Exhibit 99.3
SEVERANCE AGREEMENT
THIS AGREEMENT is made as of March 1, 2005 by and between CNF Inc., a
Delaware corporation (the "Company"), and Jennifer W. Pileggi (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 March
1, 2005 (the "Effective Date") and shall continue in effect through
December 31, 2006; provided, however, that commencing on January 1,
2006, 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 her 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
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 her dependents life, disability and accident
benefits substantially similar to those provided to the
Executive and her dependents immediately prior to the Date of
Termination or, if more favorable to the Executive, those
provided to the Executive and her 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) For the thirty-six (36) month period immediately following the
Date of Termination, the Company shall provide health and
dental benefits to the Executive and her 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 thirty-six (36) month period on the same basis as if
the Executive had survived throughout that period.
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). 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 subsection (A) 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 be paid
by the Executive to the Company not later than the fifth (5th)
business day after demand by the Company. 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-quarter (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 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);
(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.
By: /s/ Chutta Ratnathicam
------------------------------------------------
Name: Chutta Ratnathicam
Title: Senior Vice President and Chief Financial
Officer
EXECUTIVE
/s/ Jennifer W. Pileggi
------------------------------------------------
Name: Jennifer W. Pileggi
Address: 1463 Greenwood Avenue
San Carlos, CA 94070
Severance Agreement Pileggi CNF 2005
1
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 March 1, 2005, 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/ Jennifer W. Pileggi
------------------------------------------------
Signature of Executive
Jennifer W. Pileggi
------------------------------------------------
Print Name
March 4, 2005
------------------------------------------------
Date Signed