the sale or distribution of Common Interests or other equity interests of the Company to shareholders of CNF, or the sale of assets of the Company to any corporation or other entity owned, directly or indirectly, by the shareholders of CNF, in either case in substantially the same proportions as their ownership of stock in CNF. 1.5 "CNF" shall mean CNF Inc. and any successor to its business and/or assets. 1.6 "Code" means the Internal Revenue Code of 1986, as it may be amended from time to time. 1.7 "Common Interest" has the meaning given in the Company's Limited Liability Company Agreement. 1.8 "Company" means Menlo Worldwide Services, LLC or any successors thereto. 1.9 "Effective Date" means August 25, 2003. 1.10 "Eligible Employee" means an individual who, immediately prior to a Change in Control of the Company, (a) is not a party to an individual employment or severance agreement with the Company and (b) who occupies a position that has been classified as within the CNF Inc. executive level salary grade structure. An Eligible Employee becomes a "Severed Employee" once he or she incurs a Severance. 1.11 "Employer" means the Company or any of its subsidiaries. 1.12 "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. 1.13. "Good Reason" for termination by the Eligible Employee of the Eligible Employee's employment shall mean the occurrence (without the Eligible Employee's express written consent) after any Change in Control of the Company of any one of the following acts by the Company, or failures by the Company to act, unless such act or failure to act is corrected within 30 days of receipt by the Company of notice of the Eligible Employee's intent to terminate for Good Reason hereunder: (1) the failure of the successor company, following the Change in Control of the Company, to assume the Plan and all obligations thereunder, as of the date of such Change in Control of the Company; (2) the assignment to the Eligible Employee of any duties inconsistent with the Eligible Employee's status as an executive of the Company or a substantial adverse alteration in the nature or status of the Eligible Employee's responsibilities from those in effect immediately prior to the Change in Control of the Company; (3) a reduction by the Employer in the Eligible Employee's annual base salary or bonus opportunity, each as in effect immediately prior to the Change in Control of the Company or as the same may thereafter be increased from time to time; (4) the relocation of the Eligible Employee's principal place of employment to a location that results in an increase in the Eligible Employee's one way commute of at least 50 miles more than the Eligible Employee's one way commute immediately prior to the Change in Control of the Company, except for required travel on the Company's business to an extent substantially consistent with the Eligible Employee's business travel obligations immediately prior to the Change in Control of the Company; (5) the failure by the Company to pay to the Eligible Employee when due any portion of the Eligible Employee's current compensation; (6) the failure by the Company to continue to provide the Eligible Employee with benefits substantially similar to those enjoyed by the Eligible Employee under any of the Company's pension, savings, life insurance, medical, health and accident, or disability plans in which the Eligible Employee was participating immediately prior to the Change in Control of the Company (except for across the board changes similarly affecting all or substantially all employees of the Company and any entity in control of the Company), the taking of any other action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Eligible Employee of any material fringe benefit enjoyed by the Eligible Employee immediately prior to the Change in Control of the Company, or the failure by the Company to provide the Eligible Employee with the number of paid vacation days to which the Eligible Employee is entitled. The Eligible Employee's right to terminate the Eligible Employee's employment for Good Reason shall not be affected by the Eligible Employee's incapacity due to disability, including physical or mental illness. The Eligible Employee's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. 1.14 "Person" has the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include: (1) the Company or any of its subsidiaries; (2) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates; (3) an underwriter temporarily holding securities pursuant to an offering of such securities; or (4) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company. 1.15 "Plan" means the Menlo Worldwide Services, LLC Executive Severance Plan, as set forth herein, as it may be amended from time to time. 1.16 "Plan Administrator" means, prior to a Change in Control of the Company, the person or persons appointed from time to time by the Board and following a Change in Control of the Company, a committee consisting of three persons, at least two of whom were members of the Board or executive officers of the Company immediately prior to the Change in Control of the Company. 1.17 "Potential Change in Control of the Company" shall be deemed to have occurred if: (1) CNF or the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control of the Company; or (2) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control of the Company has occurred. 1.18 "Severance" means the termination of an Eligible Employee's employment with the Employer on or within one year immediately following the date of the Change in Control of the Company, (i) by the Employer other than for Cause, or (ii) by the Eligible Employee for Good Reason. For purposes of this Plan, an Eligible Employee's employment shall be deemed to have been terminated following a Change in Control of the Company by the Company without Cause or by the Eligible Employee with Good Reason, if (i) the Eligible Employee's employment is terminated by the Company without Cause following a Potential Change in Control of the Company but prior to a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs) and such termination was at the request or direction of a Person who has entered into an agreement with the Company the consummation of which would constitute a Change in Control of the Company, (ii) the Eligible Employee terminates his employment for Good Reason following a Potential Change in Control of the Company but prior to a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs) and the circumstance or event which constitutes Good Reason occurs at the request or direction of such Person; or (iii) the Eligible Employee's employment is terminated by the Company without Cause or by the Eligible Employee for Good Reason and such termination or the circumstance or event which constitutes Good Reason is otherwise in connection with or in anticipation of a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs). An Eligible Employee will not be considered to have incurred a Severance (i) if his or her employment is discontinued by reason of the Eligible Employee's death or disability, including a physical or mental condition causing such Eligible Employee's inability to substantially perform his or her duties with the Employer, including, without limitation, such condition entitling him or her to benefits under any sick pay or disability income policy or program of the Employer or (ii) by reason of the divestiture of a facility, sale of a business or business unit, or the outsourcing of a business activity with which the Eligible Employee is affiliated, notwithstanding the fact that such divestiture, sale or outsourcing constitutes, or takes place within one year following, a Change in Control of the Company, if the Eligible Employee is offered comparable employment by the successor company and such successor company agrees to assume the obligations of this Plan with respect to such Eligible Employee. 1.19 "Severance Benefits" means, at the Company's expense, (a) the continued participation by a Severed Employee and his dependents in all health and welfare benefits plans of the Company (to the extent such Severed Employee was participating in such plans prior to incurring a Severance) and (b) outplacement services determined by the Company to be suitable to the Severed Employee's position, in each case for a period of one year following such Severed Employee's Severance Date; provided, however, that benefits otherwise receivable by the Eligible Employee hereunder shall be reduced to the extent benefits of the same type are received by or made available to the Eligible Employee during the one- year period following the Eligible Employee's incurring a Severance (and any such benefits received by or made available to the Eligible Employee shall be reported to the Company by the Eligible Employee); provided, further, however, that the Company shall reimburse the Eligible Employee for the excess, if any, of the cost of such benefits to the Eligible Employee over such cost immediately prior to the Eligible Employee's incurring a Severance or, if more favorable to the Eligible Employee, immediately prior to the Change in Control of the Company. If the Severed Employee dies during the period of one year following the Severed Employee's Severance Date at a time when health and dental benefits are being provided under this Section 1.19 to the Severed Employee's dependents, the Company shall continue to provide such benefits to the dependents for the remainder of the one year period on the same basis as if the Severed Employee had survived throughout that period. 1.20 "Severance Date" means the date on or after the date of the Change in Control of the Company on which an Eligible Employee incurs a Severance. 1.21 "Severance Payment" means a payment, in lieu of any other severance payment or benefit pursuant to any other plan or agreement of the Company or any subsidiary thereof to which the Eligible Employee is otherwise entitled, of an amount equal to the sum of (a) the Severed Employee's annual base salary immediately prior to the time of Severance or, if higher, in effect immediately prior to the Change in Control of the Company and (b) the greater of (i) the Severed Employee's target bonus for the year in which the Severance occurred and (ii) the Severed Employee's actual or target bonus (whichever is greater) for the year in which the Change in Control of the Company occurred (in either case, determined as if such target bonus had been earned in full). SECTION 2. BENEFITS. 2.1An Eligible Employee who incurs a Severance shall be entitled to receive (a) a Severance Payment and (b) Severance Benefits. 2.2The Severance Payment shall be paid to an eligible Severed Employee in a cash lump sum, as soon as practicable following the Severance Date, but in no event later than 10 business days immediately following the expiration of the revocation period, if any, applicable to such Severed Employee's release, described in Section 2.4. 2.3No Severed Employee shall be eligible to receive a Severance Payment or Severance Benefits under the Plan unless he or she (or, in the event of the death of the Severed Employee, the executor, personal representative or administrator of the Severed Employee's estate) first executes a written release substantially in the form attached as Exhibit A hereto. 2.4In the event of a claim by an Eligible Employee as to the amount or timing of any distribution, such Eligible Employee shall present the reason for his or her claim in writing to the Plan Administrator. The Plan Administrator shall, within sixty (60) days after receipt of such written claim, send a written notification to the Eligible Employee as to its disposition. In the event the claim is wholly or partially denied, such written notification shall (a) state the specific reason or reasons for the denial, (b) make specific reference to pertinent Plan provisions on which the denial is based, (c) provide a description of any additional material or information necessary for the Eligible Employee to perfect the claim and an explanation of why such material or information is necessary, and (d) set forth the procedure by which the Eligible Employee may appeal the denial of his or her claim. In the event an Eligible Employee wishes to appeal the denial of his or her claim, he or she may request a review of such denial by making application in writing to the Plan Administrator within sixty (60) days after receipt of such denial. Such Eligible Employee (or his or her duly authorized legal representative) may, upon written request to the Plan Administrator, review any documents pertinent to his or her claim, and submit in writing issues and comments in support of his or her position. Within sixty (60) days after receipt of a written appeal (unless special circumstances, such as the need to hold a hearing, require an extension of time, but in no event more than one hundred twenty (120) days after such receipt), the Plan Administrator shall notify the Eligible Employee of the final decision. The final decision shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, and specific references to the pertinent Plan provisions on which the decision is based. 2.5Any further dispute or controversy arising under or in connection with this Agreement which remains after the final decision of the Plan Administrator as contemplated by Section 2.4 shall be finally settled exclusively by arbitration in Redwood City, California, in accordance with the rules of the American Arbitration Association then in effect; provided, however, that the evidentiary standards set forth in this Agreement shall apply; and provided further, that the arbitrator shall apply the applicable provisions of ERISA, and applicable regulations adopted thereunder, in such arbitration proceeding. Judgment may be entered on the arbitrator's award in any court having jurisdiction. 2.6The Company shall pay to the Eligible Employee all legal fees and expenses incurred by the Eligible Employee in seeking in good faith to obtain or enforce any benefit or right provided by this Agreement. Such payments shall be made within five (5) business days after delivery of the Eligible Employee's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 2.7The Company shall be entitled to withhold from amounts to be paid to the Severed Employee hereunder any federal, state or local withholding or other taxes or charges which it is from time to time required to withhold. 2.8The Company agrees that, if the Eligible Employee's employment with the Company terminates during the one year period following a Change in Control of the Company, the Eligible Employee is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Eligible Employee hereunder. Further, the amount of any payment or benefit provided for in this Agreement shall not be reduced (except as provided in Section 1.19 hereof) by any compensation earned by the Eligible Employee as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Eligible Employee to the Company, or otherwise. SECTION 3. PLAN ADMINISTRATION. 3.1The Plan shall be interpreted, administered and operated by the Plan Administrator, who shall have complete authority, in its sole discretion subject to the express provisions of the Plan, to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it, and to make all other determinations necessary or advisable for the administration of the Plan. 3.2All questions of any character whatsoever arising in connection with the interpretation of the Plan or its administration or operation shall be submitted to and settled and determined by the Plan Administrator in an equitable and fair manner in accordance with the procedure for claims and appeals described in Section 2.3. Subject to the rights to arbitration provided in Section 2.5 hereof, any such settlement and determination shall be final and conclusive, and shall bind and may be relied upon by the Employer, each of the Eligible Employees and all other parties in interest. 3.3The Plan Administrator may delegate any of its duties hereunder to such person or persons from time to time as it may designate. 3.4The Plan Administrator is empowered, on behalf of the Plan, to engage accountants, legal counsel and such other personnel as it deems necessary or advisable to assist it in the performance of its duties under the Plan. The functions of any such persons engaged by the Plan Administrator shall be limited to the specified services and duties for which they are engaged, and such persons shall have no other duties, obligations or responsibilities under the Plan. Such persons shall exercise no discretionary authority or discretionary control respecting the management of the Plan. All reasonable expenses thereof shall be borne by the Employer. SECTION 4. PLAN MODIFICATION OR TERMINATION. The Plan may be amended or terminated by the Board or a duly appointed committee of the Board at any time; provided, however, that during the pendency of and within six (6) months following the cessation of a Potential Change in Control of the Company and within one year following a Change in Control of the Company, the Plan may not be terminated nor may any amendment be adopted which is in any manner adverse to the interests of Eligible Employees. Notwithstanding anything in this Plan to the contrary, unless a Change in Control of the Company has previously occurred, the Plan shall automatically terminate, and be of no further force or effect, upon the occurrence of a "Change in Control" of CNF (within the meaning of Section 1 of the CNF Amended and Restated Executive Severance Plan (the "CNF Severance Plan")), provided that the CNF Severance Plan remains in effect at the time of such Change in Control of CNF. SECTION 5. GENERAL PROVISIONS. 5.1Except as otherwise provided herein or by law, no right or interest of any Eligible Employee under the Plan shall be assignable or transferable, in whole or in part, either directly or by operation of law or otherwise, including without limitation by execution, levy, garnishment, attachment, pledge or in any manner; no attempted assignment or transfer thereof shall be effective; and no right or interest of any Eligible Employee under the Plan shall be liable for, or subject to, any obligation or liability of such Eligible Employee. When a payment is due under this Plan to a Severed Employee who is unable to care for his or her affairs, payment may be made directly to his or her legal guardian or personal representative. 5.2If the Company or any Affiliate is obligated pursuant to applicable law or by virtue of being a party to a contract (but not pursuant to any severance plan) to pay severance pay, a termination indemnity, notice pay or the like or if the Company or any Affiliate is obligated by law to provide advance notice of separation ("Notice Period"), then any Severance Payment hereunder shall be reduced by the amount of any such severance pay, termination indemnity, notice pay or the like, as applicable, and by the amount of any compensation received during any Notice Period. 5.3Neither the establishment of the Plan, nor any modification thereof, nor the creation of any fund, trust or account, nor the payment of any benefits shall be construed as giving any Eligible Employee, or any person whomsoever, the right to be retained in the service of the Employer, and all Eligible Employees shall remain subject to discharge to the same extent as if the Plan had never been adopted. 5.4If any provision of this Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and this Plan shall be construed and enforced as if such provisions had not been included. 5.5This Plan shall be binding upon and shall inure to the benefit of and be enforceable by the Company and its successors and assigns, and by each Eligible Employee and by the personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees of each Eligible Employee. If any Eligible Employee shall die while any amount would still be payable to such Eligible Employee (other than amount which, by their terms, terminate upon the death of the Eligible Employee) if the Eligible Employee had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Plan to the executors, personal representatives or administrators of the Eligible Employee's estate. 5.6The headings and captions herein are provided for reference and convenience only, shall not be considered part of the Plan, and shall not be employed in the construction of the Plan. 5.7The Plan shall not be funded. No Eligible Employee shall have any right to, or interest in, any assets of any Employer which may be applied by the Employer to the payment of benefits or other rights under this Plan. 5.8All notices and all other communications provided for in this Plan (i) shall be in writing, (ii) shall be hand delivered, sent by overnight courier or by United States registered mail, return receipt requested and postage prepaid, addressed, in the case of the Company, to Menlo Worldwide Services, LLC, c/o Menlo Worldwide, LLC, One Lagoon Drive, Ste. 400, Redwood City, California 94065, Attention: President, and in the case of an Eligible Employee, to the last known address of such Eligible Employee, and (iii) shall be effective only upon actual receipt. 5.9This Plan shall be construed and enforced according to the laws of the State of California to the extent not preempted by federal law, which shall otherwise control. MENLO WORLDWIDE SERVICES, LLC By: /s/ John H. Williford --------------------- Name: John H. Williford Title: Chairman of the Board Executed: August 25, 2003 EXHIBIT A WAIVER AND RELEASE OF CLAIMS In consideration of, and subject to, the payment to be made to me by Menlo Worldwide Services, LLC (the "Company") of the "Severance Payment" (as defined in the Menlo Worldwide Services, LLC Executive Severance Plan (the "Plan")), I hereby waive any claims I may have for employment or re-employment by the Company or any parent or subsidiary of the Company after the date hereof, and I further agree to and do release and forever discharge the Company or any subsidiary of the Company, and their respective past and present officers, directors, shareholders, insurers, employees and agents from any and all claims and causes of action, known or unknown, arising out of or relating to my employment with the Company or any subsidiary of the Company, or the termination thereof, including, but not limited to, wrongful discharge, breach of contract, tort, fraud, the Civil Rights Acts, Age Discrimination in Employment Act, Employee Retirement Income Security Act of 1974, Americans with Disabilities Act, or any other federal, state or local legislation or common law relating to employment or discrimination in employment or otherwise. Notwithstanding the foregoing or any other provision hereof, nothing in this Waiver and Release of Claims shall adversely affect (i) my rights under the Plan; (ii) my rights to benefits other than severance benefits under plans, programs and arrangements of the Company or any subsidiary or parent of the Company which are accrued but unpaid as of the date of my termination; or (iii) my rights to indemnification under any indemnification agreement, applicable law and the certificates of incorporation and bylaws of the Company and any subsidiary or parent of the Company, and my rights under any director's and officers' liability insurance policy covering me. I acknowledge that I have signed this Waiver and Release of Claims voluntarily, knowingly, of my own free will and without reservation or duress, and that no promises or representations have been made to me by any person to induce me to do so other than the promise of payment set forth in the first paragraph above and the Company's acknowledgment of my rights reserved under the second paragraph above. I understand that this release will be deemed to be an application for benefits under the Plan and that my entitlement thereto shall be governed by the terms and conditions of the Plan. I expressly hereby consent to such terms and conditions. I acknowledge that I have been given not less than forty-five (45) days to review and consider this Waiver and Release of Claims (unless I have signed a written waiver of such review and consideration period), and that I have had the opportunity to consult with an attorney or other advisor of my choice and have been advised by the Company to do so if I choose. I may revoke this Waiver and Release of Claims seven days or less after its execution by providing written notice to the Company. I acknowledge that it is my intention and the intention of the Company in executing this Waiver and Release of Claims that the same shall be effective as a bar to each and every claim, demand and cause of action hereinabove specified. In furtherance of this intention, I hereby expressly waive any and all rights and benefits conferred upon me by the provisions of SECTION 1542 OF THE CALIFORNIA CIVIL CODE, to the extent applicable to me, and expressly I consent that this Waiver and Release of Claims shall be given full force and effect according to each and all of its express terms and provisions, including as well those related to unknown and unsuspected claims, demands and causes of action, if any, as well as those relating to any other claims, demands and causes of action hereinabove specified. SECTION 1542 provides: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR." I acknowledge that I may hereafter discover claims or facts in addition to or different from those which I now know or believe to exist with respect to the subject matter of this Waiver and Release of Claims and which, if known or suspected at the time of executing this Waiver and Release of Claims, may have materially affected this settlement. Finally, I acknowledge that I have read this Waiver and Release of Claims and understand all of its terms. Signature of Employee Print Name Date Signed EX-10 28 ex1027.txt MENLO WORLDWIDE TECHNOLOGIES, LLC EXECUTIVE SEVERANCE PLAN Menlo Worldwide Technologies, LLC (the "Company") hereby adopts the Menlo Worldwide Technologies, LLC Executive Severance Plan for the benefit of certain executives of the Company and its subsidiaries, on the terms and conditions hereinafter stated. SECTION 1. DEFINITIONS. As hereinafter used: 1.1 "Affiliate" means an affiliate of the Company, as defined in Rule 12b-2 promulgated under Section 12 of the Exchange Act. 1.2 "Board" means the Board of Managers of the Company or any successor thereto. 1.3 "Cause" for termination by the Employer of the Eligible Employee's employment shall mean (i) the willful and continued failure by the Eligible Employee to substantially perform the Eligible Employee's duties with the Employer (other than any such failure resulting from the Eligible Employee's incapacity due to disability, including physical or mental illness or any such actual or anticipated failure after the issuance by the Eligible Employee of a notice of intent to terminate employment for Good Reason pursuant to Section 1.13 hereof) after a written demand for substantial performance is delivered to the Eligible Employee by the Chairman of the Board of the Company, which demand specifically identifies the manner in which such Officers believe that the Eligible Employee has not substantially performed the Eligible Employee's duties, or (ii) the willful engaging by the Eligible Employee in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of this definition, no act, or failure to act, on the Eligible Employee's part shall be deemed "willful" unless done, or omitted to be done, by the Eligible Employee not in good faith and without reasonable belief that the Eligible Employee's act, or failure to act, was in the best interest of the Company. In the event of a dispute concerning the application of this provision, no claim by the Company or any Employer that Cause exists shall be given effect unless the Company establishes (i) to the Plan Administrator and (ii) in the event of an arbitration to resolve the dispute, to the arbitrator, by clear and convincing evidence that Cause exists. 1.4 "Change in Control of the Company" means the occurrence of any one of the following events: (I) the sale by CNF of more than 50% of the then outstanding Common Interests or other equity interests of the Company, whether by merger, consolidation or otherwise; (II) the sale of all or substantially all of the assets of the Company; or (III) any other transaction or course of action engaged in, directly or indirectly, by the Company or CNF that has a substantially similar effect as the transactions of the type referred to in clause (I) or (II) above. The foregoing notwithstanding, a Change in Control of the Company shall not be deemed to have occurred (A) by reason of the occurrence of a "Change in Control" of CNF (within the meaning of Section 1 of the CNF Amended and Restated Executive Severance Plan), (B) except in the case of a transaction described in clause (II) above, so long as CNF or any of its Affiliates, individually or collectively, own more than 50% of the outstanding Common Interests or other equity interests of the Company, (C) in the event of the sale of Common Interests or other equity interests of the Company to any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any other Affiliate of CNF, or (D) in the event of the sale or distribution of Common Interests or other equity interests of the Company to shareholders of CNF, or the sale of assets of the Company to any corporation or other entity owned, directly or indirectly, by the shareholders of CNF, in either case in substantially the same proportions as their ownership of stock in CNF. 1.5 "CNF" shall mean CNF Inc. and any successor to its business and/or assets. 1.6 "Code" means the Internal Revenue Code of 1986, as it may be amended from time to time. 1.7 "Common Interest" has the meaning given in the Company's Limited Liability Company Agreement. 1.8 "Company" means Menlo Worldwide Technologies, LLC or any successors thereto. 1.9 "Effective Date" means August 25, 2003. 1.10 "Eligible Employee" means an individual who, immediately prior to a Change in Control of the Company, (a) is not a party to an individual employment or severance agreement with the Company and (b) who occupies a position that has been classified as within the CNF Inc. executive level salary grade structure. An Eligible Employee becomes a "Severed Employee" once he or she incurs a Severance. 1.11 "Employer" means the Company or any of its subsidiaries. 1.12 "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. 1.13. "Good Reason" for termination by the Eligible Employee of the Eligible Employee's employment shall mean the occurrence (without the Eligible Employee's express written consent) after any Change in Control of the Company of any one of the following acts by the Company, or failures by the Company to act, unless such act or failure to act is corrected within 30 days of receipt by the Company of notice of the Eligible Employee's intent to terminate for Good Reason hereunder: (1) the failure of the successor company, following the Change in Control of the Company, to assume the Plan and all obligations thereunder, as of the date of such Change in Control of the Company; (2) the assignment to the Eligible Employee of any duties inconsistent with the Eligible Employee's status as an executive of the Company or a substantial adverse alteration in the nature or status of the Eligible Employee's responsibilities from those in effect immediately prior to the Change in Control of the Company; (3) a reduction by the Employer in the Eligible Employee's annual base salary or bonus opportunity, each as in effect immediately prior to the Change in Control of the Company or as the same may thereafter be increased from time to time; (4) the relocation of the Eligible Employee's principal place of employment to a location that results in an increase in the Eligible Employee's one way commute of at least 50 miles more than the Eligible Employee's one way commute immediately prior to the Change in Control of the Company, except for required travel on the Company's business to an extent substantially consistent with the Eligible Employee's business travel obligations immediately prior to the Change in Control of the Company; (5) the failure by the Company to pay to the Eligible Employee when due any portion of the Eligible Employee's current compensation; (6) the failure by the Company to continue to provide the Eligible Employee with benefits substantially similar to those enjoyed by the Eligible Employee under any of the Company's pension, savings, life insurance, medical, health and accident, or disability plans in which the Eligible Employee was participating immediately prior to the Change in Control of the Company (except for across the board changes similarly affecting all or substantially all employees of the Company and any entity in control of the Company), the taking of any other action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Eligible Employee of any material fringe benefit enjoyed by the Eligible Employee immediately prior to the Change in Control of the Company, or the failure by the Company to provide the Eligible Employee with the number of paid vacation days to which the Eligible Employee is entitled. The Eligible Employee's right to terminate the Eligible Employee's employment for Good Reason shall not be affected by the Eligible Employee's incapacity due to disability, including physical or mental illness. The Eligible Employee's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. 1.14 "Person" has the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include: (1) the Company or any of its subsidiaries; (2) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates; (3) an underwriter temporarily holding securities pursuant to an offering of such securities; or (4) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company. 1.15 "Plan" means the Menlo Worldwide Technologies, LLC Executive Severance Plan, as set forth herein, as it may be amended from time to time. 1.16 "Plan Administrator" means, prior to a Change in Control of the Company, the person or persons appointed from time to time by the Board and following a Change in Control of the Company, a committee consisting of three persons, at least two of whom were members of the Board or executive officers of the Company immediately prior to the Change in Control of the Company. 1.17 "Potential Change in Control of the Company" shall be deemed to have occurred if: (1) CNF or the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control of the Company; or (2) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control of the Company has occurred. 1.18 "Severance" means the termination of an Eligible Employee's employment with the Employer on or within one year immediately following the date of the Change in Control of the Company, (i) by the Employer other than for Cause, or (ii) by the Eligible Employee for Good Reason. For purposes of this Plan, an Eligible Employee's employment shall be deemed to have been terminated following a Change in Control of the Company by the Company without Cause or by the Eligible Employee with Good Reason, if (i) the Eligible Employee's employment is terminated by the Company without Cause following a Potential Change in Control of the Company but prior to a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs) and such termination was at the request or direction of a Person who has entered into an agreement with the Company the consummation of which would constitute a Change in Control of the Company, (ii) the Eligible Employee terminates his employment for Good Reason following a Potential Change in Control of the Company but prior to a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs) and the circumstance or event which constitutes Good Reason occurs at the request or direction of such Person; or (iii) the Eligible Employee's employment is terminated by the Company without Cause or by the Eligible Employee for Good Reason and such termination or the circumstance or event which constitutes Good Reason is otherwise in connection with or in anticipation of a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs). An Eligible Employee will not be considered to have incurred a Severance (i) if his or her employment is discontinued by reason of the Eligible Employee's death or disability, including a physical or mental condition causing such Eligible Employee's inability to substantially perform his or her duties with the Employer, including, without limitation, such condition entitling him or her to benefits under any sick pay or disability income policy or program of the Employer or (ii) by reason of the divestiture of a facility, sale of a business or business unit, or the outsourcing of a business activity with which the Eligible Employee is affiliated, notwithstanding the fact that such divestiture, sale or outsourcing constitutes, or takes place within one year following, a Change in Control of the Company, if the Eligible Employee is offered comparable employment by the successor company and such successor company agrees to assume the obligations of this Plan with respect to such Eligible Employee. 1.19 "Severance Benefits" means, at the Company's expense, (a) the continued participation by a Severed Employee and his dependents in all health and welfare benefits plans of the Company (to the extent such Severed Employee was participating in such plans prior to incurring a Severance) and (b) outplacement services determined by the Company to be suitable to the Severed Employee's position, in each case for a period of one year following such Severed Employee's Severance Date; provided, however, that benefits otherwise receivable by the Eligible Employee hereunder shall be reduced to the extent benefits of the same type are received by or made available to the Eligible Employee during the one- year period following the Eligible Employee's incurring a Severance (and any such benefits received by or made available to the Eligible Employee shall be reported to the Company by the Eligible Employee); provided, further, however, that the Company shall reimburse the Eligible Employee for the excess, if any, of the cost of such benefits to the Eligible Employee over such cost immediately prior to the Eligible Employee's incurring a Severance or, if more favorable to the Eligible Employee, immediately prior to the Change in Control of the Company. If the Severed Employee dies during the period of one year following the Severed Employee's Severance Date at a time when health and dental benefits are being provided under this Section 1.19 to the Severed Employee's dependents, the Company shall continue to provide such benefits to the dependents for the remainder of the one year period on the same basis as if the Severed Employee had survived throughout that period. 1.20 "Severance Date" means the date on or after the date of the Change in Control of the Company on which an Eligible Employee incurs a Severance. 1.21 "Severance Payment" means a payment, in lieu of any other severance payment or benefit pursuant to any other plan or agreement of the Company or any subsidiary thereof to which the Eligible Employee is otherwise entitled, of an amount equal to the sum of (a) the Severed Employee's annual base salary immediately prior to the time of Severance or, if higher, in effect immediately prior to the Change in Control of the Company and (b) the greater of (i) the Severed Employee's target bonus for the year in which the Severance occurred and (ii) the Severed Employee's actual or target bonus (whichever is greater) for the year in which the Change in Control of the Company occurred (in either case, determined as if such target bonus had been earned in full). SECTION 2. BENEFITS. 2.1An Eligible Employee who incurs a Severance shall be entitled to receive (a) a Severance Payment and (b) Severance Benefits. 2.2The Severance Payment shall be paid to an eligible Severed Employee in a cash lump sum, as soon as practicable following the Severance Date, but in no event later than 10 business days immediately following the expiration of the revocation period, if any, applicable to such Severed Employee's release, described in Section 2.4. 2.3No Severed Employee shall be eligible to receive a Severance Payment or Severance Benefits under the Plan unless he or she (or, in the event of the death of the Severed Employee, the executor, personal representative or administrator of the Severed Employee's estate) first executes a written release substantially in the form attached as Exhibit A hereto. 2.4In the event of a claim by an Eligible Employee as to the amount or timing of any distribution, such Eligible Employee shall present the reason for his or her claim in writing to the Plan Administrator. The Plan Administrator shall, within sixty (60) days after receipt of such written claim, send a written notification to the Eligible Employee as to its disposition. In the event the claim is wholly or partially denied, such written notification shall (a) state the specific reason or reasons for the denial, (b) make specific reference to pertinent Plan provisions on which the denial is based, (c) provide a description of any additional material or information necessary for the Eligible Employee to perfect the claim and an explanation of why such material or information is necessary, and (d) set forth the procedure by which the Eligible Employee may appeal the denial of his or her claim. In the event an Eligible Employee wishes to appeal the denial of his or her claim, he or she may request a review of such denial by making application in writing to the Plan Administrator within sixty (60) days after receipt of such denial. Such Eligible Employee (or his or her duly authorized legal representative) may, upon written request to the Plan Administrator, review any documents pertinent to his or her claim, and submit in writing issues and comments in support of his or her position. Within sixty (60) days after receipt of a written appeal (unless special circumstances, such as the need to hold a hearing, require an extension of time, but in no event more than one hundred twenty (120) days after such receipt), the Plan Administrator shall notify the Eligible Employee of the final decision. The final decision shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, and specific references to the pertinent Plan provisions on which the decision is based. 2.5Any further dispute or controversy arising under or in connection with this Agreement which remains after the final decision of the Plan Administrator as contemplated by Section 2.4 shall be finally settled exclusively by arbitration in Redwood City, California, in accordance with the rules of the American Arbitration Association then in effect; provided, however, that the evidentiary standards set forth in this Agreement shall apply; and provided further, that the arbitrator shall apply the applicable provisions of ERISA, and applicable regulations adopted thereunder, in such arbitration proceeding. Judgment may be entered on the arbitrator's award in any court having jurisdiction. 2.6The Company shall pay to the Eligible Employee all legal fees and expenses incurred by the Eligible Employee in seeking in good faith to obtain or enforce any benefit or right provided by this Agreement. Such payments shall be made within five (5) business days after delivery of the Eligible Employee's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 2.7The Company shall be entitled to withhold from amounts to be paid to the Severed Employee hereunder any federal, state or local withholding or other taxes or charges which it is from time to time required to withhold. 2.8The Company agrees that, if the Eligible Employee's employment with the Company terminates during the one year period following a Change in Control of the Company, the Eligible Employee is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Eligible Employee hereunder. Further, the amount of any payment or benefit provided for in this Agreement shall not be reduced (except as provided in Section 1.19 hereof) by any compensation earned by the Eligible Employee as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Eligible Employee to the Company, or otherwise. SECTION 3. PLAN ADMINISTRATION. 3.1The Plan shall be interpreted, administered and operated by the Plan Administrator, who shall have complete authority, in its sole discretion subject to the express provisions of the Plan, to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it, and to make all other determinations necessary or advisable for the administration of the Plan. 3.2All questions of any character whatsoever arising in connection with the interpretation of the Plan or its administration or operation shall be submitted to and settled and determined by the Plan Administrator in an equitable and fair manner in accordance with the procedure for claims and appeals described in Section 2.3. Subject to the rights to arbitration provided in Section 2.5 hereof, any such settlement and determination shall be final and conclusive, and shall bind and may be relied upon by the Employer, each of the Eligible Employees and all other parties in interest. 3.3The Plan Administrator may delegate any of its duties hereunder to such person or persons from time to time as it may designate. 3.4The Plan Administrator is empowered, on behalf of the Plan, to engage accountants, legal counsel and such other personnel as it deems necessary or advisable to assist it in the performance of its duties under the Plan. The functions of any such persons engaged by the Plan Administrator shall be limited to the specified services and duties for which they are engaged, and such persons shall have no other duties, obligations or responsibilities under the Plan. Such persons shall exercise no discretionary authority or discretionary control respecting the management of the Plan. All reasonable expenses thereof shall be borne by the Employer. SECTION 4. PLAN MODIFICATION OR TERMINATION. The Plan may be amended or terminated by the Board or a duly appointed committee of the Board at any time; provided, however, that during the pendency of and within six (6) months following the cessation of a Potential Change in Control of the Company and within one year following a Change in Control of the Company, the Plan may not be terminated nor may any amendment be adopted which is in any manner adverse to the interests of Eligible Employees. Notwithstanding anything in this Plan to the contrary, unless a Change in Control of the Company has previously occurred, the Plan shall automatically terminate, and be of no further force or effect, upon the occurrence of a "Change in Control" of CNF (within the meaning of Section 1 of the CNF Amended and Restated Executive Severance Plan (the "CNF Severance Plan")), provided that the CNF Severance Plan remains in effect at the time of such Change in Control of CNF. SECTION 5. GENERAL PROVISIONS. 5.1Except as otherwise provided herein or by law, no right or interest of any Eligible Employee under the Plan shall be assignable or transferable, in whole or in part, either directly or by operation of law or otherwise, including without limitation by execution, levy, garnishment, attachment, pledge or in any manner; no attempted assignment or transfer thereof shall be effective; and no right or interest of any Eligible Employee under the Plan shall be liable for, or subject to, any obligation or liability of such Eligible Employee. When a payment is due under this Plan to a Severed Employee who is unable to care for his or her affairs, payment may be made directly to his or her legal guardian or personal representative. 5.2If the Company or any Affiliate is obligated pursuant to applicable law or by virtue of being a party to a contract (but not pursuant to any severance plan) to pay severance pay, a termination indemnity, notice pay or the like or if the Company or any Affiliate is obligated by law to provide advance notice of separation ("Notice Period"), then any Severance Payment hereunder shall be reduced by the amount of any such severance pay, termination indemnity, notice pay or the like, as applicable, and by the amount of any compensation received during any Notice Period. 5.3Neither the establishment of the Plan, nor any modification thereof, nor the creation of any fund, trust or account, nor the payment of any benefits shall be construed as giving any Eligible Employee, or any person whomsoever, the right to be retained in the service of the Employer, and all Eligible Employees shall remain subject to discharge to the same extent as if the Plan had never been adopted. 5.4If any provision of this Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and this Plan shall be construed and enforced as if such provisions had not been included. 5.5This Plan shall be binding upon and shall inure to the benefit of and be enforceable by the Company and its successors and assigns, and by each Eligible Employee and by the personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees of each Eligible Employee. If any Eligible Employee shall die while any amount would still be payable to such Eligible Employee (other than amount which, by their terms, terminate upon the death of the Eligible Employee) if the Eligible Employee had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Plan to the executors, personal representatives or administrators of the Eligible Employee's estate. 5.6The headings and captions herein are provided for reference and convenience only, shall not be considered part of the Plan, and shall not be employed in the construction of the Plan. 5.7The Plan shall not be funded. No Eligible Employee shall have any right to, or interest in, any assets of any Employer which may be applied by the Employer to the payment of benefits or other rights under this Plan. 5.8All notices and all other communications provided for in this Plan (i) shall be in writing, (ii) shall be hand delivered, sent by overnight courier or by United States registered mail, return receipt requested and postage prepaid, addressed, in the case of the Company, to Menlo Worldwide Technologies, LLC, c/o Menlo Worldwide, LLC, One Lagoon Drive, Ste. 400, Redwood City, California 94065, Attention: President, and in the case of an Eligible Employee, to the last known address of such Eligible Employee, and (iii) shall be effective only upon actual receipt. 5.9This Plan shall be construed and enforced according to the laws of the State of California to the extent not preempted by federal law, which shall otherwise control. MENLO WORLDWIDE TECHNOLOGIES, LLC By: /s/ John H. Williford ------------------------------------- Name: John H. Williford Title: Chairman of the Board Executed: August 25, 2003 EXHIBIT A WAIVER AND RELEASE OF CLAIMS In consideration of, and subject to, the payment to be made to me by Menlo Worldwide Technologies, LLC (the "Company") of the "Severance Payment" (as defined in the Menlo Worldwide Technologies, LLC Executive Severance Plan (the "Plan")), I hereby waive any claims I may have for employment or re- employment by the Company or any parent or subsidiary of the Company after the date hereof, and I further agree to and do release and forever discharge the Company or any subsidiary of the Company, and their respective past and present officers, directors, shareholders, insurers, employees and agents from any and all claims and causes of action, known or unknown, arising out of or relating to my employment with the Company or any subsidiary of the Company, or the termination thereof, including, but not limited to, wrongful discharge, breach of contract, tort, fraud, the Civil Rights Acts, Age Discrimination in Employment Act, Employee Retirement Income Security Act of 1974, Americans with Disabilities Act, or any other federal, state or local legislation or common law relating to employment or discrimination in employment or otherwise. Notwithstanding the foregoing or any other provision hereof, nothing in this Waiver and Release of Claims shall adversely affect (i) my rights under the Plan; (ii) my rights to benefits other than severance benefits under plans, programs and arrangements of the Company or any subsidiary or parent of the Company which are accrued but unpaid as of the date of my termination; or (iii) my rights to indemnification under any indemnification agreement, applicable law and the certificates of incorporation and bylaws of the Company and any subsidiary or parent of the Company, and my rights under any director's and officers' liability insurance policy covering me. I acknowledge that I have signed this Waiver and Release of Claims voluntarily, knowingly, of my own free will and without reservation or duress, and that no promises or representations have been made to me by any person to induce me to do so other than the promise of payment set forth in the first paragraph above and the Company's acknowledgment of my rights reserved under the second paragraph above. I understand that this release will be deemed to be an application for benefits under the Plan and that my entitlement thereto shall be governed by the terms and conditions of the Plan. I expressly hereby consent to such terms and conditions. I acknowledge that I have been given not less than forty-five (45) days to review and consider this Waiver and Release of Claims (unless I have signed a written waiver of such review and consideration period), and that I have had the opportunity to consult with an attorney or other advisor of my choice and have been advised by the Company to do so if I choose. I may revoke this Waiver and Release of Claims seven days or less after its execution by providing written notice to the Company. I acknowledge that it is my intention and the intention of the Company in executing this Waiver and Release of Claims that the same shall be effective as a bar to each and every claim, demand and cause of action hereinabove specified. In furtherance of this intention, I hereby expressly waive any and all rights and benefits conferred upon me by the provisions of SECTION 1542 OF THE CALIFORNIA CIVIL CODE, to the extent applicable to me, and expressly I consent that this Waiver and Release of Claims shall be given full force and effect according to each and all of its express terms and provisions, including as well those related to unknown and unsuspected claims, demands and causes of action, if any, as well as those relating to any other claims, demands and causes of action hereinabove specified. SECTION 1542 provides: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR." I acknowledge that I may hereafter discover claims or facts in addition to or different from those which I now know or believe to exist with respect to the subject matter of this Waiver and Release of Claims and which, if known or suspected at the time of executing this Waiver and Release of Claims, may have materially affected this settlement. Finally, I acknowledge that I have read this Waiver and Release of Claims and understand all of its terms. Signature of Employee Print Name Date Signed EX-10 29 ex1028.txt CNF TRANSPORTATION INC. EXECUTIVE SEVERANCE PLAN FOR ELIGIBLE EXECUTIVES OF VECTOR SCM, LLC WHEREAS, CNF Transportation Inc. (the "Company") recently established Vector SCM, LLC ("Vector") as a joint venture with General Motors Corporation ("GM"); WHEREAS, the Company wishes to provide for certain severance benefits to eligible executives of Vector under certain circumstances; NOW THEREFORE, the Company hereby adopts the CNF Transportation Inc. Executive Severance Plan for Eligible Executives of Vector SCM, LLC, on the terms and conditions hereinafter stated. SECTION 1. DEFINITIONS. As hereinafter used: 1.1 "Affiliate" means an affiliate of the Company, as defined in Rule 12b-2 promulgated under Section 12 of the Exchange Act. 1.2 "Board" means the Board of Directors of the Company or any successor thereto. 1.3 "Cause" for termination by the Employer of the Eligible Employee's employment shall mean (i) the willful and continued failure by the Eligible Employee to substantially perform the Eligible Employee's duties with the Employer (other than any such failure resulting from the Eligible Employee's incapacity due to disability, including physical or mental illness or any such actual or anticipated failure after the issuance by the Eligible Employee of a notice of intent to terminate employment for Good Reason pursuant to Section 1.12 hereof) after a written demand for substantial performance is delivered to the Eligible Employee by the Company's Chief Executive Officer and General Counsel, which demand specifically identifies the manner in which such Officers believe that the Eligible Employee has not substantially performed the Eligible Employee's duties, or (ii) the willful engaging by the Eligible Employee in conduct which is demonstrably and materially injurious to Vector or to the Company or its subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of this definition, no act, or failure to act, on the Eligible Employee's part shall be deemed "willful" unless done, or omitted to be done, by the Eligible Employee not in good faith and without reasonable belief that the Eligible Employee's act, or failure to act, was in the best interest of the Company. In the event of a dispute concerning the application of this provision, no claim by the Company or by the Employer that Cause exists shall be given effect unless the Company establishes (i) to the Plan Administrator and (ii) in the event of an arbitration to resolve the dispute, to the arbitrator, by clear and convincing evidence that Cause exists. 1.4 "Change in Control" means the occurrence of any one of the following events: (1) any "person," as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (A) the Company or its Affiliates, (B) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or its Affiliates, and (C) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the Common Stock), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its Affiliates) representing 25% or more of the combined voting power of the Company's then outstanding voting securities; (2) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the Effective Date, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company's stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the Effective Date or whose appointment, election or nomination for election was previously so approved or recommended; (3) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or parent entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving or parent entity outstanding immediately afer such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as hereinabove defined), directly or indirectly, acquired 25% or more of the combined voting power of the Company's then outstanding securities (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its Affiliates); or (4) the stockholders of the Company approve a plan of complete liquidation of the Company or there is consummated an agreement for the sale or disposition by the Company of assets having an aggregate book value at the time of such sale or disposition of more than 75% of the total book value of the Company's assets on a consolidated basis (or any transaction having a similar effect), other than any such sale or disposition by the Company (including by way of spin-off or other distribution) to an entity, at least 50% of the combined voting power of the voting securities of which are owned immediately following such sale or disposition by stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale or disposition; provided, however, that a Change in Control shall be deemed not to have occurred under this clause (4) if, immediately prior to the consummation of any sale or disposition of a business unit that is taken into account in determining whether a Change in Control has occurred, the Executive is employed by, and is party to a severance agreement with, such business unit. 1.5 "Code" means the Internal Revenue Code of 1986, as it may be amended from time to time. 1.6 "Common Stock" means the common stock, par value $0.625 per share, of the Company. 1.7 "Company" means CNF Transportation Inc. or any successors thereto. 1.8 "Effective Date" means December 13, 2000. 1.9 "Eligible Employee" means an individual who, immediately prior to a Change in Control, (a) is an employee of Vector, (b) is not a party to an individual employment or severance agreement with the Company and (c) who occupies a position that has been classified as within the CNF Transportation Inc. executive level salary grade structure. An Eligible Employee becomes a "Severed Employee" once he or she incurs a Severance. 1.10 "Employer" means Vector. 1.11 "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. 1.12. "Good Reason" for termination by the Eligible Employee of the Eligible Employee's employment shall mean the occurrence (without the Eligible Employee's express written consent) after any Change in Control of any one of the following acts by the Company, or failures by the Company to act, unless such act or failure to act is corrected within 30 days of receipt by the Company of notice of the Eligible Employee's intent to terminate for Good Reason hereunder: (1) the failure of the successor company, following the Change in Control, to assume the Plan and all obligations thereunder, as of the date of such Change in Control; (2) the assignment to the Eligible Employee of any duties inconsistent with the Eligible Employee's status as an executive of the Employer or a substantial adverse alteration in the nature or status of the Eligible Employee's responsibilities from those in effect immediately prior to the Change in Control; (3) a reduction by the Employer in the Eligible Employee's annual base salary or bonus opportunity, each as in effect immediately prior to the Change in Control or as the same may thereafter be increased from time to time; (4) the relocation of the Eligible Employee's principal place of employment to a location that results in an increase in the Eligible Employee's one way commute of at least 50 miles more than the Eligible Employee's one way commute immediately prior to the Change in Control, except for required travel on the Company's business to an extent substantially consistent with the Eligible Employee's business travel obligations immediately prior to the Change in Control; (5) the failure by the Company to pay to the Eligible Employee when due any portion of the Eligible Employee's current compensation; (6) the failure by the Company to continue to provide the Eligible Employee with benefits substantially similar to those enjoyed by the Eligible Employee under any of the Company's pension, savings, life insurance, medical, health and accident, or disability plans in which the Eligible Employee was participating immediately prior to the Change in Control (except for across the board changes similarly affecting all or substantially all employees of the Company and any entity in control of the Company), the taking of any other action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Eligible Employee of any material fringe benefit enjoyed by the Eligible Employee immediately prior to the Change in Control, or the failure by the Company to provide the Eligible Employee with the number of paid vacation days to which the Eligible Employee is entitled. The Eligible Employee's right to terminate the Eligible Employee's employment for Good Reason shall not be affected by the Eligible Employee's incapacity due to disability, including physical or mental illness. The Eligible Employee's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. 1.13 "Plan" means the CNF Transportation Inc. Amended and Restated Executive Severance Plan for Eligible Executives of Vector SCM, LLC, as set forth herein, as it may be amended from time to time. 1.14 "Plan Administrator" means, prior to a Change in Control, the person or persons appointed from time to time by the Board and following a Change in Control, a committee consisting of three persons, at least two of whom were directors or executive officers of the Company immediately prior to the Change in Control. 1.15 "Potential Change in Control" shall be deemed to have occurred if: (1) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control; (2) the Company or any "person" (as defined in Section 1.4(1)) publicly announces an intention to take or to consider actions, including but not limited to proxy contests or consent solicitations, which, if consummated, would constitute a Change in Control; (3) any "person" (as defined in Section 1.4(1)) becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 15% or more of either the then outstanding shares of Common Stock of the Company or the combined voting power of the Company's then outstanding securities (not including in the securities beneficially owned by such "person" any securities acquired directly from the Company or its Affiliates); or (4) the Board adopts a resolution to the effect that, for purposes of this Plan, a Potential Change in Control has occurred. 1.16 "Severance" means the termination of an Eligible Employee's employment with the Employer on or within one year immediately following the date of the Change in Control, (i) by the Employer other than for Cause, or (ii) by the Eligible Employee for Good Reason. For purposes of this Plan, an Eligible Employee's employment shall be deemed to have been terminated following a Change in Control by the Company without Cause or by the Eligible Employee with Good Reason, if (i) the Eligible Employee's employment is terminated by the Company without Cause following a Potential Change in Control but prior to a Change in Control (whether or not a Change in Control ever occurs) and such termination was at the request or direction of a "person" (as defined in Section 1.4(1)) who has entered into an agreement with the Company the consummation of which would constitute a Change in Control, (ii) the Eligible Employee terminates his employment for Good Reason following a Potential Change in Control but prior to a Change in Control (whether or not a Change in Control ever occurs) and the circumstance or event which constitutes Good Reason occurs at the request or direction of such "person"; or (iii) the Eligible Employee's employment is terminated by the Company without Cause or by the Eligible Employee for Good Reason and such termination or the circumstance or event which constitutes Good Reason is otherwise in connection with or in anticipation of a Change in Control (whether or not a Change in Control ever occurs). An Eligible Employee will not be considered to have incurred a Severance (i) if his or her employment is discontinued by reason of the Eligible Employee's death or disability, including a physical or mental condition causing such Eligible Employee's inability to substantially perform his or her duties with the Employer, including, without limitation, such condition entitling him or her to benefits under any sick pay or disability income policy or program of the Employer or (ii) by reason of the divestiture of a facility, sale of a business or business unit, or the outsourcing of a business activity with which the Eligible Employee is affiliated, notwithstanding the fact that such divestiture, sale or outsourcing constitutes, or takes place within one year following, a Change in Control, if the Eligible Employee is offered comparable employment by the successor company and such successor company agrees to assume the obligations of this Plan with respect to such Eligible Employee. 1.17 "Severance Benefits" means, at the Company's expense, (a) the continued participation by a Severed Employee and his dependents in all health and welfare benefits plans of the Company (to the extent such Severed Employee was participating in such plans prior to incurring a Severance) and (b) outplacement services determined by the Company to be suitable to the Severed Employee's position, in each case for a period of one year following such Severed Employee's Severance Date; provided, however, that benefits otherwise receivable by the Eligible Employee hereunder shall be reduced to the extent benefits of the same type are received by or made available to the Eligible Employee during the one- year period following the Eligible Employee's incurring a Severance (and any such benefits received by or made available to the Eligible Employee shall be reported to the Company by the Eligible Employee); provided, further, however, that the Company shall reimburse the Eligible Employee for the excess, if any, of the cost of such benefits to the Eligible Employee over such cost immediately prior to the Eligible Employee's incurring a Severance or, if more favorable to the Eligible Employee, immediately prior to the Change in Control. If the Severed Employee dies during the period of one year following the Severed Employee's Severance Date at a time when health and dental benefits are being provided under this Section 1.17 to the Severed Employee's dependents, the Company shall continue to provide such benefits to the dependents for the remainder of the one year period on the same basis as if the Severed Employee had survived throughout that period. 1.18 "Severance Date" means the date on or after the date of the Change in Control on which an Eligible Employee incurs a Severance. 1.19 "Severance Payment" means a payment, in lieu of any other severance payment or benefit pursuant to any other plan or agreement of the Company or any subsidiary thereof to which the Eligible Employee is otherwise entitled, of an amount equal to the sum of (a) the Severed Employee's annual base salary immediately prior to the time of Severance or, if higher, in effect immediately prior to the Change in Control and (b) the greater of (i) the Severed Employee's target bonus for the year in which the Severance occurred and (ii) the Severed Employee's actual or target bonus (whichever is greater) for the year in which the Change in Control occurred (in either case, determined as if such target bonus had been earned in full). SECTION 2. BENEFITS. 2.1An Eligible Employee who incurs a Severance shall be entitled to receive (a) a Severance Payment and (b) Severance Benefits. 2.2The Severance Payment shall be paid to an eligible Severed Employee in a cash lump sum, as soon as practicable following the Severance Date, but in no event later than 10 business days immediately following the expiration of the revocation period, if any, applicable to such Severed Employee's release, described in Section 2.4. 2.3No Severed Employee shall be eligible to receive a Severance Payment or Severance Benefits under the Plan unless he or she (or, in the event of the death of the Severed Employee, the executor, personal representative or administrator of the Severed Employee's estate) first executes a written release substantially in the form attached as Exhibit A hereto. 2.4In the event of a claim by an Eligible Employee as to the amount or timing of any distribution, such Eligible Employee shall present the reason for his or her claim in writing to the Plan Administrator. The Plan Administrator shall, within sixty (60) days after receipt of such written claim, send a written notification to the Eligible Employee as to its disposition. In the event the claim is wholly or partially denied, such written notification shall (a) state the specific reason or reasons for the denial, (b) make specific reference to pertinent Plan provisions on which the denial is based, (c) provide a description of any additional material or information necessary for the Eligible Employee to perfect the claim and an explanation of why such material or information is necessary, and (d) set forth the procedure by which the Eligible Employee may appeal the denial of his or her claim. In the event an Eligible Employee wishes to appeal the denial of his or her claim, he or she may request a review of such denial by making application in writing to the Plan Administrator within sixty (60) days after receipt of such denial. Such Eligible Employee (or his or her duly authorized legal representative) may, upon written request to the Plan Administrator, review any documents pertinent to his or her claim, and submit in writing issues and comments in support of his or her position. Within sixty (60) days after receipt of a written appeal (unless special circumstances, such as the need to hold a hearing, require an extension of time, but in no event more than one hundred twenty (120) days after such receipt), the Plan Administrator shall notify the Eligible Employee of the final decision. The final decision shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, and specific references to the pertinent Plan provisions on which the decision is based. 2.5Any further dispute or controversy arising under or in connection with this Agreement which remains after the final decision of the Plan Administrator as contemplated by Section 2.4 shall be finally settled exclusively by arbitration in Palo Alto, California, in accordance with the rules of the American Arbitration Association then in effect; provided, however, that the evidentiary standards set forth in this Agreement shall apply; and provided further, that the arbitrator shall apply the applicable provisions of ERISA, and applicable regulations adopted thereunder, in such arbitration proceeding. Judgment may be entered on the arbitrator's award in any court having jurisdiction. 2.6The Company shall pay to the Eligible Employee all legal fees and expenses incurred by the Eligible Employee in seeking in good faith to obtain or enforce any benefit or right provided by this Agreement. Such payments shall be made within five (5) business days after delivery of the Eligible Employee's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 2.7The Company shall be entitled to withhold from amounts to be paid to the Severed Employee hereunder any federal, state or local withholding or other taxes or charges which it is from time to time required to withhold. 2.8 The Company agrees that, if the Eligible Employee's employment with the Company terminates during the one year period following a Change in Control, the Eligible Employee is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Eligible Employee hereunder. Further, the amount of any payment or benefit provided for in this Agreement shall not be reduced (except as provided in Section 1.17 hereof) by any compensation earned by the Eligible Employee as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Eligible Employee to the Company, or otherwise. SECTION 3. PLAN ADMINISTRATION. 3.1The Plan shall be interpreted, administered and operated by the Plan Administrator, who shall have complete authority, in its sole discretion subject to the express provisions of the Plan, to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it, and to make all other determinations necessary or advisable for the administration of the Plan. 3.2All questions of any character whatsoever arising in connection with the interpretation of the Plan or its administration or operation shall be submitted to and settled and determined by the Plan Administrator in an equitable and fair manner in accordance with the procedure for claims and appeals described in Section 2.3. Subject to the rights to arbitration provided in Section 2.5 hereof, any such settlement and determination shall be final and conclusive, and shall bind and may be relied upon by the Employer, each of the Eligible Employees and all other parties in interest. 3.3The Plan Administrator may delegate any of its duties hereunder to such person or persons from time to time as it may designate. 3.4The Plan Administrator is empowered, on behalf of the Plan, to engage accountants, legal counsel and such other personnel as it deems necessary or advisable to assist it in the performance of its duties under the Plan. The functions of any such persons engaged by the Plan Administrator shall be limited to the specified services and duties for which they are engaged, and such persons shall have no other duties, obligations or responsibilities under the Plan. Such persons shall exercise no discretionary authority or discretionary control respecting the management of the Plan. All reasonable expenses thereof shall be borne by the Employer. SECTION 4. PLAN MODIFICATION OR TERMINATION. The Plan may be amended or terminated by the Board or a duly appointed committee of the Board at any time; provided, however, that during the pendency of and within six (6) months following the cessation of a Potential Change in Control and within one year following a Change in Control, the Plan may not be terminated nor may any amendment be adopted which is in any manner adverse to the interests of Eligible Employees. Notwithstanding the foregoing or any other provision of this Plan to the contrary, this Plan shall automatically and immediately terminate in the event that (i) GM acquires a controlling interest in Vector or (ii) Vector is dissolved, except as to any Eligible Employee who has incurred a Severance following a Change in Control prior to the occurrence of either of the termination events described in clauses (i) and (ii) above. SECTION 5. GENERAL PROVISIONS. 5.1Except as otherwise provided herein or by law, no right or interest of any Eligible Employee under the Plan shall be assignable or transferable, in whole or in part, either directly or by operation of law or otherwise, including without limitation by execution, levy, garnishment, attachment, pledge or in any manner; no attempted assignment or transfer thereof shall be effective; and no right or interest of any Eligible Employee under the Plan shall be liable for, or subject to, any obligation or liability of such Eligible Employee. When a payment is due under this Plan to a Severed Employee who is unable to care for his or her affairs, payment may be made directly to his or her legal guardian or personal representative. 5.2If the Company or any Affiliate is obligated pursuant to applicable law or by virtue of being a party to a contract (but not pursuant to any severance plan) to pay severance pay, a termination indemnity, notice pay or the like or if the Company or any Affiliate is obligated by law to provide advance notice of separation ("Notice Period"), then any Severance Payment hereunder shall be reduced by the amount of any such severance pay, termination indemnity, notice pay or the like, as applicable, and by the amount of any compensation received during any Notice Period. 5.3Neither the establishment of the Plan, nor any modification thereof, nor the creation of any fund, trust or account, nor the payment of any benefits shall be construed as giving any Eligible Employee, or any person whomsoever, the right to be retained in the service of the Employer, and all Eligible Employees shall remain subject to discharge to the same extent as if the Plan had never been adopted. 5.4If any provision of this Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and this Plan shall be construed and enforced as if such provisions had not been included. 5.5This Plan shall be binding upon and shall inure to the benefit of and be enforceable by the Company and its successors and assigns, and by each Eligible Employee and by the personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees of each Eligible Employee. If any Eligible Employee shall die while any amount would still be payable to such Eligible Employee (other than amount which, by their terms, terminate upon the death of the Eligible Employee) if the Eligible Employee had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Plan to the executors, personal representatives or administrators of the Eligible Employee's estate. 5.6The headings and captions herein are provided for reference and convenience only, shall not be considered part of the Plan, and shall not be employed in the construction of the Plan. 5.7The Plan shall not be funded. No Eligible Employee shall have any right to, or interest in, any assets of any Employer which may be applied by the Employer to the payment of benefits or other rights under this Plan. 5.8All notices and all other communications provided for in this Plan (i) shall be in writing, (ii) shall be hand delivered, sent by overnight courier or by United States registered mail, return receipt requested and postage prepaid, addressed, in the case of the Company, to 3240 Hillview Avenue, Palo Alto, California 94304, and in the case of an Eligible Employee, to the last known address of such Eligible Employee, and (iii) shall be effective only upon actual receipt. 5.9This Plan shall be construed and enforced according to the laws of the State of California to the extent not preempted by federal law, which shall otherwise control. EXHIBIT A WAIVER AND RELEASE OF CLAIMS In consideration of, and subject to, the payment to be made to me by CNF Transportation Inc. (the "Company") of the "Severance Payment" (as defined in the CNF Transportation Inc. Amended and Restated Executive Severance Plan for Eligible Employees of Vector SCM, LLC (the "Plan")), I hereby waive any claims I may have for employment or re-employment by the Company or any subsidiary of the Company after the date hereof, and I further agree to and do release and forever discharge the Company or any subsidiary of the Company, and their respective past and present officers, directors, shareholders, insurers, employees and agents from any and all claims and causes of action, known or unknown, arising out of or relating to my employment with the Company or any subsidiary of the Company, or the termination thereof, including, but not limited to, wrongful discharge, breach of contract, tort, fraud, the Civil Rights Acts, Age Discrimination in Employment Act, Employee Retirement Income Security Act of 1974, Americans with Disabilities Act, or any other federal, state or local legislation or common law relating to employment or discrimination in employment or otherwise. Notwithstanding the foregoing or any other provision hereof, nothing in this Waiver and Release of Claims shall adversely affect (i) my rights under the Plan; (ii) my rights to benefits other than severance benefits under plans, programs and arrangements of the Company or any subsidiary or parent of the Company which are accrued but unpaid as of the date of my termination; or (iii) my rights to indemnification under any indemnification agreement, applicable law and the certificates of incorporation and bylaws of the Company and any subsidiary or parent of the Company, and my rights under any director's and officers' liability insurance policy covering me. I acknowledge that I have signed this Waiver and Release of Claims voluntarily, knowingly, of my own free will and without reservation or duress, and that no promises or representations have been made to me by any person to induce me to do so other than the promise of payment set forth in the first paragraph above and the Company's acknowledgment of my rights reserved under the second paragraph above. I understand that this release will be deemed to be an application for benefits under the Plan and that my entitlement thereto shall be governed by the terms and conditions of the Plan. I expressly hereby consent to such terms and conditions. I acknowledge that I have been given not less than forty-five (45) days to review and consider this Waiver and Release of Claims (unless I have signed a written waiver of such review and consideration period), and that I have had the opportunity to consult with an attorney or other advisor of my choice and have been advised by the Company to do so if I choose. I may revoke this Waiver and Release of Claims seven days or less after its execution by providing written notice to the Company. I acknowledge that it is my intention and the intention of the Company in executing this Waiver and Release of Claims that the same shall be effective as a bar to each and every claim, demand and cause of action hereinabove specified. In furtherance of this intention, I hereby expressly waive any and all rights and benefits conferred upon me by the provisions of SECTION 1542 OF THE CALIFORNIA CIVIL CODE, to the extent applicable to me, and expressly I consent that this Waiver and Release of Claims shall be given full force and effect according to each and all of its express terms and provisions, including as well those related to unknown and unsuspected claims, demands and causes of action, if any, as well as those relating to any other claims, demands and causes of action hereinabove specified. SECTION 1542 provides: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR." I acknowledge that I may hereafter discover claims or facts in addition to or different from those which I now know or believe to exist with respect to the subject matter of this Waiver and Release of Claims and which, if known or suspected at the time of executing this Waiver and Release of Claims, may have materially affected this settlement. Finally, I acknowledge that I have read this Waiver and Release of Claims and understand all of its terms. EX-10 30 ex1029.txt MENLO WORLDWIDE, LLC EXECUTIVE SEVERANCE PLAN FOR ELIGIBLE EXECUTIVES OF VECTOR SCM, LLC Menlo Worldwide, LLC (the "Company") hereby adopts the Menlo Worldwide, LLC Executive Severance Plan for the benefit of certain executives of Vector SCM, LLC ("Vector"), on the terms and conditions hereinafter stated. SECTION 1. DEFINITIONS. As hereinafter used: 1.1 "Affiliate" means an affiliate of the Company, as defined in Rule 12b-2 promulgated under Section 12 of the Exchange Act. 1.2 "Board" means the Board of Managers of the Company or any successor thereto. 1.3 "Cause" for termination by the Employer of the Eligible Employee's employment shall mean (i) the willful and continued failure by the Eligible Employee to substantially perform the Eligible Employee's duties with the Employer (other than any such failure resulting from the Eligible Employee's incapacity due to disability, including physical or mental illness or any such actual or anticipated failure after the issuance by the Eligible Employee of a notice of intent to terminate employment for Good Reason pursuant to Section 1.13 hereof) after a written demand for substantial performance is delivered to the Eligible Employee by the Company's Chief Executive Officer, which demand specifically identifies the manner in which such Officer believes that the Eligible Employee has not substantially performed the Eligible Employee's duties, or (ii) the willful engaging by the Eligible Employee in conduct which is demonstrably and materially injurious to Vector or to the Company or its subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of this definition, no act, or failure to act, on the Eligible Employee's part shall be deemed "willful" unless done, or omitted to be done, by the Eligible Employee not in good faith and without reasonable belief that the Eligible Employee's act, or failure to act, was in the best interest of the Company. In the event of a dispute concerning the application of this provision, no claim by the Company or any Employer that Cause exists shall be given effect unless the Company establishes (i) to the Plan Administrator and (ii) in the event of an arbitration to resolve the dispute, to the arbitrator, by clear and convincing evidence that Cause exists. 1.4 "Change in Control of the Company" means the occurrence of any one of the following events: (I) the sale by CNF of more than 50% of the then outstanding Common Interests or other equity interests of the Company, whether by merger, consolidation or otherwise; (II) the sale of all or substantially all of the assets of the Company; or (III) any other transaction or course of action engaged in, directly or indirectly, by the Company or CNF that has a substantially similar effect as the transactions of the type referred to in clause (I) or (II) above. The foregoing notwithstanding, a Change in Control of the Company shall not be deemed to have occurred (A) by reason of the occurrence of a "Change in Control" of CNF (within the meaning of Section 1 of the CNF Amended and Restated Executive Severance Plan), (B) except in the case of a transaction described in clause (II) above, so long as CNF or any of its Affiliates, individually or collectively, own more than 50% of the outstanding Common Interests or other equity interests of the Company, (C) in the event of the sale of Common Interests or other equity interests of the Company to any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any other Affiliate of CNF, or (D) in the event of the sale or distribution of Common Interests or other equity interests of the Company to shareholders of CNF, or the sale of assets of the Company to any corporation or other entity owned, directly or indirectly, by the shareholders of CNF, in either case in substantially the same proportions as their ownership of stock in CNF. 1.5 "CNF" shall mean CNF Inc. and any successor to its business and/or assets. 1.6 "Code" means the Internal Revenue Code of 1986, as it may be amended from time to time. 1.7 "Common Interest" has the meaning given in the Company's Limited Liability Company Agreement. 1.8 "Company" means Menlo Worldwide, LLC or any successors thereto. 1.9 "Effective Date" means August 25, 2003. 1.10 "Eligible Employee" means an individual who, immediately prior to a Change in Control of the Company, (a) is an employee of Vector, (b) is not a party to an individual employment or severance agreement with the Company and (c) who occupies a position that has been classified as within the CNF Inc. executive level salary grade structure. An Eligible Employee becomes a "Severed Employee" once he or she incurs a Severance. 1.11 "Employer" means Vector. 1.12 "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. 1.13. "Good Reason" for termination by the Eligible Employee of the Eligible Employee's employment shall mean the occurrence (without the Eligible Employee's express written consent) after any Change in Control of the Company of any one of the following acts by the Company, or failures by the Company to act, unless such act or failure to act is corrected within 30 days of receipt by the Company of notice of the Eligible Employee's intent to terminate for Good Reason hereunder: (1) the failure of the successor company, following the Change in Control of the Company, to assume the Plan and all obligations thereunder, as of the date of such Change in Control of the Company; (2) the assignment to the Eligible Employee of any duties inconsistent with the Eligible Employee's status as an executive of the Company or a substantial adverse alteration in the nature or status of the Eligible Employee's responsibilities from those in effect immediately prior to the Change in Control of the Company; (3) a reduction by the Employer in the Eligible Employee's annual base salary or bonus opportunity, each as in effect immediately prior to the Change in Control of the Company or as the same may thereafter be increased from time to time; (4) the relocation of the Eligible Employee's principal place of employment to a location that results in an increase in the Eligible Employee's one way commute of at least 50 miles more than the Eligible Employee's one way commute immediately prior to the Change in Control of the Company, except for required travel on the Company's business to an extent substantially consistent with the Eligible Employee's business travel obligations immediately prior to the Change in Control of the Company; (5) the failure by the Company to pay to the Eligible Employee when due any portion of the Eligible Employee's current compensation; (6) the failure by the Company to continue to provide the Eligible Employee with benefits substantially similar to those enjoyed by the Eligible Employee under any of the Company's pension, savings, life insurance, medical, health and accident, or disability plans in which the Eligible Employee was participating immediately prior to the Change in Control of the Company (except for across the board changes similarly affecting all or substantially all employees of the Company and any entity in control of the Company), the taking of any other action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Eligible Employee of any material fringe benefit enjoyed by the Eligible Employee immediately prior to the Change in Control of the Company, or the failure by the Company to provide the Eligible Employee with the number of paid vacation days to which the Eligible Employee is entitled. The Eligible Employee's right to terminate the Eligible Employee's employment for Good Reason shall not be affected by the Eligible Employee's incapacity due to disability, including physical or mental illness. The Eligible Employee's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. 1.14 "Person" has the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include: (1) the Company or any of its subsidiaries; (2) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates; (3) an underwriter temporarily holding securities pursuant to an offering of such securities; or (4) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company. 1.15 "Plan" means the Menlo Worldwide, LLC Executive Severance Plan, as set forth herein, as it may be amended from time to time. 1.16 "Plan Administrator" means, prior to a Change in Control of the Company, the person or persons appointed from time to time by the Board and following a Change in Control of the Company, a committee consisting of three persons, at least two of whom were members of the Board or executive officers of the Company immediately prior to the Change in Control of the Company. 1.17 "Potential Change in Control of the Company" shall be deemed to have occurred if: (1) CNF or the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control of the Company; or (2) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control of the Company has occurred. 1.18 "Severance" means the termination of an Eligible Employee's employment with the Employer on or within one year immediately following the date of the Change in Control of the Company, (i) by the Employer other than for Cause, or (ii) by the Eligible Employee for Good Reason. For purposes of this Plan, an Eligible Employee's employment shall be deemed to have been terminated following a Change in Control of the Company by the Company without Cause or by the Eligible Employee with Good Reason, if (i) the Eligible Employee's employment is terminated by the Company without Cause following a Potential Change in Control of the Company but prior to a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs) and such termination was at the request or direction of a Person who has entered into an agreement with the Company the consummation of which would constitute a Change in Control of the Company, (ii) the Eligible Employee terminates his employment for Good Reason following a Potential Change in Control of the Company but prior to a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs) and the circumstance or event which constitutes Good Reason occurs at the request or direction of such Person; or (iii) the Eligible Employee's employment is terminated by the Company without Cause or by the Eligible Employee for Good Reason and such termination or the circumstance or event which constitutes Good Reason is otherwise in connection with or in anticipation of a Change in Control of the Company (whether or not a Change in Control of the Company ever occurs). An Eligible Employee will not be considered to have incurred a Severance (i) if his or her employment is discontinued by reason of the Eligible Employee's death or disability, including a physical or mental condition causing such Eligible Employee's inability to substantially perform his or her duties with the Employer, including, without limitation, such condition entitling him or her to benefits under any sick pay or disability income policy or program of the Employer or (ii) by reason of the divestiture of a facility, sale of a business or business unit, or the outsourcing of a business activity with which the Eligible Employee is affiliated, notwithstanding the fact that such divestiture, sale or outsourcing constitutes, or takes place within one year following, a Change in Control of the Company, if the Eligible Employee is offered comparable employment by the successor company and such successor company agrees to assume the obligations of this Plan with respect to such Eligible Employee. 1.19 "Severance Benefits" means, at the Company's expense, (a) the continued participation by a Severed Employee and his dependents in all health and welfare benefits plans of the Company (to the extent such Severed Employee was participating in such plans prior to incurring a Severance) and (b) outplacement services determined by the Company to be suitable to the Severed Employee's position, in each case for a period of one year following such Severed Employee's Severance Date; provided, however, that benefits otherwise receivable by the Eligible Employee hereunder shall be reduced to the extent benefits of the same type are received by or made available to the Eligible Employee during the one- year period following the Eligible Employee's incurring a Severance (and any such benefits received by or made available to the Eligible Employee shall be reported to the Company by the Eligible Employee); provided, further, however, that the Company shall reimburse the Eligible Employee for the excess, if any, of the cost of such benefits to the Eligible Employee over such cost immediately prior to the Eligible Employee's incurring a Severance or, if more favorable to the Eligible Employee, immediately prior to the Change in Control of the Company. If the Severed Employee dies during the period of one year following the Severed Employee's Severance Date at a time when health and dental benefits are being provided under this Section 1.19 to the Severed Employee's dependents, the Company shall continue to provide such benefits to the dependents for the remainder of the one year period on the same basis as if the Severed Employee had survived throughout that period. 1.20 "Severance Date" means the date on or after the date of the Change in Control of the Company on which an Eligible Employee incurs a Severance. 1.21 "Severance Payment" means a payment, in lieu of any other severance payment or benefit pursuant to any other plan or agreement of the Company or any subsidiary thereof to which the Eligible Employee is otherwise entitled, of an amount equal to the sum of (a) the Severed Employee's annual base salary immediately prior to the time of Severance or, if higher, in effect immediately prior to the Change in Control of the Company and (b) the greater of (i) the Severed Employee's target bonus for the year in which the Severance occurred and (ii) the Severed Employee's actual or target bonus (whichever is greater) for the year in which the Change in Control of the Company occurred (in either case, determined as if such target bonus had been earned in full). SECTION 2. BENEFITS. 2.1An Eligible Employee who incurs a Severance shall be entitled to receive (a) a Severance Payment and (b) Severance Benefits. 2.2The Severance Payment shall be paid to an eligible Severed Employee in a cash lump sum, as soon as practicable following the Severance Date, but in no event later than 10 business days immediately following the expiration of the revocation period, if any, applicable to such Severed Employee's release, described in Section 2.4. 2.3No Severed Employee shall be eligible to receive a Severance Payment or Severance Benefits under the Plan unless he or she (or, in the event of the death of the Severed Employee, the executor, personal representative or administrator of the Severed Employee's estate) first executes a written release substantially in the form attached as Exhibit A hereto. 2.4In the event of a claim by an Eligible Employee as to the amount or timing of any distribution, such Eligible Employee shall present the reason for his or her claim in writing to the Plan Administrator. The Plan Administrator shall, within sixty (60) days after receipt of such written claim, send a written notification to the Eligible Employee as to its disposition. In the event the claim is wholly or partially denied, such written notification shall (a) state the specific reason or reasons for the denial, (b) make specific reference to pertinent Plan provisions on which the denial is based, (c) provide a description of any additional material or information necessary for the Eligible Employee to perfect the claim and an explanation of why such material or information is necessary, and (d) set forth the procedure by which the Eligible Employee may appeal the denial of his or her claim. In the event an Eligible Employee wishes to appeal the denial of his or her claim, he or she may request a review of such denial by making application in writing to the Plan Administrator within sixty (60) days after receipt of such denial. Such Eligible Employee (or his or her duly authorized legal representative) may, upon written request to the Plan Administrator, review any documents pertinent to his or her claim, and submit in writing issues and comments in support of his or her position. Within sixty (60) days after receipt of a written appeal (unless special circumstances, such as the need to hold a hearing, require an extension of time, but in no event more than one hundred twenty (120) days after such receipt), the Plan Administrator shall notify the Eligible Employee of the final decision. The final decision shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, and specific references to the pertinent Plan provisions on which the decision is based. 2.5Any further dispute or controversy arising under or in connection with this Agreement which remains after the final decision of the Plan Administrator as contemplated by Section 2.4 shall be finally settled exclusively by arbitration in Redwood City, California, in accordance with the rules of the American Arbitration Association then in effect; provided, however, that the evidentiary standards set forth in this Agreement shall apply; and provided further, that the arbitrator shall apply the applicable provisions of ERISA, and applicable regulations adopted thereunder, in such arbitration proceeding. Judgment may be entered on the arbitrator's award in any court having jurisdiction. 2.6The Company shall pay to the Eligible Employee all legal fees and expenses incurred by the Eligible Employee in seeking in good faith to obtain or enforce any benefit or right provided by this Agreement. Such payments shall be made within five (5) business days after delivery of the Eligible Employee's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. 2.7The Company shall be entitled to withhold from amounts to be paid to the Severed Employee hereunder any federal, state or local withholding or other taxes or charges which it is from time to time required to withhold. 2.8The Company agrees that, if the Eligible Employee's employment with the Company terminates during the one year period following a Change in Control of the Company, the Eligible Employee is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Eligible Employee hereunder. Further, the amount of any payment or benefit provided for in this Agreement shall not be reduced (except as provided in Section 1.19 hereof) by any compensation earned by the Eligible Employee as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Eligible Employee to the Company, or otherwise. SECTION 3. PLAN ADMINISTRATION. 3.1The Plan shall be interpreted, administered and operated by the Plan Administrator, who shall have complete authority, in its sole discretion subject to the express provisions of the Plan, to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it, and to make all other determinations necessary or advisable for the administration of the Plan. 3.2All questions of any character whatsoever arising in connection with the interpretation of the Plan or its administration or operation shall be submitted to and settled and determined by the Plan Administrator in an equitable and fair manner in accordance with the procedure for claims and appeals described in Section 2.3. Subject to the rights to arbitration provided in Section 2.5 hereof, any such settlement and determination shall be final and conclusive, and shall bind and may be relied upon by the Employer, each of the Eligible Employees and all other parties in interest. 3.3The Plan Administrator may delegate any of its duties hereunder to such person or persons from time to time as it may designate. 3.4The Plan Administrator is empowered, on behalf of the Plan, to engage accountants, legal counsel and such other personnel as it deems necessary or advisable to assist it in the performance of its duties under the Plan. The functions of any such persons engaged by the Plan Administrator shall be limited to the specified services and duties for which they are engaged, and such persons shall have no other duties, obligations or responsibilities under the Plan. Such persons shall exercise no discretionary authority or discretionary control respecting the management of the Plan. All reasonable expenses thereof shall be borne by the Employer. SECTION 4. PLAN MODIFICATION OR TERMINATION. The Plan may be amended or terminated by the Board or a duly appointed committee of the Board at any time; provided, however, that during the pendency of and within six (6) months following the cessation of a Potential Change in Control of the Company and within one year following a Change in Control of the Company, the Plan may not be terminated nor may any amendment be adopted which is in any manner adverse to the interests of Eligible Employees. Notwithstanding anything in this Plan to the contrary, (i) unless a Change in Control of the Company has previously occurred, the Plan shall automatically terminate, and be of no further force or effect, upon the occurrence of a "Change in Control" of CNF (within the meaning of Section 1 of the CNF Inc. Executive Severance Plan for Eligible Employees of Vector SCM, LLC (the "CNF Severance Plan")), provided that the CNF Severance Plan remains in effect at the time of such Change in Control of CNF, and (ii) this Plan shall automatically and immediately terminate in the event that (a) GM acquires a controlling interest in Vector or (b) Vector is dissolved, except as to any Eligible Employee who has incurred a Severance following a Change in Control prior to the occurrence of either of the termination events described in clauses (a) and (b) above. SECTION 5. GENERAL PROVISIONS. 5.1Except as otherwise provided herein or by law, no right or interest of any Eligible Employee under the Plan shall be assignable or transferable, in whole or in part, either directly or by operation of law or otherwise, including without limitation by execution, levy, garnishment, attachment, pledge or in any manner; no attempted assignment or transfer thereof shall be effective; and no right or interest of any Eligible Employee under the Plan shall be liable for, or subject to, any obligation or liability of such Eligible Employee. When a payment is due under this Plan to a Severed Employee who is unable to care for his or her affairs, payment may be made directly to his or her legal guardian or personal representative. 5.2If the Company or any Affiliate is obligated pursuant to applicable law or by virtue of being a party to a contract (but not pursuant to any severance plan) to pay severance pay, a termination indemnity, notice pay or the like or if the Company or any Affiliate is obligated by law to provide advance notice of separation ("Notice Period"), then any Severance Payment hereunder shall be reduced by the amount of any such severance pay, termination indemnity, notice pay or the like, as applicable, and by the amount of any compensation received during any Notice Period. 5.3Neither the establishment of the Plan, nor any modification thereof, nor the creation of any fund, trust or account, nor the payment of any benefits shall be construed as giving any Eligible Employee, or any person whomsoever, the right to be retained in the service of the Employer, and all Eligible Employees shall remain subject to discharge to the same extent as if the Plan had never been adopted. 5.4If any provision of this Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and this Plan shall be construed and enforced as if such provisions had not been included. 5.5This Plan shall be binding upon and shall inure to the benefit of and be enforceable by the Company and its successors and assigns, and by each Eligible Employee and by the personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees of each Eligible Employee. If any Eligible Employee shall die while any amount would still be payable to such Eligible Employee (other than amount which, by their terms, terminate upon the death of the Eligible Employee) if the Eligible Employee had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Plan to the executors, personal representatives or administrators of the Eligible Employee's estate. 5.6The headings and captions herein are provided for reference and convenience only, shall not be considered part of the Plan, and shall not be employed in the construction of the Plan. 5.7The Plan shall not be funded. No Eligible Employee shall have any right to, or interest in, any assets of any Employer which may be applied by the Employer to the payment of benefits or other rights under this Plan. 5.8All notices and all other communications provided for in this Plan (i) shall be in writing, (ii) shall be hand delivered, sent by overnight courier or by United States registered mail, return receipt requested and postage prepaid, addressed, in the case of the Company, to One Lagoon Drive, Ste. 400, Redwood City, California 94065, Attention: President, and in the case of an Eligible Employee, to the last known address of such Eligible Employee, and (iii) shall be effective only upon actual receipt. 5.9This Plan shall be construed and enforced according to the laws of the State of California to the extent not preempted by federal law, which shall otherwise control. MENLO WORLDWIDE, LLC By: /s/ John H. Williford ---------------------- Name: John H. Williford Title: President and Chief Executive Officer Executed: August 25, 2003 EXHIBIT A WAIVER AND RELEASE OF CLAIMS In consideration of, and subject to, the payment to be made to me by Menlo Worldwide, LLC (the "Company") of the "Severance Payment" (as defined in the Menlo Worldwide, LLC Executive Severance Plan for Eligible Executives of Vector SCM, LLC (the "Plan")), I hereby waive any claims I may have for employment or re-employment by the Company or any parent or subsidiary of the Company after the date hereof, and I further agree to and do release and forever discharge the Company or any subsidiary of the Company, and their respective past and present officers, directors, shareholders, insurers, employees and agents from any and all claims and causes of action, known or unknown, arising out of or relating to my employment with the Company or any subsidiary of the Company, or the termination thereof, including, but not limited to, wrongful discharge, breach of contract, tort, fraud, the Civil Rights Acts, Age Discrimination in Employment Act, Employee Retirement Income Security Act of 1974, Americans with Disabilities Act, or any other federal, state or local legislation or common law relating to employment or discrimination in employment or otherwise. Notwithstanding the foregoing or any other provision hereof, nothing in this Waiver and Release of Claims shall adversely affect (i) my rights under the Plan; (ii) my rights to benefits other than severance benefits under plans, programs and arrangements of the Company or any subsidiary or parent of the Company which are accrued but unpaid as of the date of my termination; or (iii) my rights to indemnification under any indemnification agreement, applicable law and the certificates of incorporation and bylaws of the Company and any subsidiary or parent of the Company, and my rights under any director's and officers' liability insurance policy covering me. I acknowledge that I have signed this Waiver and Release of Claims voluntarily, knowingly, of my own free will and without reservation or duress, and that no promises or representations have been made to me by any person to induce me to do so other than the promise of payment set forth in the first paragraph above and the Company's acknowledgment of my rights reserved under the second paragraph above. I understand that this release will be deemed to be an application for benefits under the Plan and that my entitlement thereto shall be governed by the terms and conditions of the Plan. I expressly hereby consent to such terms and conditions. I acknowledge that I have been given not less than forty-five (45) days to review and consider this Waiver and Release of Claims (unless I have signed a written waiver of such review and consideration period), and that I have had the opportunity to consult with an attorney or other advisor of my choice and have been advised by the Company to do so if I choose. I may revoke this Waiver and Release of Claims seven days or less after its execution by providing written notice to the Company. I acknowledge that it is my intention and the intention of the Company in executing this Waiver and Release of Claims that the same shall be effective as a bar to each and every claim, demand and cause of action hereinabove specified. In furtherance of this intention, I hereby expressly waive any and all rights and benefits conferred upon me by the provisions of SECTION 1542 OF THE CALIFORNIA CIVIL CODE, to the extent applicable to me, and expressly I consent that this Waiver and Release of Claims shall be given full force and effect according to each and all of its express terms and provisions, including as well those related to unknown and unsuspected claims, demands and causes of action, if any, as well as those relating to any other claims, demands and causes of action hereinabove specified. SECTION 1542 provides: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR." I acknowledge that I may hereafter discover claims or facts in addition to or different from those which I now know or believe to exist with respect to the subject matter of this Waiver and Release of Claims and which, if known or suspected at the time of executing this Waiver and Release of Claims, may have materially affected this settlement. Finally, I acknowledge that I have read this Waiver and Release of Claims and understand all of its terms. Signature of Employee Print Name Date Signed EX-10 31 ex1010.txt Execution Copy 1 AMENDMENT NO.1 TO AMENDED AND RESTATED SEVERANCE AGREEMENT BY AND BETWEEN CON-WAY TRANSPORTATION SERVICES, INC. AND GERALD L. DETTER Effective January 1, 2003 This Amendment No. 1 (this "Amendment") is made to the Severance Agreement as of July 31, 2000 by and between Con-Way Transportation Services, Inc. (the "Company"), a wholly owned subsidiary of CNF Inc., a Delaware corporation, and Gerald L. Detter (the "Executive") (the "Severance Agreement"). WHEREAS, on July 31, 2000, the Company and the Executive entered into this Severance Agreement; WHEREAS, the Board of Directors of the Company has determined that it is in the best interests of the Company and of its stockholders to amend the Severance Agreement; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained in this Amendment, the Company and the Executive agree as follows (capitalized terms used without definition have the meanings given to those terms in the Severance Agreement): 1. Amendment to Severance Payment. The severance payment set forth in Section 6.1(A) of the Severance Agreement shall be amended in its entirety to read as follows: (A) In lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination and in lieu of any severance benefit otherwise payable to the Executive, the Company shall pay to the Executive a lump sum severance payment, in cash, equal to three times the sum of (i) the Executive's annual base salary as in effect immediately prior to the Date of Termination or, if higher, in effect immediately prior to the Change in Control and (ii) the average annual bonus earned by the Executive pursuant to any annual bonus or incentive plan maintained by the Company in respect of the three fiscal years ending immediately prior to the fiscal year in which occurs the Change in Control. 2. Amendment to Additional Retirement Benefits. Section 6. 1(D) of the Severance Agreement shall be deleted. 3. Amendment to Definition of the Term "Good Reason". Section 15(P) of the Severance Agreement (definition of the term "Good Reason") shall be amended by deleting the following paragraph at the end of Section 15(P): "Notwithstanding anything in this Agreement to the contrary, if the Executive's employment is terminated by the Executive for any reason during the one-month period commencing on the first anniversary of a Change in Control, such termination shall be deemed a termination of the Executive's employment for Good Reason." 4. Name Change. The name of "CNF Transportation Inc." has been changed to "CNF Inc." and all references in the Severance Agreement to "CNF Transportation Inc." shall be changed to references to "CNF Inc." 5. Effective Date. The effective date of this Amendment shall be January 1, 2003. Except as expressly amended, the Severance Agreement remains unchanged and in full force and effect. CNF INC. By: /s/ Gregory L. Quesnel -------------------------- Name: Gregory L. Quesnel Title: Chairman of the Board EXECUTIVE By: /s/ Gerald L. Detter -------------------------- Name: Gerald L. Detter Address: 506 Woodland Drive Clarklake, MI 49234 EX-32 32 ex32.txt Exhibit 32(a) CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-Q of CNF Inc. (the "Company") for the quarterly period ended March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Gregory L. Quesnel, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: May 6, 2004 /s/ Gregory L. Quesnel - ------------------------------- Name: Gregory L. Quesnel Title: Chief Executive Officer Exhibit 32(b) CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-Q of CNF Inc. (the "Company") for the quarterly period ended March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Chutta Ratnathicam, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: May 6, 2004 /s/ Chutta Ratnathicam - ------------------------------- Name: Chutta Ratnathicam Title: Chief Financial Officer EX-31 33 ex31.txt Exhibit 31(a) CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Gregory L. Quesnel, certify that: 1. I have reviewed this quarterly report on Form 10-Q of CNF Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. May 6, 2004 /s/Gregory L. Quesnel ----------------------- Gregory L. Quesnel Chief Executive Officer Exhibit 31(b) CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Chutta Ratnathicam, certify that: 1. I have reviewed this quarterly report on Form 10-Q of CNF Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. May 6, 2004 /s/Chutta Ratnathicam ----------------------- Chutta Ratnathicam Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----