CNF INC.
VALUE MANAGEMENT PLAN
(2006 Amendment and Restatement)
Table of Contents
1. - Purpose; Effective Date; Administration..1
2. - Definitions..............................1
3. - Eligibility..............................4
4. - Vesting..................................5
5. - Amount of Award Payout...................6
6. - Payment of Award.........................6
7. - Special Award Cycles.....................7
8. - Amendment; Termination...................7
Appendix A - Illustrative Examples............
1. Purpose; Effective Date; Administration.
The Board of Directors of CNF Inc. (the "Company") adopted the CNF Inc.
1997 Equity and Incentive Plan (the "EIP") on January 27, 1997 and has
amended the EIP from time to time. Section 6(b)(vi) of the EIP
authorizes the Committee to grant Awards to Grantees in the form of
Other Cash-Based Awards, as deemed by the Committee to be consistent
with the purposes of the EIP. The Committee has adopted this CNF Inc.
Value Management Plan (the "VMP") pursuant to the EIP to implement the
grant of such Other Cash-Based Awards. The VMP is subject to all of the
applicable terms and provisions of the EIP, as amended from time to
time, including without limitation (i) Section 3 (Administration),
(ii) Section 4 (Eligibility), (iii) Section 6(b)(vi) (Other Cash-Based
Awards), (iv) Section 7 (Change in Control Provisions), (v) Section 8
(Claims Procedures), and (vi) Section 9 (General Provisions).
Capitalized terms used in the VMP that are not defined in the VMP are
defined in the EIP.
The VMP was originally effective December 1, 1999. This 2006 Amendment
and Restatement of the VMP is effective with respect to Award Cycles
ending after December 1, 2005 except that:
(a) the third paragraph of Section 3 and changes made to the definition
of Beginning Base Salary shall instead apply to Award Cycles
beginning on or after January 1, 2005;
(b) changes made by this 2006 Amendment and Restatement shall not serve
to increase an Award Payout to any "covered employee" within the
meaning of Section 162(m) of the Internal Revenue Code with respect
to any Award Cycle beginning before January 1, 2006; and
(c) Awards that vested prior to December 1, 2005 shall be subject to
the terms of the VMP as in effect immediately prior to this 2006
Amendment and Restatement.
2. Definitions.
For purposes of the VMP, the following terms shall be defined as set
forth below:
"Absolute Performance Matrix" means a table consisting of two axes, one
axis showing Cumulative EBITDA for the applicable Business Unit for an
Award Cycle, and the second axis showing Average ROCE for the applicable
Business Unit. No Absolute Performance Payout will be made for
performance below the minimum Cumulative EDITDA or the minimum Average
ROCE shown on the Absolute Performance Matrix. Each Absolute Performance
Matrix shall have a point beyond which no additional Absolute Perfor-
mance Payout will be made (with the maximum payout pursuant to each
Absolute Performance Matrix being 200% of a Participant's Absolute
Performance Target Award). The intersection points on the Absolute
Performance Matrix shall be expressed as percentages. An illustrative
example of an Absolute Performance Matrix is shown in Appendix A annexed
hereto.
"Absolute Performance Payout" means the product of (i) a Participant's
Absolute Performance Target Award and (ii) the Absolute Performance
Payout Percentage.
"Absolute Performance Payout Percentage" means a percentage indicated on
the Absolute Performance Matrix for an Award Cycle which reflects the
actual Cumulative EBITDA and Average ROCE of the applicable Business
Unit for such Award Cycle. For purposes of determining a Participant's
Absolute Performance Payout Percentage, straight-line interpolation
shall be utilized to the extent necessary to reflect results that fall
between the percentages indicated on the Absolute Performance Matrix.
"Absolute Performance Target Award" means the product, rounded to the
nearest whole Dollar, of (i) a Participant's Total Target Award and (ii)
the fraction 2/3.
"Affiliate" is defined in Section 2 of the EIP.
"Average ROCE" means, with respect to a Business Unit for an Award
Cycle, the arithmetic average of Return on Capital Employed of such
Business Unit as determined for each year of the Award Cycle.
"Award Cycle" means a period of three consecutive calendar years except
in the case of a special Award Cycle provided in Section 7. Each Award
Cycle shall be identified by its first calendar year. For example, the
2006 Award Cycle runs from January 1, 2006 to December 31, 2008.
"Award Opportunity" means a percentage of a Participant's Beginning Base
Salary, which percentage shall be established by the Committee in its
discretion, subject to adjustment by reason of any promotion occurring
during the first 90 days of an Award Cycle.
"Award Payout" means, for any Award Cycle, the cash award that a
Participant is eligible to receive under the VMP for that Award Cycle.
"Beginning Base Salary" means a Participant's annual base salary as in
effect at the beginning of an Award Cycle, subject to any adjustment
made to such Participant's annual base salary in connection with the
annual review and adjustment of executive salaries generally and in
connection with any promotion, provided in each case that such
adjustment occurs during the first 90 days of the Award Cycle.
"Business Unit" is defined in Section 3 of the VMP for purposes of the
VMP. "Business Unit" Is also defined in Section 2 of the EIP, but that
definition does not apply to the VMP (except indirectly for purposes of
the definition of Change in Control).
"Capital Employed" means, with respect to a Business Unit for each year
during an Award Cycle, a twelve-month average, determined as of the end
of such year, of total assets minus current liabilities, plus short-term
debt and current maturities of long-term debt.
"Change in Control" is defined in Section 2 of the EIP.
"Cumulative EBITDA" means the sum of the EBITDA of the applicable
Business Unit for each year in the Award Cycle.
"DJTA Companies" means, for any Award Cycle, companies (other than the
Company) that were included in the Dow Jones Transportation Average for
the entirety of such Award Cycle.
"EBITDA" means, with respect to any year in an Award Cycle, the
applicable Business Unit's earnings before interest, taxes, depreciation
and amortization, calculated in accordance with GAAP.
"EIP" means the 2006 Amendment and Restatement of the CNF Inc. 1997
Equity and Incentive Plan, as amended from time to time, or any
successor plan.
"GAAP" means United States generally accepted accounting principles.
"Participant" means an employee designated by the Committee pursuant to
Section 3 of the VMP. The Participants are also Grantees, as that term
is defined in Section 2 of the EIP.
"Relative Performance Target Award" means the product, rounded to the
nearest whole Dollar, of (i) a Participant's Total Target Award and (ii)
the fraction 1/3.
"Relative Performance Payout" means the product of (i) a Participant's
Relative Performance Target Award and (ii) the Relative Performance
Payout Percentage.
"Relative Performance Payout Percentage" means a percentage indicated on
the Relative Performance Table for an Award Cycle, which reflects the
Company's percentile ranking in TSR for such Award Cycle against the
DJTA Companies. For purposes of determining a Participant's Relative
Performance Payout Percentage, straight-line interpolation shall be
utilized to the extent necessary to reflect results that fall between
the percentile rankings indicated on the Relative Performance Table.
"Relative Performance Table" means a table determined by the Committee
for an Award Cycle, pursuant to which the TSR of the Company for such
Award Cycle shall be percentile ranked against the TSR of the DJTA
Companies for such Award Cycle. Each Relative Performance Table shall
have a point at and below which no Relative Performance Payout shall be
made and a point beyond which no additional Relative Performance Payout
shall be made (the maximum payout pursuant to each Relative Performance
Table shall be 200% of a Participant's Relative Performance Target
Award). An illustrative example of a Relative Performance Table is shown
in Appendix A attached hereto.
"Return on Capital Employed" means, with respect to a Business Unit for
each year of an Award Cycle, income before income taxes and interest
expense of such Business Unit for such year, divided by Capital Employed
of such Business Unit for such year.
"Subsidiary" is defined in Section 2 of the EIP.
"Total Shareholder Return" or "TSR" for any company means the percentage
(expressed as a decimal) obtained by dividing (i) the sum of (A) the
appreciation in the value of a share of common stock of such company
during an Award Cycle, as measured by the difference between the market
price of such share of stock at the beginning and end dates of such
Award Cycle, plus (B) the dividends payable on such share of common
stock during such Award Cycle, divided by (ii) the market price of such
share of stock at the beginning date of such Award Cycle. For purposes
of determining "Total Shareholder Return," (iii) the term "market price"
shall mean the average closing price of such share of stock for the 60
trading days immediately preceding the applicable date, and (iv)
appropriate adjustments shall be made to reflect stock splits, reverse
stock splits, spinoffs, recapitalizations and other similar transactions
to the extent that they materially alter the equity value of a share of
common stock.
"Total Target Award" means, with respect to a Participant for an Award
Cycle, such Participant's Beginning Base Salary multiplied by such
Participant's Award Opportunity.
3. Eligibility.
The Committee shall designate the employees eligible to participate in
an Award Cycle ("Participants"), pursuant to Section 4 of the EIP. A
Participant must be an employee of the Company or one of its
Subsidiaries or Affiliates as designated by the Committee, and must be
designated as eligible as of the beginning of each Award Cycle, except
as otherwise provided in the last paragraph of this Section 3. The
Company shall maintain in its records a list of Participants for each
Award Cycle.
The Committee shall also designate, for each Participant during each
Award Cycle, whether such Participant's Absolute Performance Payout is
to be based upon the performance of (i) the Company, (ii) a Subsidiary,
(iii) a business unit or division of the Company or a Subsidiary, or
(iv) a combination of the foregoing. Any entity upon whose performance
an Absolute Performance Payout is based, in whole or in part, whether
such entity is the Company, a Subsidiary, or a business unit or division
of the Company or a Subsidiary, is referred to herein as a "Business
Unit." The terms and conditions applicable to awards made to
Participants for an Award Cycle need not be identical.
If a Participant transfers from one Business Unit to another during an
Award Cycle, the Participant's Absolute Performance Payout shall be
prorated based on the performance of each Business Unit, based on the
amount of time the Participant was working for each Business Unit. A
transfer shall be considered to occur on the first day of the month
following the month in which the transfer is effective in the Company's
payroll records. For example, assume a Participant starts out in
Business Unit A, and the Committee provides that the Participant's
Absolute Performance Payout shall be determined 60% on the performance
of Business Unit A and 40% on the performance of the Company. At the end
of the first year of the Award Cycle, the Participant transfers from the
payroll of Business Unit A to the payroll of Business Unit B and remains
on the payroll of Business Unit B until the end of the Award Cycle. The
Participant's Absolute Performance Payout for the entire Award Cycle,
based 60% on the performance of Business Unit A and 40% on the
performance of the Company, would be $3,000. The Participant's Absolute
Performance Payout for the entire Award Cycle, based 60% on the
performance of Business Unit B and 40% on the performance of the
Company, would be $6,000. The Participant's Absolute Performance Payout
for the entire Award Cycle is $5,000 (one third of $3,000 plus two
thirds of $6,000).
If an employee first becomes eligible within the first 90 days of an
Award Cycle (because hired or promoted), the employee may be designated
as eligible to participate in that Award Cycle as of the first day of
the month following the month in which the employee is hired or promoted
(determined in accordance with payroll records). The Participant's
Absolute Performance Payout shall be based on the prorated performance
of the Business Unit to which the Participant is assigned. For example,
an employee hired on the first March 15 of an Award Cycle may
participate as of April 1. If the Participant is still employed at the
end of the Award Cycle, the Participant's Absolute Performance Payout
will be what it would have been if the Participant had participated for
the full Award Cycle times 33/36.
4. Vesting.
A Participant shall become vested in his or her right to receive an
Award Payout if the Participant is continuously employed by the Company
or one of its Business Units until the end of the applicable Award Cycle
or until the occurrence of one of the events described below. A
Participant who ceases to be so continuously employed before the last
day of an Award Cycle shall forfeit his or her right to receive an Award
Payout unless the departure coincides with one of the following (in
which case the Participant's right to receive an Award Payout shall
vest):
(a) The Participant's death.
(b) The Participant's total disability as defined in the Company's Long
Term Disability Plan or a successor to that plan.
(c) The Participant's (i) early retirement under the Company's tax
qualified Retirement Plan if the Participant elects within 60 days
from the last day of regular employment to receive monthly pension
benefits under such Retirement Plan starting on the first day of
the month following the last day of employment, or (ii) normal or
deferred retirement under such Retirement Plan.
In addition, a Participant's right to receive an Award Payout shall vest
upon the occurrence of a Change in Control.
Award Payouts that vest pursuant to this Section 4 shall be payable as
provided in Section 6; provided, however, that, if a Participant's
employment is terminated for cause, or cause is found to exist after
termination of employment, no further vesting shall take place, any
unpaid Award Payments shall be forfeited, whether or not previously
vested, and no payment shall be made. In case of doubt, the Committee
shall determine whether or not cause exists, in its sole discretion,
using whatever standard it deems appropriate.
5. Amount of Award Payout.
Subject to Section 6(c) and the other terms and provisions of the VMP, a
Participant shall be eligible to receive an Award Payout, payable as
provided in Section 6, in an amount equal to the sum of such
Participant's (i) Absolute Performance Payout and (ii) Relative
Performance Payout.
(a) Establishment of Total Target Award. Not later than 90 days
following the commencement of an Award Cycle, the Committee shall
establish an Award Opportunity with respect to each Participant who
is participating in such Award Cycle.
(b) Absolute Performance Component. Not later than 90 days following
the commencement of an Award Cycle, the Committee shall establish
the Absolute Performance Matrix for each Business Unit for that
Award Cycle. The Committee may assign to a Business Unit the
Absolute Performance Matrix of another Business Unit or a blend of
the Absolute Performance Matrices of two or more Business Units. As
soon as practicable following the end of an Award Cycle, the
Committee shall certify the Absolute Performance Payout Percentage
for each Business Unit for such Award Cycle.
(c) Relative Performance Component. Not later than 90 days following
the commencement of an Award Cycle, the Committee shall establish
the Relative Performance Table. As soon as practicable following
the end of an Award Cycle, the Committee shall certify the Relative
Performance Payout Percentage for such Award Cycle.
6. Payment of Award.
(a) Normal Payment. Except as otherwise provided in Section 6(b), the
Company shall pay a Participant's award for an Award Cycle to the
Participant in a lump sum of cash within 60 days after the end of
such Award Cycle, unless the Participant has made a valid election
to defer payment under the CNF Inc. Deferred Compensation Plan for
Executives or the 2005 CNF Inc. Deferred Compensation Plan for
Executives.
(b) Payments Upon Early Vesting. In the event that, pursuant to Section
4, a Participant shall become vested in his or her right to receive
an Award Payout prior to the end of an Award Cycle, then (i) the
Award Cycle applicable to such Participant shall be deemed to have
ended (A) in the case of a Change in Control, as of the end of the
month immediately preceding such Change in Control and (B) in all
other cases, as of the end of the calendar year in which such
vesting occurs, (ii) the Award Payout shall be determined pursuant
to Section 5 based upon the actual performance of the applicable
Business Unit(s) and the Company for such Award Cycle, and (iii)
such Award Payout shall be paid to such Participant within 60 days
after the end (or deemed end) of such Award Cycle or, in the event
of a Participant's death, as provided in the next paragraph.
In the event of a Participant's death, the Award Payout payable to
the Participant for an Award Cycle shall be paid to the
Participant's Beneficiary. "Beneficiary" means the person or
persons designated by the Participant pursuant to a beneficiary
designation form properly completed and delivered to the Corporate
Secretary. If no such beneficiary designation form is in effect,
then the Beneficiary shall be the Participant's estate. Payment to
the Beneficiary shall be made within 60 days after the end (or
deemed end) of the applicable Award Cycle.
(c) Adjustments. In the event that the Committee determines (i) that
the Award Payout payable to one or more Participants for an Award
Cycle has been materially affected as a result of events or
circumstances that were unanticipated at the beginning of the Award
Cycle and/or extraordinary in nature and (ii) that the goals of the
VMP would be frustrated if adjustments were not made to such Award
Payouts, then the Committee, in its sole discretion, may make such
adjustments to such Award Payouts as it deems appropriate, which
adjustments may have the effect of increasing or decreasing the
amount of the Award Payouts otherwise payable pursuant to the VMP
(subject to the prohibition of increases with respect to covered
employees imposed by Section 6(b)(vi) of the EIP).
7. Special Award Cycles.
Notwithstanding any provision thereof to the contrary, the Committee may
elect at any time and from time to time to designate employees to
participate in special Award Cycles, which may be periods of one, two or
three years. All designations and determinations required under the VMP
with respect to such special Award Cycles (including, without
limitation, those under Sections 3 and 5) shall be made prior to or
within 90 days after the commencement of the special Award Cycle.
8. Amendment; Termination.
(a) Amendment. The Committee may amend the VMP at any time by notice to
the Participants, except that no amendment shall reduce the Award
determined for an Award Cycle that has ended before the date of the
amendment.
(b) Termination. The VMP will automatically terminate when the EIP
terminates, and the Committee may terminate the VMP at any earlier
time. Notwithstanding the termination of the VMP, the Award Payouts
for each Award Cycle then in progress shall be calculated, and be
payable, following the completion of each such Award Cycle, in
accordance with the provisions of Sections 5 and 6.
CNF Inc.
By: ________________________________
Jennifer W. Pileggi
Senior Vice President, General Counsel and
Secretary
2006 Amended and Restated Value Management Plan
Executed: ___________________