Exhibit 10.33
CNF TRANSPORTATION INC.
VALUE MANAGEMENT PLAN
1 . Purpose; Effective Date; Administration
1.1 Purpose
The purpose of the CNF Transportation Inc. Value Management
Plan (the "Plan") is to provide eligible employees of CNF
Transportation Inc. (the "Company") and its subsidiaries or
affiliates with long term compensation that is linked to
both the Company's mission of creating long-term shareholder
value and to the "Total Business Return" (as defined in
Section 3.1) of (i) the Company, (ii) a specified subsidiary
of the Company, (iii) a business unit or division of the
Company or a subsidiary of the Company, or (iv) a
combination of the foregoing, thereby providing them with an
incentive to maximize financial results for shareholders.
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.
1.3 Administration
The Plan shall be administered by the Compensation Committee
of the Board of Directors of the Company (the "Committee").
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 2000 Award Cycle runs from
January 1, 2000 to December 31, 2002.
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 Award
Payout is to be based upon the Total Business Return 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
Total Business Return an 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."
2.4 Vesting
A Participant shall become vested in his or her right to
receive an Award Payout if the employee 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. An
employee 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.
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 a change in control of the
Company, which will be deemed to have occurred if:
(a) 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 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); or
(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.
"Board" means the Board of Directors of the Company or any
successor thereto.
"Effective Date" has the meaning given to such term in
Section 1.2.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
3 . Awards
3.1 Award Payouts
Subject to Section 3.4 and the other terms and provisions of
this Plan, a Participant shall be entitled to receive an
Award Payout, payable as provided in Section 3.2, in an
amount equal to (i) the Participant's Beginning Base Salary
("BBS") times (ii) the Award Opportunity ("AO") times (iii)
the TBR Performance Multiple ("PM") times (iv) the Relative
TSR Performance Adjustment ("RPA").
Award Payout = BBS x AO x PM x RPA
In the event that the Committee designates that a
Participant's Award Payout is to be based upon the Total
Business Return of more than one Business Unit, the
Committee shall designate the weighting of such
Participant's Award Payout that is to be based upon the
Total Business Return of each such Business Unit. At the
end of the applicable Award Cycle, an Award Payout shall be
calculated utilizing the formula stated above based upon
the Total Business Return of each such Business Unit and the
applicable Award Opportunity and TBR Performance Multiple;
and the total Award Payout payable to such Participant shall
be the sum of the weighted Award Payouts so calculated.
"Annualized TBR" means, for each Business Unit during each
Award Cycle, the compound annual change in Total Business
Return (expressed as a percent) of such Business Unit during
such Award Cycle.
Example: Assume that the Total Business
Return for a Business Unit during a three-year
Award Cycle is 60%. In order to produce a 60%
return over a three-year period, the compound
annual rate of return required to produce such
Total Business Return is 17%. [(1.17) x
(1.17) x (1.17) = 1.60].
"Award Opportunity" means the percentage of a Participant's
Beginning Base Salary that the Participant is eligible to
receive as a cash award at the end of an Award Cycle. The
Committee shall determine each Participant's Award
Opportunity for an Award Cycle prior to the commencement of
such Award Cycle and shall inform such Participant in
writing of such determination.
"Beginning Base Salary" means a Participant's annual base
salary in effect during the first full payroll week of an
Award Cycle.
"Business Unit" has the meaning given to that term in
Section 2.3.
"Factor" means, for each Business Unit during each Award
Cycle, a factor specified by the Committee for such Award
Cycle for purposes of calculating the Total Business Return
of such Business Unit for such Award Cycle. In the event
that the Committee fails to specify a Factor for any
Business Unit for any Award Cycle, the Factor shall be
deemed to be the same as the Factor applicable to such
Business Unit for the immediately preceding Award Cycle, or,
if no Factor was specified for such Business Unit during the
preceding Award Cycle, the factor applicable to the Company
for such previous Award Cycle.
"Relative TSR Performance Adjustment" means, for any Award
Cycle, either 1.15, 0.85 or 1 (i.e., the Award Payout at the
end of any Award Cycle will be increased by 15%, decreased
by 15% or not changed), depending on whether the Company's
Total Shareholder Return during such Award Cycle (a) is in
the top quartile relative to the companies (other than the
Company) (1) that comprise the Dow Jones Transportation
Average ("DJTA") as of the end of such Award Cycle and (2)
the common stock of which has been publicly traded at all
times during the period commencing 60 trading days prior to
the commencement of such Award Cycle and ending on the last
day of such Award Cycle, (b) is below the median relative to
such companies or (c) is below the top quartile but above
the median relative to such companies for the period
covered by the Award Cycle.
"TBR Performance Multiple" means, for each Business Unit, a
number from 0 to 2, depending on the Annualized TBR attained
by such Business Unit during such Award Cycle. The
Committee shall set a Target Annualized TBR, a Superior
Annualized TBR and a Threshold Annualized TBR for each
Business Unit for each Award Cycle, and shall also set the
TBR Performance Multiple that shall apply when the Threshold
Annualized TBR is attained. If the Target Annualized TBR is
attained, the TBR Performance Multiple shall be equal to 1;
if the Superior Annualized TBR is attained, the TBR
Performance Multiple shall be equal to 2; and if the
Annualized TBR is less than the Threshold Annualized TBR,
the TBR Performance Multiple shall be equal to 0. If the
Annualized TBR is between the Threshold Annualized TBR and
the Target Annualized TBR, or if the Annualized TBR is
between the Target Annualized TBR and the Superior
Annualized TBR then the TBR Performance Multiple shall be
determined by interpolation.
"Total Business Return" ("TBR") is a method of simulating
the return shareholders would earn from investing in a
Business Unit. It shall be determined for each Award Cycle
for each Business Unit. The Total Business Return is
determined by dividing (a) the sum of (i) the cumulative
increase in net cash earnings ("Increase in NCE") of the
Business Unit from the beginning of an Award Cycle to the
end of an Award Cycle, multiplied by the applicable Factor
("F") and (ii) the free cash flow ("FCF") of such Business
Unit, by (b) the excess of (i) the net cash earnings
("NCE") of such Business Unit, determined as of December 31
of the year prior to the first year of the applicable Award
Cycle, multiplied by the applicable Factor ("F"), over (ii)
the outstanding Debt of such Business Unit at the beginning
of the Award Cycle, and adding to the amount so determined
the adjustment factor ("AF").
TBR =[((Increase in NCE x F) + FCF) / ((NCE x F) - Debt)] +
AF
For purposes of determining TBR, (i) the term "net cash
earnings" shall mean, for any Business Unit for any period,
the net income plus depreciation plus amortization of such
Business Unit for such period; (ii) the term "free cash
flow" shall mean, for any Business Unit for any period, the
net cash earnings minus capital expenditures minus increase
in working capital of such Business Unit for such period;
(iii) the term "working capital" shall mean, for any
Business Unit, the currents assets minus the non-Debt
liabilities of such Business Unit; (iv) the term "Debt"
shall mean, for any Business Unit on any date, the debt as
shown on the books of such Business Unit as of such date
plus an allocated portion of the debt of the Company on such
date; and (v) the term "adjustment factor" shall mean, for
any Business Unit for any Award Cycle, an adjustment factor
specified by the Committee for such Award Cycle.
"Total Shareholder Return" shall mean, for any company whose
common stock is publicly traded, for any period, 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 such period, as measured
by the difference between the market price of such share of
stock at the beginning and end of such period, plus (b) the
dividends payable on such share of common stock during such
period, divided by (ii) the market price of such share of
stock at the beginning of such period.
For purposes of determining "Total Shareholder Return," (x)
the term "market price" shall mean, for any share of
publicly-traded stock on any date, the average closing price
of such share of stock for the sixty (60) trading days
immediately preceding such 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.
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 Transportation
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 Total Business Return of the applicable Business
Unit(s) for such Award Cycle, and (iii) such Award Payout
shall be paid to such Participant within sixty (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 otherwise payable pursuant to this Plan.
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 of 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.
CNF TRANSPORTATION INC.
By: /s/Eberhard G.H. Schmoller
Name: Eberhard G. H. Schmoller
Title: Senior Vice President,
General Counsel and Secretary
Executed: June 28, 1999