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