UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2019
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM                      TO                     
Commission File Number: 1-4364

RYDERLOGOEVERBETTERWTMA37.JPG
RYDER SYSTEM, INC.
(Exact name of registrant as specified in its charter)
Florida
59-0739250
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
 
11690 N.W. 105th Street
 
Miami, Florida 33178
(305) 500-3726
(Address of principal executive offices, including zip code)
(Registrant’s telephone number, including area code)
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock
R
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ         NO ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES þ         NO ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ
 
Accelerated filer ¨
Non-accelerated filer ¨
 
Smaller reporting company ¨
Emerging growth company ¨
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act  ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)  ¨ YES    þ NO
The number of shares of Ryder System, Inc. Common Stock ($0.50 par value per share) outstanding at March 31, 2019 , was 53,300,205 .
 
 
 
 
 



RYDER SYSTEM, INC.
FORM 10-Q QUARTERLY REPORT
TABLE OF CONTENTS
 
 
 
 
 
 
Page No.  
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


i


PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

RYDER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(unaudited)
 
 
Three months ended March 31,
 
2019
 
2018
 
(In thousands, except per share amounts)
Lease & related maintenance and rental revenues
$
899,559

 
824,991

Services revenue
1,132,048

 
928,144

Fuel services revenue
148,720

 
151,070

Total revenues
2,180,327

 
1,904,205

 
 
 
 
Cost of lease & related maintenance and rental
664,289

 
615,605

Cost of services
971,690

 
788,771

Cost of fuel services
143,275

 
146,903

Other operating expenses
33,626

 
32,975

Selling, general and administrative expenses
231,325

 
207,828

Non-operating pension costs
6,462

 
1,222

Used vehicle sales, net
8,217

 
7,431

Interest expense
55,336

 
38,160

Miscellaneous income, net
(8,222
)
 
(2,510
)
Restructuring and other items, net
6,178

 
15,121

 
2,112,176

 
1,851,506

Earnings from continuing operations before income taxes
68,151

 
52,699

Provision for income taxes
22,261


15,386

Earnings from continuing operations
45,890


37,313

Loss from discontinued operations, net of tax
(574
)
 
(427
)
Net earnings
$
45,316

 
36,886

 
 
 
 
Earnings (loss) per common share — Basic
 
 
 
Continuing operations
$
0.87

 
0.71

Discontinued operations
(0.01
)
 
(0.01
)
Net earnings
$
0.86

 
0.70

 
 
 
 
Earnings (loss) per common share — Diluted
 
 
 
Continuing operations
$
0.87

 
0.70

Discontinued operations
(0.01
)
 
(0.01
)
Net earnings
$
0.86

 
0.70

 
 
 
 
See accompanying notes to consolidated condensed financial statements.
Note: EPS amounts may not be additive due to rounding.

1

RYDER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)

        
 
Three months ended March 31,
 
2019
 
2018
 
(In thousands)
 
 
 
 
Net earnings
$
45,316

 
36,886

 
 
 
 
Other comprehensive income:
 
 
 
 
 
 
 
Changes in currency translation adjustment and other
15,762

 
11,765

 
 
 
 
Amortization of pension and postretirement items
7,468

 
7,215

Income tax expense related to amortization of pension and postretirement items
(2,014
)
 
(1,609
)
   Amortization of pension and postretirement items, net of tax
5,454

 
5,606

 
 
 
 
Other comprehensive income, net of taxes
21,216

 
17,371

 
 
 
 
Comprehensive income
$
66,532

 
54,257

See accompanying notes to consolidated condensed financial statements.




2


RYDER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(unaudited)
 

 
March 31,
2019
 
December 31,
2018
 
(Dollars in thousands, except
share amounts)
Assets:
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
62,787


68,111

Receivables, net of allowance of $17,497 and $17,182, respectively
1,221,769


1,242,058

Inventories
80,082


79,228

Prepaid expenses and other current assets
193,147


178,313

Total current assets
1,557,785

 
1,567,710

Revenue earning equipment, net
10,009,161


9,415,961

Operating property and equipment, net of accumulated depreciation of $1,277,906 and $1,256,037, respectively
871,524


862,054

Goodwill
474,742


475,206

Intangible assets, net of accumulated amortization of $67,145 and $65,048, respectively
57,068


59,075

Sales-type leases and other assets
978,705


967,802

Total assets
$
13,948,985


13,347,808

 
 
 
 
Liabilities and shareholders’ equity:
 
 
 
Current liabilities:
 
 
 
Short-term debt and current portion of long-term debt
$
1,117,489


937,131

Accounts payable
839,792


731,876

Accrued expenses and other current liabilities
797,298


847,739

Total current liabilities
2,754,579

 
2,516,746

Long-term debt
6,025,679


5,712,146

Other non-current liabilities
1,399,273


1,402,625

Deferred income taxes
1,202,650


1,179,723

Total liabilities
11,382,181

 
10,811,240

 
 
 
 
Shareholders’ equity:
 
 
 
Preferred stock, no par value per share — authorized, 3,800,917; none outstanding,
March 31, 2019 or December 31, 2018
—

 
—

Common stock, $0.50 par value per share — authorized, 400,000,000; outstanding,
March 31, 2019 — 53,300,205 December 31, 2018 — 53,116,485
26,651

 
26,559

Additional paid-in capital
1,086,714

 
1,084,391

Retained earnings
2,343,857

 
2,337,252

Accumulated other comprehensive loss
(890,418
)
 
(911,634
)
Total shareholders’ equity
2,566,804


2,536,568

Total liabilities and shareholders’ equity
$
13,948,985


13,347,808

See accompanying notes to consolidated condensed financial statements.

3


RYDER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)


 
Three months ended March 31,
 
2019
 
2018
 
(In thousands)
Cash flows from operating activities from continuing operations:
 
 
 
Net earnings
$
45,316

 
36,886

Less: Loss from discontinued operations, net of tax
(574
)
 
(427
)
Earnings from continuing operations
45,890

 
37,313

Depreciation expense
377,357

 
332,768

Goodwill impairment charge
—

 
15,513

Used vehicle sales, net
8,217

 
7,431

Amortization expense and other non-cash charges, net
48,522

 
32,061

Non-operating pension costs and share-based compensation expense
13,861

 
6,563

Deferred income tax expense
19,729

 
33,076

Collections on sales-type leases
34,017

 
21,580

Changes in operating assets and liabilities:
 
 
 
Receivables
26,181

 
22,265

Inventories
(756
)
 
(253
)
Prepaid expenses and other assets
(27,645
)
 
(46,053
)
Accounts payable
18,586

 
(30,851
)
Accrued expenses and other non-current liabilities
(78,629
)
 
(94,563
)
Net cash provided by operating activities from continuing operations
485,330

 
336,850

 
 
 
 
Cash flows from financing activities from continuing operations:
 
 
 
Net change in commercial paper borrowings and revolving credit facilities
158,258


237,960

Debt proceeds
799,300


446,500

Debt repaid
(478,411
)

(414,299
)
Dividends on common stock
(29,301
)
 
(27,795
)
Common stock issued
(332
)
 
1,417

Common stock repurchased
(14,156
)
 
(12,921
)
Debt issuance costs and other items
(1,070
)
 
(1,259
)
Net cash provided by financing activities from continuing operations
434,288

 
229,603

 
 
 
 
Cash flows from investing activities from continuing operations:
 
 
 
Purchases of property and revenue earning equipment
(1,026,711
)
 
(662,744
)
Sales of revenue earning equipment
101,549

 
89,023

Sales of operating property and equipment
1,918

 
933

Net cash used in investing activities from continuing operations
(923,244
)
 
(572,788
)
 
 
 
 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
(1,551
)
 
3,519

Decrease in cash, cash equivalents, and restricted cash from continuing operations
(5,177
)
 
(2,816
)
 
 
 
 
 
 
 
 
Decrease in cash, cash equivalents, and restricted cash from discontinued operations
(147
)
 
(348
)
 
 
 
 
Decrease in cash, cash equivalents, and restricted cash
(5,324
)
 
(3,164
)
Cash, cash equivalents, and restricted cash at January 1
68,111

 
83,022

Cash, cash equivalents, and restricted cash at March 31
$
62,787

 
79,858

See accompanying notes to consolidated condensed financial statements.

4


RYDER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY
(unaudited)


 
 
Preferred
Stock
 
Common Stock
 
Additional
Paid-In Capital
 
Retained Earnings
 
Accumulated
Other
Comprehensive Loss
 
 
 
 
Amount
 
Shares
 
Par
 
 
 
 
Total
 
 
(Dollars in thousands, except share amounts)
Balance at January 1, 2019
 
$
—

 
53,116,485

 
$
26,559

 
1,084,391

 
2,337,252

 
(911,634
)
 
2,536,568

Comprehensive income
 
—

 
—

 
—

 
—

 
45,316

 
21,216

 
66,532

Common stock dividends declared and paid—$0.54 per share
 
—

 
—

 
—

 
—

 
(29,207
)
 
—

 
(29,207
)
Common stock issued under employee stock option and stock purchase plans (1)
 
—

 
409,294

 
205

 
(547
)
 
—

 
—

 
(342
)
Benefit plan stock sales (2)
 
—

 
270

 
—

 
10

 
—

 
—

 
10

Common stock repurchases
 
—

 
(225,844
)
 
(113
)
 
(4,539
)
 
(9,504
)
 
—

 
(14,156
)
Share-based compensation
 
—

 
—

 
—

 
7,399

 
—

 
—

 
7,399

Balance at March 31, 2019
 
$
—

 
53,300,205

 
$
26,651

 
1,086,714

 
2,343,857

 
(890,418
)
 
2,566,804



 
 
Preferred
Stock
 
Common Stock
 
Additional
Paid-In Capital
 
Retained Earnings
 
Accumulated
Other
Comprehensive Loss
 
 
 
 
Amount
 
Shares
 
Par
 
 
 
 
Total
 
 
(Dollars in thousands, except share amounts)
Balance at January 1, 2018
 
$
—

 
52,955,314

 
$
26,478

 
1,051,017

 
2,086,918

 
(710,836
)
 
2,453,577

Comprehensive income
 
—

 
—

 
—

 
—

 
36,886

 
17,371

 
54,257

Common stock dividends declared and paid—$0.52 per share
 
—

 
—

 
—

 
—

 
(27,695
)
 
—

 
(27,695
)
Common stock issued under employee stock option and stock purchase plans (1)
 
—

 
310,173

 
155

 
1,195

 
—

 
—

 
1,350

Benefit plan stock sales (2)
 
—

 
715

 
—

 
67

 
—

 
—

 
67

Common stock repurchases
 
—

 
(171,304
)
 
(86
)
 
(3,354
)
 
(9,482
)
 
—

 
(12,922
)
Share-based compensation
 
—

 
—

 
—

 
5,341

 
—

 
—

 
5,341

Adoption of new accounting standard (3)
 
—

 
—

 
—

 
—

 
100,567

 
(100,567
)
 
—

Balance at March 31, 2018
 
$
—

 
53,094,898

 
$
26,547

 
1,054,266

 
2,187,194

 
(794,032
)
 
2,473,975


__________________
(1)
Net of common shares delivered as payment for the exercise price or to satisfy the holders’ withholding tax liability upon exercise of options.
(2)
Represents open-market transactions of common shares by the trustee of Ryder’s deferred compensation plans.
(3)
Reflects the impact of adopting ASU No. 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income in 2018, which resulted in a reclassification of stranded tax effects caused by the 2017 Tax Cuts and Jobs Act from accumulated other comprehensive loss to retained earnings.
See accompanying notes to consolidated condensed financial statements.


5
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)


1. GENERAL

Interim Financial Statements

The accompanying unaudited Consolidated Condensed Financial Statements include the accounts of Ryder System, Inc. (Ryder) and all entities in which Ryder has a controlling voting interest (subsidiaries) and variable interest entities (VIEs) required to be consolidated in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The accompanying unaudited Consolidated Condensed Financial Statements have been prepared in accordance with the accounting policies described in our 2018 Annual Report on Form 10-K and should be read in conjunction with the Consolidated Financial Statements and notes thereto except for the update to our revenue recognition and leases significant accounting policies discussed below. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement have been included and the disclosures herein are adequate. The operating results for interim periods are unaudited and are not necessarily indicative of the results that can be expected for a full year.

Update to Significant Accounting Policies

Our significant accounting policies are detailed in "Note 1: Summary of Significant Accounting Policies" within Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2018 . As discussed in Note 2 , " Recent Accounting Pronouncements ," effective January 1, 2019, we adopted Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842) using the modified retrospective transition comparative method. We have recast all prior period amounts in this Form 10-Q to conform to the current period presentation based on our adoption of this new accounting standard. Refer to Note 2 , " Recent Accounting Pronouncements ," for additional information on the revised amounts. The significant changes to our accounting policies as a result of adopting Topic 842 are discussed below.

Revenue Recognition

Lease & related maintenance and rental revenues includes ChoiceLease and commercial rental revenues from our Fleet Management Solutions (FMS) business segment. We offer a full service lease as well as a lease with more flexible maintenance options under our ChoiceLease product line, which are marketed, priced and managed as bundled lease arrangements, and include equipment, service and financing components. We do not offer a stand-alone unbundled lease of new vehicles. We offer rental of vehicles under our commercial rental product line, which allows customers to supplement their fleet of vehicles on a short-term basis.

Our ChoiceLease arrangements include the lease of a vehicle (lease component) and the executory agreement for the maintenance, insurance, taxes and other services (non-lease components) related to the leased vehicles during the lease term. We generally lease new vehicles to our customers. Arrangement consideration is allocated between the lease component and non-lease component based on management's best estimate of the relative standalone selling price of each component. Our ChoiceLease arrangements provide for a fixed charge billing and a variable charge billing based on mileage or time usage. Fixed charges are typically billed at the beginning of the month and variable charges are typically billed a month in arrears. Revenue from the lease component of ChoiceLease agreements is recognized based on the classification of the arrangement, typically as either an operating or a sales-type lease. Our commercial rental arrangements include the short-term rental of a vehicle (one day up to one year in length). All of our rental arrangements are classified as operating leases and revenue is recognized on a straight-line basis.

The majority of our leases are classified as operating leases and we recognize revenue for the lease component of the product line on a straight-line basis. The non-lease component for maintenance services is accounted for in accordance with revenue guidance in Revenue from Contracts with Customers (Topic 606) . Maintenance services are not typically performed evenly over the life of a ChoiceLease contract as the level of maintenance provided generally increases as vehicles age. We recognize maintenance revenue using an input method, consistent with the estimated pattern of the costs to maintain the underlying vehicles. This will generally result in the recognition of a contract liability for some portion of the customer's payments allocated to the maintenance service component of the arrangement. Included in lease & related maintenance and rental revenues is non-lease revenue from maintenance services recognized in accordance with Topic 606 of $239 million and $223 million for the three months ended March 31, 2019 and 2018, respectively.

6
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)



Effective with the adoption of Topic 842, we recorded an after-tax cumulative effect adjustment to decrease retained earnings as of January 1, 2017, by approximately $315 million primarily to recognize a contract liability (deferred revenue) related to maintenance services, and partially offset by costs capitalized related to sales commissions.

We recorded deferred revenue of approximately $564 million and $566 million as of March 31, 2019 and December 31, 2018, respectively, related to the maintenance services component of our ChoiceLease product line. Refer to Note 3 , " Revenue ," and Note 5 , " Accrued Expenses and Other Liabilities ." In addition, we recorded an asset of approximately $92 million and $93 million as of March 31, 2019 and December 31, 2018, respectively; related to incremental sales commissions paid to our sales force as a result of obtaining ChoiceLease contracts. Capitalized sales commissions includes initial direct costs of our leases in the amount of $53 million at March 31, 2019 and December 31, 2018, respectively, accounted for in accordance with Topic 842. Refer to Note 3 , " Revenue ."

Lease and rental agreements do not usually provide for scheduled rent increases or escalations. However, most lease agreements allow for rate changes based upon changes in the Consumer Price Index (CPI). ChoiceLease and rental agreements also provide for vehicle usage charges based on a time charge and/or a fixed per-mile charge. The time charge, the per-mile charge and the changes in rates attributed to changes in the CPI are considered contingent rentals and are not considered fixed or determinable until the CPI change or the equipment usage occurs. This consideration is allocated to the lease and non-lease components of the contract as it is billed to the customer based on the allocation determined at contract inception. Variable consideration allocated to the lease component is recognized in revenue on a straight-line basis for the remainder of the contract term and variable consideration allocated to the non-lease component is recognized in revenue using an input method, consistent with the estimated pattern of maintenance costs for the remainder of the contract term.

Leases not classified as operating leases are generally considered sales-type leases. We recognize revenue for sales-type leases using the effective interest method, which provides a constant periodic rate of return on the outstanding investment in the lease. We generally lease new vehicles under our sales-type lease arrangements. Therefore, there is generally not a difference between the net investment in the lease and the carrying value of the vehicles, and we do not recognize selling profit or loss at lease commencement. Revenue is recognized net of amounts collected from customers for taxes, such as sales tax, that are remitted to the applicable taxing authorities.

Significant Judgments and Estimates

Allocating consideration between lease and non-lease components in our ChoiceLease arrangements requires significant judgment. We do not sell the components of our ChoiceLease product offering on a stand-alone basis. Judgment is required to determine the standalone selling prices of the lease and non-lease components in order to allocate the consideration on a relative standalone selling price basis.

We determine the standalone price of the lease component using the projected cash flows of the lease assuming a certain targeted return. We consider a number of factors to determine the targeted return, including the net present value of the projected cash flows in a ChoiceLease arrangement discounted at our weighted average cost of capital.

Our ChoiceLease arrangements include maintenance as a non-lease component of the contract. We determine the standalone price of the maintenance component using an expected cost plus margin approach. The expected costs are based on our historical costs of providing maintenance services in our ChoiceLease arrangements. The margin is based on historical margin percentages for our full service maintenance contracts in the SelectCare product line, as the maintenance performance obligation in those contracts is similar to maintenance in our ChoiceLease arrangements. Full service maintenance arrangements in SelectCare are priced based on targeted margin percentages for new and used vehicles by type of vehicle (trucks, tractors, and trailers), considering the fixed and variable costs of providing maintenance services. Certain ChoiceLease arrangements include liability and/or physical damage insurance coverage to our customers. We charge a separate fixed monthly rate for these insurance offerings, which represents the standalone selling price.

We allocate the contract consideration (excluding insurance) between the lease and maintenance components based on the relative standalone selling prices of each of those services and allocate contract consideration for insurance based on the price of insurance, which is priced separately. If the lessee elects to obtain insurance coverage from us, the consideration for the fixed monthly rate is allocated to the insurance performance obligations.

Variable consideration, such as billings for mileage and from changes in CPI, is excluded from the allocation of consideration at the inception of the contract. Revenues associated with licensing and operating taxes that are billed as incurred

7
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)



based on the contract arrangement are also excluded from the allocation of consideration at contract inception and allocated as earned. The variable consideration and licensing and operating tax revenues are allocated to the lease and maintenance components based on the same allocation percentages at contract inception (or the most recent contract modification) when earned.

Contract Balances

We do not have material contract assets as we generally invoice customers as we perform services. Contract receivables are recorded in “Receivables, net” in the Consolidated Condensed Balance Sheets. Payment terms vary by contract type, although terms generally include a requirement of payment within 15 to 90 days. As a practical expedient, we do not assess whether a contract has a significant financing component as the period between the receipt of customer payment and the transfer of service to the customer is less than a year.

Our contract liabilities consist of deferred revenue related to maintenance services. We record deferred revenues when cash payments are received or due in advance of our performance, including amounts that are refundable. We classify deferred revenue for performance obligations we expect to perform within 12 months as current liabilities and for performance obligations to be performed later than 12 months as other non-current liabilities. Revenue is recognized upon satisfaction of the performance obligation.

As practical expedients, 1) we do not disclose information about remaining performance obligations that are part of a contract that has an original expected duration of one year or less, and 2) we do not disclose information about remaining performance obligations when we have the right to invoice the customer and the revenue recognized corresponds directly with the value to the customer of our performance completed to date.

Leases

Leases as Lessor

We lease revenue earning equipment to customers for periods ranging from three to seven years for trucks and tractors and up to ten years for trailers. We determine if an arrangement is or contains a lease at inception. The standard lease agreement for revenue earning equipment provides both parties the right to terminate; therefore, we evaluate whether the lessee is reasonably certain to exercise the termination option in order to determine the appropriate lease term. If we terminate, the customer has the right (but not obligation) to purchase the vehicle. If the customer terminates, we have the option to require the customer to purchase the vehicle or pay a termination penalty. Our leases generally do not provide either party an option to renew the lease. We also rent revenue earning equipment to customers on a short-term basis, from one day up to one year in length. From time to time, we may also lease facilities to third parties. The majority of our leases are classified as operating leases. However, some of our revenue earning equipment leases are classified as sales-type leases.

Our determination of the residual values (i.e., the price at which we ultimately expect to dispose of revenue earning equipment) is established with a long-term view considering historical market price changes, current and expected future market price trends, expected lives of vehicles and extent of alternative uses. Factors that could cause actual results to materially differ from estimates include, but are not limited to, unforeseen changes in technology innovations, sudden changes in supply and demand, and competitor pricing. We have developed disciplines related to the management and maintenance of our leased vehicles designed to manage the risk associated with the residual values of our revenue earning equipment. In addition, we also monitor market trends throughout the year and assess residual values of vehicles expected to be sold in the near term and may adjust residual values for these vehicles.

Leases as Lessee

We lease facilities, revenue earning equipment, material handling equipment, automated washing machines, vehicles and office equipment. We determine if an arrangement is or contains a lease at inception. Effective with the adoption of Topic 842, we have established right-of-use (ROU) assets, which represent our right to use an underlying asset for the lease term and lease liabilities, which represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate of return, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. Operating lease ROU assets also exclude lease incentives received. We pay variable lease charges related

8
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)



to property taxes, insurance and maintenance as well as changes in CPI for leased facilities; equipment usage for revenue earning equipment, automated washing machines, vehicles and office equipment; and hours of operation for material handling equipment. For leases with a term of 12 months or less, with the exception of our real estate leases, we recognize lease payments in our income statement on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments is incurred.

Lease terms for the facilities are generally three to five years with one or more five -year renewal options and the lease terms for revenue earning equipment, material handling equipment, automated washing machines and vehicles typically range from three to seven years typically with no extension options. For purposes of calculating ROU assets and operating lease liabilities, lease terms may be deemed to include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Macroeconomic conditions is the primary factor used to estimate whether an option to extend a lease term will be exercised or not. None of our leasing arrangements contain restrictive financial covenants. Certain of our material handling equipment leases have residual value guarantees. We recorded operating lease ROU assets and finance lease assets totaling approximately $235 million and $245 million as of March 31, 2019 and December 31, 2018, respectively, related to leases as lessee. Refer to Note 6 , " Leases ".



9
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)



2. RECENT ACCOUNTING PRONOUNCEMENTS

Cloud Computing Arrangements

In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal Use Software (Topic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which amends ASC 350-40 to address a customer’s accounting for implementation costs incurred in a cloud computing arrangement (CCA) that is a service contract. ASU 2018-15 aligns the accounting for costs incurred to implement a CCA that is a service arrangement with the guidance on capitalizing costs associated with developing or obtaining internal-use software. The standard is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. Entities are permitted to apply either a retrospective or prospective approach to adopt the guidance. We are currently evaluating the impact of the adoption of this update on our consolidated financial position, results of operations, and cash flows.

Derivatives and Hedging

In August 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.
2017-12, Derivatives and Hedging (Topic 815) , which simplifies and clarifies the accounting and disclosure for hedging
activities by more closely aligning the results of cash flow and fair value hedge accounting with the risk management activities of an entity. The amendments in this update are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018, with early adoption permitted. We adopted this standard during the first quarter of 2018 and it did not impact our consolidated financial position, results of operations or cash flows.

Leases

In February 2016, the FASB issued Topic 842, which sets out the principles for the identification, measurement, recognition, presentation and disclosure of leases. The FASB issued a number of subsequent updates to the standard. Topic 842 impacts the accounting for both lessors and lessees. We have adopted the standard effective January 1, 2019, using the modified retrospective transition method and initial application date of January 1, 2017. For all our facilities and equipment that we lease, we have elected the practical expedient to combine lease and non-lease components. For our existing operating and finance leases that commenced before the date of initial application, we have made an accounting policy election, as lessee, to use the incremental borrowing rate for our leases considering the remaining lease term and remaining minimum rental payments. After lease commencement of our operating leases as lessee, unless the ROU assets are impaired, we have made an accounting policy election to subsequently measure operating lease ROU assets by amortizing the ROU assets calculated as the difference between the straight line cost for the period (including amortization of initial direct costs) and the periodic accretion of the lease liability using the effective interest method. In calculating the change in ROU assets from a lease modification that decreases our rights as lessee to use one or more underlying assets, we have made an accounting policy election of remeasuring the ROU asset based on how much of the original right of use remains after modification.

The new standard requires lessors to identify and evaluate the lease and non-lease components in arrangements containing a lease, provides clarification on the scope of non-lease components and provides more guidance on how to identify and separate the components. From a lessor perspective, the adoption of the new lease standard primarily impacts our ChoiceLease product line, which includes a vehicle lease as well as maintenance and other services.

The standard requires lessees to classify leases as either finance or operating leases. This classification determines whether the related expense is recognized based on asset amortization and interest on the obligation (finance leases) or on a straight-line basis over the term of the lease (operating lease). We recorded a ROU asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. We have elected the practical expedient in Topic 842 to not apply these recognition requirements to leases with a term of 12 months or less with the exception of our real estate leases. Instead we recognize the lease payments in profit or loss on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments is incurred.








10
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)



Adoption of the new lease standard impacted our previously reported Consolidated Condensed Statements of Earnings and Comprehensive Income results as follows (in millions, except per share amounts):
 
Three months ended March 31, 2018
 
 
 
 
 
 
 
 
 
As Previously
 
Lessor
 
Lessee and Other
 
 
 
Reported
 
Adjustments (1)
 
Adjustments (1)
 
As Revised
Lease & related maintenance and rental revenues
$
824.3

 
0.5

 
0.3

 
825.0

Total revenues

1,903.5

 
0.5

 
0.3

 
1,904.2

Cost of lease & related maintenance and rental
619.2

 
(3.6
)
 
—

 
615.6

Cost of services (2)
787.2

 
—

 
1.5

 
788.8

Other operating expenses
33.5

 
—

 
(0.5
)
 
33.0

Selling, general and administrative expenses (2)
208.6

 
(0.4
)
 
(0.4
)
 
207.8

Interest expense
37.8

 
—

 
0.4

 
38.2

Restructuring and other items, net (2)
16.0

 
—

 
(0.9
)
 
15.1

Earnings from continuing operations before income taxes

48.1

 
4.5

 
0.1

 
52.7

Provision for income taxes
14.2

 
1.2

 
—

 
15.4

Earnings from continuing operations

33.9

 
3.3

 
0.1

 
37.3

Net earnings
33.5

 
3.3

 
0.1

 
36.9

 
 
 
 
 
 
 
 
Comprehensive income
51.0

 
3.4

 
—

 
54.3

 
 
 
 
 
 
 
 
Earnings per common share - Basic
 
 
 
 
 
 
 
        Continuing operations

$
0.65

 
0.06

 
—

 
0.71

        Net earnings

$
0.64

 
0.06

 
—

 
0.70

 
 
 
 
 
 
 
 
Earnings per common share - Diluted
 
 
 
 
 
 
 
        Continuing operations
$
0.64

 
0.06

 
—

 
0.70

        Net earnings
$
0.63

 
0.06

 
—

 
0.70

————————————
(1)
Amounts include the correction of a prior period error. The primary components of the error correction are a reduction of "Lease & related maintenance and rental revenues" of approximately $4.7 million and an offsetting reduction in depreciation expense (included in "Cost of lease & related maintenance and rental") of approximately $4.7 million . We determined certain lessor arrangements of revenue earning equipment historically accounted for as operating leases should have been accounted for as direct financing leases. Additionally, we evaluated our leases for classification and determined that certain lessee arrangements, primarily real estate leases, historically accounted for as operating leases should have been accounted for as capital leases. We concluded these errors were not material to any of our previously issued consolidated financial statements.
(2)
Adjustments primarily reflects the reclassification of our Singapore operations into "Restructuring and other items, net," that we will shut down during 2019.

Note: Amounts may not be additive due to rounding.














11
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)



Adoption of the new lease standard impacted our previously reported Consolidated Condensed Balance Sheet as follows (in millions):
 
 
 
 
December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
As Previously
 
Lessor
 
Lessee
 
 
 
 
 
 
Reported
 
Adjustments (1)
 
Adjustments (1)
 
As Revised
Receivables, net
$
1,219.4

 
22.6

 
—

 
1,242.1

Prepaid expenses and other current assets
201.6

 
(23.3
)
 
—

 
178.3

Total current assets
1,568.4

 
(0.7
)
 
—

 
1,567.7

Revenue earning equipment, net
9,498.0

 
(84.2
)
 
2.2

 
9,416.0

Operating property and equipment, net
843.8

 
—

 
18.2

 
862.1

Sales-type leases and other assets
606.6

 
156.8

 
204.3

 
967.8

Total assets
13,051.1

 
72.0

 
224.7

 
13,347.8

Short-term debt and current portion of long term-debt
930.0

 
—

 
7.2

 
937.1

Accrued expenses and other current liabilities
630.5

 
145.1

 
72.2

 
847.7

Total current liabilities
2,292.3

 
145.1

 
79.3

 
2,516.7

Long-term debt
5,693.6

 
—

 
18.5

 
5,712.1

Other non-current liabilities
849.9

 
421.2

 
131.5

 
1,402.6

Deferred income taxes
1,304.8

 
(124.6
)
 
(0.5
)
 
1,179.7

Total liabilities
10,140.8

 
441.7

 
228.8

 
10,811.2

Retained earnings
2,710.7

 
(369.6
)
 
(3.8
)
 
2,337.3

Accumulated other comprehensive loss
(911.3
)
 
(0.1
)
 
(0.2
)
 
(911.6
)
Total shareholders' equity
2,910.3

 
(369.7
)
 
(4.1
)
 
2,536.6

Total liabilities and shareholders' equity
13,051.1

 
72.0

 
224.7

 
13,347.8

————————————
(1)
Amounts include the correction of a prior period error. The primary components of the error correction are an increase in "Receivables, net" of approximately $24 million , an increase in sales-type leases and other assets of approximately $65 million and a reduction in "Revenue earning equipment, net" of $83 million . We determined certain lessor arrangements of revenue earning equipment historically accounted for as operating leases should have been accounted for as direct financing leases. Additionally, we evaluated our leases for classification and determined that certain lessee arrangements, primarily real estate leases, historically accounted for as operating leases should have been accounted for as capital leases. We concluded these errors were not material to any of our previously issued consolidated financial statements.


Note: Amounts may not be additive due to rounding.


12
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)



Adoption of the new lease standard impacted our previously reported Consolidated Condensed Statements of Cash Flows as follows (in millions):
 
Three months ended March 31, 2018
 
As Previously Reported
 
New Lease Standard Adjustments
 
As Revised
Net earnings
33.5

 
3.4

 
36.9

Earnings from continuing operations
33.9

 
3.4

 
37.3

Depreciation expense
336.7

 
(3.9
)
 
332.8

Amortization expense and other non-cash charges, net
13.6

 
18.5

 
32.1

Deferred income tax expense
31.9

 
1.2

 
33.1

Collections on sales-type leases and other items
—

 
21.6

 
21.6

Changes in operating assets and liabilities:
 
 


 
 
Prepaid expenses and other assets
(26.0
)
 
(20.1
)
 
(46.1
)
Accrued expenses and other non-current liabilities
(95.9
)
 
1.3

 
(94.6
)
Net cash provided by operating activities from continuing operations
314.9

 
22.0

 
336.9

Debt repaid
(412.1
)
 
(2.2
)
 
(414.3
)
Net cash provided by financing activities from continuing operations
231.8

 
(2.2
)
 
229.6

Collections on direct finance leases and other items
19.7

 
(19.7
)
 
—

Net cash used in investing activities from continuing operations
(553.0
)
 
(19.7
)
 
(572.8
)
 
 
 
 
 
 


Note: Amounts may not be additive due to rounding.


13
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)



3 . REVENUE

Disaggregation of Revenue

The following tables disaggregate our revenue by primary geographical market, major product/service lines, and industry. During 2019, we adopted Topic 842 and have retrospectively adjusted 2018 for the impact of this new standard.

Primary Geographical Markets
 
Three months ended March 31, 2019
 
FMS
 
DTS
 
SCS
 
Eliminations
 
Total
 
(In thousands)
United States
$
1,198,943

 
349,621

 
529,393

 
(151,163
)
 
1,926,794

Canada
74,014

 
—

 
49,708

 
(5,401
)
 
118,321

Europe
78,642

 
—

 
—

 
—

 
78,642

Mexico
—

 
—

 
53,277

 
—

 
53,277

Singapore
—

 
—

 
3,293

 
—

 
3,293

Total revenue
$
1,351,599

 
349,621

 
635,671

 
(156,564
)
 
2,180,327




 
Three months ended March 31, 2018
 
FMS
 
DTS
 
SCS
 
Eliminations
 
Total
 
(In thousands)
United States (1)
1,085,446

 
298,970

 
401,883

 
(127,716
)
 
1,658,583

Canada
74,808

 
—

 
43,093

 
(4,806
)
 
113,095

Europe
82,796

 
—

 
—

 
—

 
82,796

Mexico (1)
—

 
—

 
44,032

 
—

 
44,032

Singapore
—

 
—

 
5,699

 
—

 
5,699

Total revenue
1,243,050

 
298,970

 
494,707

 
(132,522
)
 
1,904,205

————————————
(1) 2018 SCS total revenue amounts for the United States and Mexico include reclassifications to conform to the current period presentation.


Major Products/Service Lines
 
Three months ended March 31, 2019
 
FMS
 
DTS
 
SCS
 
Eliminations
 
Total
 
(In thousands)
ChoiceLease
$
748,579

 
—

 
—

 
(68,191
)
 
680,388

SelectCare
135,779

 
—

 
—

 
(12,250
)
 
123,529

Commercial rental
236,148

 
—

 
—

 
(16,977
)
 
219,171

Fuel
207,866

 
—

 
—

 
(59,146
)
 
148,720

Other
23,227

 
—

 
—

 
—

 
23,227

DTS
—

 
349,621

 
—

 
—

 
349,621

SCS
—

 
—

 
635,671

 
—

 
635,671

Total revenue
$
1,351,599

 
349,621

 
635,671

 
(156,564
)
 
2,180,327





14
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)



 
Three months ended March 31, 2018
 
FMS
 
DTS
 
SCS
 
Eliminations
 
Total
 
(In thousands)
ChoiceLease
690,902

 
—

 
—

 
(60,377
)
 
630,525

SelectCare
121,873

 
—

 
—

 
(9,344
)
 
112,529

Commercial rental
204,530

 
—

 
—

 
(10,064
)
 
194,466

Fuel
203,807

 
—

 
—

 
(52,737
)
 
151,070

Other
21,938

 
—

 
—

 
—

 
21,938

DTS
—

 
298,970

 
—

 
—

 
298,970

SCS
—

 
—

 
494,707

 
—

 
494,707

Total revenue
1,243,050

 
298,970

 
494,707

 
(132,522
)
 
1,904,205



Industry

Our SCS business segment includes revenue from the below industries:
 
Three months ended March 31,
 
2019
 
2018
 
(In thousands)
Automotive
$
253,679

 
207,792

Technology and healthcare
113,668

 
103,097

CPG and retail
217,098

 
135,358

Industrial and other
51,226

 
48,460

Total revenue
$
635,671

 
494,707


Contract Balances

We record a receivable related to revenue recognized when we have an unconditional right to invoice. There were no material contract assets as of March 31, 2019 or December 31, 2018 . Trade receivables were $1.06 billion and $1.09 billion at March 31, 2019 and December 31, 2018 , respectively. Impairment losses on receivables were not material during the first quarters of 2019 and 2018.

Contract liabilities relate to payments received in advance of performance under the contract. Changes in contract liabilities are due to our performance under the contract. The amount of revenue recognized during the three months ended March 31, 2019 , that was included within deferred revenue at January 1, 2019, was $58 million . In addition, we deferred $57 million of revenue during the first quarter of 2019 . Refer to Note 5 , " Accrued Expenses and Other Liabilities ," for additional information on deferred revenue.

Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized (“contracted not recognized revenue”). Contracted not recognized revenue includes deferred revenue and amounts for full service ChoiceLease maintenance revenue that will be invoiced and recognized as revenue in future periods as we provide maintenance services to our customers. Contracted not recognized revenue excludes variable revenue as it is not included in the transaction price consideration allocated at contract inception. Contracted not recognized revenue was $2.7 billion as of March 31, 2019. As a practical expedient, revenue related to our insurance performance obligations is excluded from contracted not recognized revenue since insurance coverage is provided over time, and we recognize revenue in the amount we have the right to bill the customer, which corresponds directly with the value to the customer of our performance completed to date.



15
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)



Costs to Obtain and Fullfill a Contract

We capitalize incremental sales commissions paid to our sales force as a result of obtaining ChoiceLease, DTS and SCS service contracts as contract costs. We recorded capitalized sales commissions of $106 million and $107 million at March 31, 2019 and December 31, 2018, respectively. Capitalized sales commissions includes initial direct costs of our leases in the amount of $53 million at March 31, 2019 and December 31, 2018, respectively, accounted for in accordance with Topic 842. Capitalized sales commissions are presented in “Prepaid expenses and other current assets” and “Sales-type leases and other assets” in our Consolidated Condensed Balance Sheets.

Capitalized sales commissions related to our ChoiceLease product are amortized based on the same pattern that the revenue is recognized for the underlying lease or non-lease components of the contract. Incremental sales commissions capitalized in connection with our ChoiceLease contracts relate to the lease component and non-lease maintenance components of our contracts. We allocate the ChoiceLease commissions to the lease and non-lease components based on the same allocation of the contract consideration. The portion of capitalized commissions related to the lease component is amortized on a straight-line basis and the portion of the capitalized commissions related to the maintenance portion is amortized consistent with the estimated pattern of maintenance costs. The amortization period aligns with the term of our contract, which typically ranges from three to seven years, and amortization expense is included in “Selling, general and administrative expenses” in our Consolidated Condensed Statements of Earnings.

Capitalized commissions related to our DTS and SCS service contracts are amortized based on the same patten that the revenue is recognized for the underlying contracts. This generally results in a straight-line amortization as the amount of revenue billed to the customer under DTS and SCS contracts corresponds directly with the value to the customer of our performance completed to date. The amortization period aligns with the term of the contract, which typically ranges from three to five years, and amortization expense is included in “Selling, general and administrative expenses” in our Consolidated Condensed Statement of Earnings.

For the three months ended March 31, 2019 and 2018, the amount of amortization was $11 million and $6 million , respectively. As a practical expedient, we recognize the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that we otherwise would have recognized is one year or less.




16
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)

4 . REVENUE EARNING EQUIPMENT, NET

 
March 31, 2019
 
December 31, 2018
 
Cost
 
Accumulated
Depreciation
 
Net  Book
Value (1)
 
Cost
 
Accumulated
Depreciation
 
Net  Book
Value (1)
 
(In thousands)
Held for use:
 
ChoiceLease
$
11,331,946

 
(3,743,391
)
 
7,588,555

 
10,824,989

 
(3,645,655
)
 
7,179,334

Commercial rental
3,315,660

 
(1,047,437
)
 
2,268,223

 
3,152,908

 
(1,047,346
)
 
2,105,562

Held for sale
537,173

 
(384,790
)
 
152,383

 
467,093

 
(336,028
)
 
131,065

Total
$
15,184,779

 
(5,175,618
)
 
10,009,161

 
14,444,990

 
(5,029,029
)
 
9,415,961

 ————————————
(1)
Revenue earning equipment, net includes vehicles under finance leases of $12 million , less accumulated depreciation of $6 million , at March 31, 2019 , and $23 million , less accumulated depreciation of $13 million , at December 31, 2018 .

Revenue earning equipment held for sale is stated at the lower of carrying amount or fair value less costs to sell. Losses on vehicles held for sale for which carrying values exceeded fair value are recognized at the time they arrive at our used truck sales centers and are presented within “Used vehicle sales, net” in the Consolidated Condensed Statements of Earnings. For revenue earning equipment held for sale, we stratify our fleet by vehicle type (trucks, tractors and trailers), weight class, age and other relevant characteristics and create classes of similar assets for analysis purposes. For a certain population of our revenue earning equipment held for sale, fair value was determined based upon recent market prices obtained from our own sales experience for sales of each class of similar assets and vehicle condition. Expected declines in market prices were also considered when valuing the vehicles held for sale. These vehicles held for sale were classified within Level 3 of the fair value hierarchy.

The following table presents our assets held for sale that are measured at fair value on a nonrecurring basis and considered a Level 3 fair value measurement:
 
 
 
Total Losses (2)
 
March 31,
 
December 31,
 
Three months ended March 31,
 
2019
 
2018
 
2019
 
2018
 
(In thousands)
Assets held for sale:
 
 
 
 
 
 
 
Revenue earning equipment (1) :
 
 
 
 
 
 
 
Trucks
$
41,813

 
44,325

 
$
11,546

 
8,601

Tractors
43,269

 
35,397

 
4,968

 
3,377

Trailers
1,547

 
1,507

 
180

 
1,593

Total assets at fair value
$
86,629

 
81,229

 
$
16,694

 
13,571

 ————————————
(1)
Assets held for sale in the above table only include the portion of revenue earning equipment held for sale where net book values exceeded fair values and fair value adjustments were recorded. The net book value of assets held for sale that were less than fair value was $66 million and $50 million as of March 31, 2019 and December 31, 2018 , respectively.
(2)
Total losses represent fair value adjustments for all vehicles reclassified to held for sale throughout the period for which fair value was less than net book value.






17
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)

The components of used vehicle sales, net were as follows:
 
Three months ended March 31,
 
2019
 
2018

(In thousands)
Gains on vehicle sales, net
$
(8,477
)
 
(6,140
)
Losses from fair value adjustments
16,694

 
13,571

Used vehicle sales, net
$
8,217

 
7,431


We own the majority of our revenue earning equipment. Revenue earning equipment that we lease as a lessee are immaterial, and are therefore not separately disclosed from owned revenue earning equipment.
   


18
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)

5 . ACCRUED EXPENSES AND OTHER LIABILITIES

 
March 31, 2019
 
December 31, 2018
 
Accrued
Expenses
 
Non-Current
Liabilities
 
Total
 
Accrued
Expenses
 
Non-Current
Liabilities
 
Total
 
(In thousands)
Salaries and wages
$
93,355

 
—

 
93,355

 
149,629

 
—

 
149,629

Deferred compensation
5,730

 
57,876

 
63,606

 
4,524

 
55,279

 
59,803

Pension benefits
3,764

 
455,989

 
459,753

 
3,754

 
456,979

 
460,733

Other postretirement benefits
1,391

 
18,114

 
19,505

 
1,387

 
18,097

 
19,484

Other employee benefits
7,728

 
—

 
7,728

 
28,370

 
—

 
28,370

Insurance obligations (1)
149,946

 
254,270

 
404,216

 
139,314

 
247,552

 
386,866

Operating taxes
108,343

 
—

 
108,343

 
100,399

 
—

 
100,399

Income taxes
2,872

 
19,655

 
22,527

 
3,491

 
18,477

 
21,968

Interest
40,373

 
—

 
40,373

 
39,522

 
—

 
39,522

Deposits, mainly from customers
81,930

 
3,460

 
85,390

 
80,401

 
3,390

 
83,791

Operating lease liabilities
71,992

 
134,784

 
206,776

 
73,422

 
137,384

 
210,806

Deferred revenue (2)
168,271

 
415,166

 
583,437

 
160,902

 
421,176

 
582,078

Restructuring liabilities (3)
4,566

 
—

 
4,566

 
7,595

 
—

 
7,595

Other
57,037

 
39,959

 
96,996

 
55,029

 
44,291

 
99,320

Total
$
797,298

 
1,399,273

 
2,196,571

 
847,739

 
1,402,625

 
2,250,364

  ————————————
(1)
Insurance obligations are primarily comprised of self-insured claim liabilities.
(2)
Deferred revenue is primarily related to the non-lease maintenance services component of our ChoiceLease product line.
(3)
The reduction in restructuring liabilities from December 31, 2018 , principally represents cash payments for employee termination costs. The majority of the balance remaining in restructuring liabilities is expected to be paid by the end of 2019.



19
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)



6 . LEASES
Leases as Lessor

The components of lease income were as follows:
 
Three months ended March 31,
 
2019
 
2018
 
(In thousands)
Operating leases
 
 
 
     Lease income related to lease payments
$
360,309

 
334,367

Lease income related to commercial rental (1)
219,171

 
194,466

 
 
 
 
Sales type leases
 
 
 
     Interest income related to net investment in leases
11,456

 
9,797

 
 
 
 
Variable lease income excluding commercial rental (1)
55,439

 
52,227

————————————
(1)
Lease income related to commercial rental includes both fixed and variable lease income. Variable lease income is approximately 15% to 25% of total commercial rental income based on management's internal estimates.


The components of net investment in sales-type leases were as follows:
 
March 31, 2019
 
December 31, 2018
 
(In thousands)
Net investment in the lease — lease payment receivable
$
514,531

 
505,057

Net investment in the lease — unguaranteed residual assets
46,828

 
46,209

 
$
561,359

 
551,266

————————————
Note: The net investment in the sales-type lease shown above are included in "Accounts receivables, net" and "Sales-type leases and other assets" in the Consolidated Condensed Balance Sheets.


Maturities of sales-type lease receivables were as follows:
 
March 31, 2019
 
December 31, 2018
 
(In thousands)
2019 (excluding three months ended March 31, 2019)
$
103,957

 
133,557

2020
143,811

 
136,924

2021
121,433

 
114,983

2022
92,028

 
85,146

2023
58,175

 
52,161

Thereafter
91,033

 
78,935

 
 
 
 
Total undiscounted cash flows
610,437

 
601,706

Present value of lease payments (recognized as lease receivables)
(514,531
)
 
(505,057
)
Difference between undiscounted cash flows and discounted cash flows
95,906

 
96,649







20
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)



Maturities of operating lease payments were as follows:
 
March 31, 2019
 
December 31, 2018
 
(In thousands)
2019 (excluding three months ended March 31, 2019)
$
936,560

 
1,159,851

2020
1,008,773

 
892,721

2021
756,134

 
646,008

2022
507,429

 
421,050

2023
319,320

 
249,255

Thereafter
291,636

 
203,632

 
 
 
 
Total undiscounted cash flows
$
3,819,852

 
3,572,517



Leases as Lessee

The components of lease expense were as follows:
 
 
 
Three months ended March 31,
 
Classification
 
2019
 
2018
 
 
 
(In thousands)
Finance lease cost
 
 
 
 
 
     Amortization of right-of-use assets
Other operating expenses, SG&A
 
$
7,788

 
5,143

     Interest on lease liabilities
Interest expense
 
643

 
597

Operating lease cost
Other operating expenses, SG&A
 
23,218

 
19,687

Short-term lease and other
Other operating expenses, SG&A
 
1,124

 
982

Variable lease cost
Other operating expenses, SG&A
 
3,016

 
2,353

Sublease income
Cost of lease & related maintenance and rental, cost of services
 
(5,824
)
 
(6,364
)
Total lease cost
 
 
$
29,965

 
22,398


Supplemental cash flow information related to leases was as follows:
 
Three months ended March 31,
 
2019
 
2018
 
(In thousands)
Cash paid for amounts included in measurement of liabilities
 
 
 
     Operating cash flows from finance leases
$
643

 
597

     Operating cash flows from operating leases
22,974

 
19,303

     Financing cash flows from finance leases
7,466

 
5,039

Right-of-use assets obtained in exchange for lease obligations:
 
 
 
Finance leases
2,418

 
2,006

Operating leases
16,605

 
16,908












21
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)



Supplemental balance sheet information relates to leases was as follows:

 
Classification
 
March 31, 2019
 
December 31, 2018
 
 
 
(In thousands)
Assets
 
 
 
 
 
Operating lease right-of-use assets
Sales-type leases and other assets
 
$
199,048

 
203,834

Finance lease assets
Operating property and equipment, net and revenue earning equipment, net
 
36,007

 
41,647

 
 
 
 
 
 
Total leased assets
 
 
$
235,055

 
245,481

 
 
 
 
 
 
Liabilities
 
 
 
 
 
Current
 
 
 
 
 
     Operating
Accrued expenses and other current liabilities
 
$
71,992

 
73,422

     Finance
Short-term debt and current portion of long-term debt
 
11,256

 
14,543

 
 
 
 
 
 
Noncurrent
 
 
 
 
 
     Operating
Other non-current liabilities
 
134,784

 
137,384

     Finance
Long-term debt
 
32,446

 
32,909

 
 
 
 
 
 
Total lease liabilities
 
 
$
250,478

 
258,258

 
 
 
 
 
 

 
March 31, 2019
 
December 31, 2018
 
(In thousands)
Weighted-average remaining lease term
 
 
 
     Operating
4 years

 
4 years

     Finance
7 years

 
7 years

Weighted-average discount rate
 
 
 
     Operating
3.7
%
 
3.7
%
     Finance
8.3
%
 
8.0
%



















22
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)



Maturities of lease liabilities were as follows:
 
Operating
Leases
 
Finance Leases
 
Total
 
(In thousands)
2019 (excluding three months ended March 31, 2019)
$
61,234

 
10,527

 
71,761

2020
58,772

 
10,523

 
69,295

2021
39,367

 
8,790

 
48,157

2022
29,231

 
6,112

 
35,343

2023
14,302

 
3,786

 
18,088

Thereafter
20,022

 
13,688

 
33,710

Total lease payments
222,928

 
53,426

 
276,354

Less: Imputed Interest
(16,152
)
 
(9,724
)
 
(25,876
)
Present value of lease liabilities
$
206,776

 
43,702

 
250,478

 
 
 
 
 
 

As of March 31, 2019, we have additional facility operating leases that have not yet commenced of $8 million . The operating leases will commence in 2019 with lease terms of 3 to 5 years .



23
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)

7 . DEBT
 
Weighted-Average
Interest Rate
 
 
 
 
 
 
 
March 31,
2019
 
December 31,
2018
 
Maturities
 
March 31,
2019
 
December 31,
2018
 
 
 
 
 
 
 
(In thousands)
Short-term debt and current portion of long-term debt:
 
 
 
 
 
 
 
 
 
Short-term debt
1.46%
 
2.69%
 

 
$
210,185

 
81,522

Current portion of long-term debt, including finance leases
 
 
 
 
 
907,304

 
855,609

Total short-term debt and current portion of long-term debt
 
 
 
 
 
1,117,489

 
937,131

Long-term debt:
 
 
 
 
 
 
 
 
 
U.S. commercial paper (1)
2.76%
 
2.78%
 
2023
 
695,272

 
454,397

Canadian commercial paper (1)
1.99%
 
2.28%
 
2023
 
105,169

 
123,491

Trade receivables program
—%
 
3.15%
 
2019
 
—

 
200,000

Global revolving credit facility
2.28%
 
2.25%
 
2023
 
13,224

 
12,581

Unsecured U.S. notes — Medium-term notes  (1)(2)
3.30%
 
3.22%
 
2019-2025
 
5,207,369

 
4,853,496

Unsecured U.S. obligations
3.49%
 
3.50%
 
2019-2024
 
250,000

 
50,000

Unsecured foreign obligations
2.67%
 
1.61%
 
2020-2021
 
33,710

 
216,719

Asset-backed U.S. obligations  (3)
2.36%
 
2.37%
 
2019-2025
 
605,634

 
627,707

Finance lease obligations
8.32%
 
7.97%
 
2019-2073
 
43,702

 
47,452

Total long-term debt
 
 
 
 
 
 
6,954,080

 
6,585,843

Debt issuance costs
 
 
 
 
 
 
(21,097
)
 
(18,088
)
 
 
 
 
 
 
 
6,932,983

 
6,567,755

Current portion of long-term debt, including finance leases
 
 
 
 
 
(907,304
)
 
(855,609
)
Long-term debt
 
 
 
 
 
 
6,025,679

 
5,712,146

Total debt
 
 
 
 
 
 
$
7,143,168

 
6,649,277

  ————————————
(1)
Amounts are net of unamortized original issue discounts of $7 million at March 31, 2019 and December 31, 2018 , respectively.
(2)
Amounts are inclusive of fair market value adjustments on notes subject to hedging of $6 million and $10 million at March 31, 2019 and December 31, 2018 , respectively. The notional amount of the executed interest rate swaps designated as fair value hedges was $725 million at March 31, 2019 and December 31, 2018 . Refer to Note 8 , " Derivatives ," for additional information.
(3)
Asset-backed U.S. obligations are related to financing transactions backed by a portion of our revenue earning equipment.

We maintain a $1.4 billion global revolving credit facility with a syndicate of twelve lending institutions led by Bank of America N.A., BNP Paribas, Lloyds Bank Plc, Mizuho Bank, Ltd., MUFG Bank, Ltd., Royal Bank of Canada, U.S. Bank N.A. and Wells Fargo Bank, N.A. The facility matures in September 2023. The agreement provides for annual facility fees that range from 7.5 basis points to 20 basis points based on Ryder's long-term credit ratings. The annual facility fee is currently 10 basis points , which applies to the total facility size of $1.4 billion .

The credit facility is primarily used to finance working capital but can also be used to issue up to $75 million in letters of credit (there were no letters of credit outstanding against the facility at March 31, 2019 ). At our option, the interest rate on borrowings under the credit facility is based on LIBOR, prime, federal funds or local equivalent rates. The credit facility contains no provisions limiting its availability in the event of a material adverse change to Ryder’s business operations; however, the credit facility does contain standard representations and warranties, events of default, cross-default provisions and certain affirmative and negative covenants.

In order to maintain availability of funding, we must maintain a ratio of debt to consolidated net worth of less than or equal to 300% . Net worth, as defined in the credit facility, represents shareholders' equity excluding any accumulated other comprehensive income or loss associated with our pension and other postretirement plans. The ratio at March 31, 2019 , was 197% . At March 31, 2019 , there was $572 million available under the credit facility.


24
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)

Our global revolving credit facility enables us to refinance short-term obligations on a long-term basis. Short-term commercial paper obligations not required for working capital needs are classified as long-term as we have both the intent and ability to refinance on a long-term basis. In addition, we have the intent and ability to refinance the current portion of certain long-term debt on a long-term basis. At March 31, 2019 , we classified $800 million of short-term commercial paper, $350 million of the current portion of long-term debt and $69 million of short-term debt as long-term debt. At December 31, 2018 , we classified $578 million of short-term commercial paper, $200 million of trade receivables borrowings, $250 million of the current portion of long-term debt and $50 million of short-term debt as long-term debt.

In February 2019, we issued $600 million of unsecured medium-term notes maturing in March 2024. The proceeds from these notes were used to pay off maturing debt and for general corporate purposes. If these notes are downgraded below investment grade following, and as a result of, a change in control, the note holders can require us to repurchase all or a portion of the notes at a purchase price equal to 101% of principal value plus accrued and unpaid interest.

In the first quarter of 2019, we executed two $100 million bank term loans maturing in February and March 2024, respectively. The proceeds from these loans were used to pay off maturing debt and for general corporate purposes.

We have a trade receivables purchase and sale program, pursuant to which we sell certain of our domestic trade accounts receivable to a bankruptcy remote, consolidated subsidiary of Ryder, that in turn sells, on a revolving basis, an ownership interest in certain of these accounts receivable to a committed purchaser. The subsidiary is considered a VIE and is consolidated based on our control of the entity’s activities. We use this program to provide additional liquidity to fund our operations, particularly when it is cost effective to do so. The costs under the program may vary based on changes in interest rates. The available proceeds that may be received under the program are limited to $225 million . If no event occurs that causes early termination, the 364 -day program will expire on June 12, 2019. The program contains provisions restricting its availability in the event of a material adverse change to our business operations or the collectibility of the collateralized receivables. Sales of receivables under this program are accounted for as secured borrowings based on our continuing involvement in the transferred assets. No amounts were outstanding under the program at March 31, 2019 . At December 31, 2018 , $200 million was outstanding under the program.

At March 31, 2019 and December 31, 2018 , we had letters of credit and surety bonds outstanding totaling $373 million and $375 million , respectively, which primarily guarantee the payment of insurance claims.

The fair value of total debt (excluding capital lease and asset-backed U.S. obligations) at March 31, 2019 and December 31, 2018 , was approximately $6.57 billion and $5.97 billion , respectively. For publicly-traded debt, estimates of fair value were based on market prices. For other debt, fair value was estimated based on a model-driven approach using rates currently available to us for debt with similar terms and remaining maturities. The fair value measurements of our publicly-traded debt and other debt were classified within Level 2 of the fair value hierarchy. The carrying amounts reported in the Consolidated Condensed Balance Sheets for “Cash and cash equivalents,” “Receivables, net” and “Accounts payable” approximate fair value because of the immediate or short-term maturities of these financial instruments.


25
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)

8 . DERIVATIVES

From time to time, we enter into interest rate derivatives to manage our fixed and variable interest rate exposure and to better match the repricing of debt instruments to that of our portfolio of assets. We assess the risk that changes in interest rates will have either on the fair value of debt obligations or on the amount of future interest payments by monitoring changes in interest rate exposures and by evaluating hedging opportunities. We regularly monitor interest rate risk attributable to both our outstanding or forecasted debt obligations as well as any offsetting hedge positions. This risk management process involves the use of analytical techniques, including cash flow sensitivity analyses, to estimate the expected impact of changes in interest rates on our future cash flows.
 
As of March 31, 2019 , we had interest rate swaps outstanding that are designated as fair value hedges for certain debt obligations, with a total notional value of $725 million and maturities through 2022 . Interest rate swaps are measured at fair value on a recurring basis using Level 2 fair value inputs. The fair value of these interest rate swaps was a liability of $6 million and $10 million as of March 31, 2019 and December 31, 2018 , respectively. The amounts are presented in "Accrued expenses and other current liabilities" and "Other non-current liabilities" in our Consolidated Condensed Balance Sheets. Changes in the fair value of our interest rate swaps were offset by changes in the fair value of the hedged debt instruments. Accordingly, there was no ineffectiveness related to the interest rate swaps.

As of March 31, 2019 , we had interest rate swaps outstanding that are designated as cash flow hedges for a certain debt obligations, with a total notional value of $215 million and maturities through 2024 . The interest rate swaps are measured at fair value on a recurring basis using Level 2 fair value inputs. The fair value of these interest rate swaps was a liability of $2 million as of March 31, 2019. The fair value of these interest rate swaps was not material as of December 31, 2018. The amounts are presented in "Other non-current liabilities" in our Consolidated Condensed Balance Sheets. The effective portion of the change in the fair value of the hedging instrument is reported in other comprehensive income. The amounts accumulated in other comprehensive income are reclassified to earnings when the related interest payments affect earnings. There was no ineffectiveness related to the interest rate swap.



9 . SHARE REPURCHASE PROGRAMS

In December 2017, our Board of Directors authorized a share repurchase program intended to mitigate the dilutive impact of shares issued under our employee stock plans (the program). Under the program, management is authorized to repurchase up to 1.5 million shares of common stock, the sum of which will not exceed the number of shares issued to employees under the Company’s employee stock plans from December 31, 2017 to December 13, 2019. Share repurchases of common stock are made periodically in open-market transactions and are subject to market conditions, legal requirements and other factors. Management may establish prearranged written plans for the Company under Rule 10b5-1 of the Securities Exchange Act of 1934 as part of the program, which allow for share repurchases during Ryder’s quarterly blackout periods as set forth in the trading plan.

During the three months ended March 31, 2019 and March 31, 2018 , we repurchased approximately 226,000 shares for $14 million and 171,000 shares for $13 million , respectively.



26
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)



10 . ACCUMULATED OTHER COMPREHENSIVE LOSS

The following summary sets forth the components of accumulated other comprehensive loss, net of tax:
 
 
Currency
Translation
Adjustments and Other
 
Net Actuarial
Loss (1)
 
Prior Service (Cost)/
Credit (1)
 
Accumulated
Other
Comprehensive
Loss
 
 
(In thousands)
December 31, 2018
 
$
(199,713
)
 
(700,384
)
 
(11,537
)
 
(911,634
)
Amortization
 
—

 
5,307

 
147

 
5,454

Other current period change
 
15,762

 
—

 
—

 
15,762

March 31, 2019
 
(183,951
)
 
(695,077
)
 
(11,390
)
 
(890,418
)

 
 
Currency
Translation
Adjustments and Other
 
Net Actuarial
Loss (1)
 
Prior Service
Credit (1)
 
Accumulated
Other
Comprehensive
Loss
 
 
(In thousands)
December 31, 2017
 
(143,773
)
 
(560,153
)
 
(6,910
)
 
(710,836
)
Amortization
 
—

 
5,517

 
89

 
5,606

Other current period change
 
11,765

 
—

 
—

 
11,765

Adoption of new accounting standard (2)
 
—

 
(98,987
)
 
(1,580
)
 
(100,567
)
March 31, 2018
 
(132,008
)
 
(653,623
)
 
(8,401
)
 
(794,032
)
_______________________ 
(1)
These amounts are included in the computation of net pension expense. See Note 13 , " Employee Benefit Plans ," for additional information.
(2)
Reflects the impact of adopting ASU No. 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income in 2018, which resulted in a reclassification of stranded tax effects caused by the 2017 Tax Cuts and Jobs Act from accumulated other comprehensive loss to retained earnings in the Consolidated Condensed Balance Sheet.

The gain from currency translation adjustments in the three months ended March 31, 2019 , of $16 million was primarily due to the strengthening of the British Pound and Canadian Dollar against the U.S. Dollar. The gain from currency translation adjustments in the three months ended March 31, 2018 , of $12 million was primarily due to the strengthening of the British Pound against the U.S. Dollar, partially offset by the weakening of the Canadian Dollar against the U.S. Dollar.





27
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)

11 . EARNINGS PER SHARE

The following table presents the calculation of basic and diluted earnings per common share from continuing operations:
 
Three months ended March 31,
 
2019
 
2018
 
(In thousands, except per share amounts)
Earnings per share — Basic:
 
 
 
Earnings from continuing operations
$
45,890

 
37,313

Less: Distributed and undistributed earnings allocated to unvested stock
(177
)
 
(130
)
Earnings from continuing operations available to common shareholders — Basic
$
45,713

 
37,183

 
 
 
 
Weighted average common shares outstanding — Basic
52,418

 
52,405

 
 
 
 
Earnings from continuing operations per common share — Basic
$
0.87

 
0.71

 
 
 
 
Earnings per share — Diluted:
 
 
 
Earnings from continuing operations
$
45,890

 
37,313

Less: Distributed and undistributed earnings allocated to unvested stock
(177
)
 
(130
)
Earnings from continuing operations available to common shareholders — Diluted
$
45,713

 
37,183

 
 
 
 
Weighted average common shares outstanding — Basic
52,418

 
52,405

Effect of dilutive equity awards
223

 
608

Weighted average common shares outstanding — Diluted
52,641

 
53,013

 
 
 
 
Earnings from continuing operations per common share — Diluted
$
0.87

 
0.70

 
 
 
 
Anti-dilutive equity awards not included above
1,682

 
1,046



28
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)



12 . SHARE-BASED COMPENSATION PLANS

Share-based incentive awards are provided to employees under the terms of various share-based compensation plans (collectively, the “Plans”). The Plans are administered by the Compensation Committee of the Board of Directors. Awards under the plan principally include at-the-money stock options, unvested stock and cash awards. Unvested stock awards include grants of market-based, performance-based and time-vested restricted stock rights. Under the terms of our Plans, dividends on unvested stock are not paid unless the stock award vests. Upon vesting, the amount of the dividends paid is equal to the aggregate dividends declared on common shares during the period from the grant date of the award until the date the shares underlying the award are delivered.

The following table provides information on share-based compensation expense and income tax benefits recognized during the periods:
 
Three months ended March 31,
 
2019
 
2018
 
(In thousands)
Stock option and stock purchase plans
$
1,819

 
1,875

Unvested stock
5,580

 
3,466

Share-based compensation expense
7,399

 
5,341

Income tax benefit
(1,160
)
 
(1,161
)
Share-based compensation expense, net of tax
$
6,239

 
4,180


During the three months ended March 31, 2019 and 2018 , approximately 182,000 and 347,000 stock options, respectively, were granted under the Plans. These awards generally vest in equal annual installments over a three year period beginning on the date of grant. The stock options have contractual terms of ten years . The fair value of each option award at the date of grant was estimated using a Black-Scholes-Merton option-pricing valuation model. Share-based compensation expense is recognized on a straight-line basis over the vesting period. The weighted-average fair value per option granted during the three months ended March 31, 2019 and 2018 was $11.74 and $15.89 , respectively.

During the three months ended March 31, 2019 , there were no awards with a return on capital (ROC) performance-based vesting condition granted under the Plans. During the three months ended March 31, 2018, there were approximately 95,000 awards granted with a return on capital (ROC) performance-based vesting condition. The awards are segmented into three one -year performance periods. For these awards, up to 150% of the awards may be earned based on Ryder's one-year adjusted return on capital (ROC) measured against an annual ROC target. If earned, employees will receive the grant of stock three years after the grant date, provided they continue to be employed with Ryder, subject to Compensation Committee approval. For accounting purposes, these awards are not considered granted until the Compensation Committee approves the annual ROC target. During the three months ended March 31, 2019 and 2018 , approximately 79,000 and 98,000 PBRSRs, respectively, were considered granted for accounting purposes. The fair value of the PBRSRs is determined and fixed on the grant date based on Ryder's stock price on the date of grant. Share-based compensation expense is recognized on a straight-line basis over the vesting period, based upon the probability that the performance target will be met. The weighted-average fair value per PBRSR granted during the three months ended March 31, 2019 and 2018 was $57.92 and $74.72 , respectively.

During the three months ended March 31, 2019 , and 2018 , approximately 75,000 and 51,000 performance-based restricted stock rights (PBRSRs), respectively, were awarded under the Plans. For these awards, up to 200% of the awards may be earned based on the spread between Ryder's adjusted return on capital and the cost of capital (ROC/COC) measured against a three-year ROC/COC target. The majority of these awards include a TSR modifier. Ryder's TSR will be compared against the TSR of each of the companies in a custom peer group to determine Ryder's TSR percentile rank versus this custom peer group. The number of ROC/COC PBRSRs will then be adjusted based on Ryder's relative TSR percentile rank. The fair value of these PBRSRs is estimated using a lattice-based option-pricing valuation model that incorporates a Monte-Carlo simulation. Share-based compensation expense is recognized on a straight-line basis over the vesting period, based upon the probability that the performance target will be met. The weighted-average fair value per PBRSR granted during the three months ended March 31, 2019 and 2018 was $61.22 and $72.93 , respectively.




29
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)



During the three months ended March 31, 2019 , and 2018 , approximately 75,000 and 51,000 performance-based restricted stock rights (PBRSRs), respectively, were awarded under the Plans. For these awards, up to 200% of the awards may be earned based on Ryder's strategic revenue growth (SRG) measured against a three-year SRG target. The majority of these awards include a TSR modifier. Ryder's TSR will be compared against the TSR of each of the companies in a custom peer group to determine Ryder's TSR percentile rank versus this custom peer group. The number of SRG PBRSRs will then be adjusted based on Ryder's relative TSR percentile rank. The fair value of these PBRSRs is estimated using a lattice-based option-pricing valuation model that incorporates a Monte-Carlo simulation. Share-based compensation expense is recognized on a straight-line basis over the vesting period, based upon the probability that the performance target will be met. The weighted-average fair value per PBRSR granted during the three months ended March 31, 2019 and 2018 was $61.22 and $72.93 , respectively.

During the three months ended March 31, 2019 and 2018 , approximately 298,000 and 132,000 time-vested restricted stock rights, respectively, were granted under the Plans. The time-vested restricted stock rights entitle the holder to shares of common stock when the awards vest. The 2019 awards primarily vest in equal annual installments over a three -year period beginning on the date of grant. In 2018, 104,000 of the awards granted vest in equal annual installments over a three -year period beginning on the date of grant. The remaining awards granted in 2018 vest at the end of the three -year period. The fair value of the time-vested awards is determined and fixed based on Ryder’s stock price on the date of grant. Share-based compensation expense is recognized on a straight-line basis over the vesting period. The weighted-average fair value per time-vested restricted stock right granted during the three months ended March 31, 2019 and 2018 was $57.92 and $76.69 , respectively.

Certain employees were granted cash awards prior to 2016 as part of our long-term incentive compensation program. The cash awards are accounted for as liability awards under the share-based compensation accounting guidance as the awards are based upon the performance of our common stock and are settled in cash. As a result, the liability is adjusted to reflect fair value at the end of each reporting period. The fair value of the cash awards was estimated using a lattice-based option-pricing valuation model that incorporates a Monte-Carlo simulation. Share-based compensation expense is recognized on a straight-line basis over the vesting period. There was no compensation expense associated with cash awards during the three months ended March 31, 2019 . The compensation expense associated with cash awards was not material for the three months ended March 31, 2018.

Total unrecognized pre-tax compensation expense related to all share-based compensation arrangements at March 31, 2019 , was $53 million and is expected to be recognized over a weighted-average period of 2.1 years.


30
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)

13 . EMPLOYEE BENEFIT PLANS

Components of net pension expense were as follows:
 
Three months ended March 31,
 
2019
 
2018
 
(In thousands)
Pension Benefits
 
 
 
Company-administered plans:
 
 
 
Service cost
$
3,032

 
3,201

Interest cost
21,469

 
19,752

Expected return on plan assets
(22,676
)
 
(25,834
)
Amortization of:
 
 
 
Net actuarial loss
7,610

 
7,372

Prior service cost
179

 
145

 
9,614

 
4,636

Union-administered plans
2,457

 
2,346

Net pension expense
$
12,071

 
6,982

 
 
 
 
Company-administered plans:
 
 
 
U.S.
$
11,473

 
7,357

Non-U.S.
(1,859
)
 
(2,721
)
 
9,614

 
4,636

Union-administered plans
2,457

 
2,346

Net pension expense
$
12,071

 
6,982


During the three months ended March 31, 2019 , we contributed $8 million to our pension plans. In 2019 , the expected total contributions to our pension plans are approximately $34 million . We also maintain other postretirement benefit plans that are not reflected in the above table. The amount of postretirement benefit expense was not material for the three months ended March 31, 2019 and 2018.



31
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)



14 . OTHER ITEMS IMPACTING COMPARABILITY

Our primary measure of segment performance as shown in Note 17 , " Segment Reporting ," excludes certain items we do not believe are representative of the ongoing operations of the segment. Excluding these items from our segment measure of performance allows for better year over year comparison:
 
Three months ended March 31,
 
2019
 
2018
 
(In thousands)
Restructuring and other, net
$
2,588

 
(392
)
ERP implementation
3,590

 
—

Goodwill impairment
—

 
15,513

Restructuring and other items, net
$
6,178

 
15,121


During the three months ended March 31, 2019 and 2018, the below items were recorded in "Restructuring and other, net":

•
In the first quarter of 2019, we recorded $2.6 million of net charges primarily related to consulting fees related to cost savings initiatives, professional fees related to the pursuit of a commercial claim, and income from our Singapore operations that will be shut down in the second quarter of 2019. These items were reflected within "Restructuring and other items, net" in our Consolidated Condensed Statements of Earnings.

•
In the first quarter of 2018, we recorded $0.4 million of net benefit primarily related to an adjustment to the one-time Tax Reform-related employee bonus accrued as of December 31, 2017, income from our Singapore operations that will be shut down in the second quarter of 2019, offset by charges related to professional fees, adjustments to the restructuring accrual recorded as of December 31, 2017 and acquisition transaction costs. These items were reflected within "Restructuring and other items, net" in our Consolidated Condensed Statements of Earnings.

During the first quarter of 2019, we recorded $3.6 million of charges related to the implementation of an Enterprise Resource Planning (ERP) system. This item was reflected within "Restructuring and other items, net" in our Consolidated Condensed Statements of Earnings.

During the first quarter of 2018, we recorded an impairment charge of $15.5 million for all goodwill in the FMS Europe reporting unit. This item was reflected within "Restructuring and other items, net" in our Consolidated Condensed Statements of Earnings.





32
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)



15 .  OTHER MATTERS

We are a party to various claims, complaints and proceedings arising in the ordinary course of our continuing business operations including, but not limited to, those relating to commercial and employment claims, environmental matters, risk management matters (e.g., vehicle liability, workers’ compensation, etc.) and administrative assessments primarily associated with operating taxes. We have established loss provisions for matters in which losses are probable and can be reasonably estimated. We believe that the resolution of these claims, complaints and legal proceedings will not have a material effect on our consolidated condensed financial statements.

Our estimates regarding potential losses and materiality are based on our judgment and assessment of the claims utilizing currently available information. Although we will continue to reassess our reserves and estimates based on future developments, our objective assessment of the legal merits of such claims may not always be predictive of the outcome and actual results may vary from our current estimates.



16 . SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information was as follows:
 
Three months ended March 31,
 
2019
 
2018
 
(In thousands)
Interest paid
$
52,490

 
40,165

Income taxes paid
3,611

 
8,187

Changes in accounts payable related to purchases of revenue earning equipment
87,053

 
48,176

Operating and revenue earning equipment acquired under finance leases
2,026

 
257







33
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)

17 . SEGMENT REPORTING
Ryder is a global leader in transportation and supply chain management solutions. Our operating segments are aggregated into reportable business segments based upon similar economic characteristics, products, services, customers and delivery methods. We report our financial performance in three business segments: (1) FMS, which provides full service leasing and leasing with flexible maintenance options, commercial rental and contract or transactional maintenance services of trucks, tractors and trailers to customers principally in the U.S., Canada and the U.K.; (2) DTS, which provides turnkey transportation solutions in the U.S. that includes dedicated vehicles, drivers and engineering and administrative support; and (3) SCS, which provides integrated logistics solutions, including distribution, management, dedicated transportation and professional services primarily in North America. Dedicated transportation services provided as part of an integrated, multi-service, supply chain solution to SCS customers are reported in the SCS business segment.

Our primary measurement of segment financial performance, defined as segment “Earnings Before Tax” (EBT) from continuing operations, includes an allocation of Central Support Services (CSS) and excludes non-operating pension costs and the restructuring and other items, net discussed in Note 14 , " Other Items Impacting Comparability ." CSS represents those costs incurred to support all business segments, including human resources, finance and procurement, corporate services, public affairs, information technology, health and safety, legal, marketing and corporate communications. The objective of the EBT measurement is to provide clarity on the profitability of each business segment and, ultimately, to hold leadership of each segment accountable for their allocated share of CSS costs. Certain costs are considered to be overhead not attributable to any segment and remain unallocated in CSS. Included among the unallocated overhead remaining within CSS are the costs for investor relations, public affairs and certain executive compensation. CSS costs attributable to the business segments are predominantly allocated to FMS, DTS and SCS as follows:

• Finance, corporate services, and health and safety — allocated based upon estimated and planned resource utilization;

• Human resources — individual costs within this category are allocated under various methods, including allocation based on estimated utilization and number of personnel supported;

• Information technology — principally allocated based upon utilization-related metrics such as number of users or minutes of CPU time. Customer-related project costs and expenses are allocated to the business segment responsible for the project; and

• Other — represents legal and other centralized costs and expenses including certain share-based incentive compensation costs. Expenses, where allocated, are based primarily on the number of personnel supported.

Our FMS segment leases revenue earning equipment and provides fuel, maintenance and other ancillary services to the DTS and SCS segments. Inter-segment revenue and EBT are accounted for at rates similar to those executed with third parties. EBT related to inter-segment equipment and services billed to DTS and SCS customers (equipment contribution) are included in both FMS and the segment that served the customer and then eliminated (presented as “Eliminations”).  

Segment results are not necessarily indicative of the results of operations that would have occurred had each segment been an independent, stand-alone entity during the periods presented. The following tables set forth financial information for each of our segments and provide a reconciliation between segment EBT and earnings from continuing operations before income taxes for the three months ended March 31, 2019 and 2018 . Prior period segment amounts have been revised to reflect the adoption of ASC 842.

34
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(unaudited)

 
FMS
 
DTS
 
SCS
 
Eliminations
 
Total
 
(In thousands)
For the three months ended March 31, 2019
 
 
 
 
 
 
 
 
Revenue from external customers
$
1,195,035

 
349,621

 
635,671

 
—

 
2,180,327

Inter-segment revenue
156,564

 
—

 
—

 
(156,564
)
 
—

Total revenue
$
1,351,599

 
349,621

 
635,671

 
(156,564
)
 
2,180,327

 
 
 
 
 
 
 
 
 
 
Segment EBT
$
60,911

 
17,412

 
32,317

 
(17,302
)
 
93,338

Unallocated CSS
 
 
 
 
 
 
 
 
(12,547
)
     Non-operating pension costs   (1)
 
 
 
 
 
 
 
 
(6,462
)
Restructuring and other items, net (2)
 
 
 
 
 
 
 
 
(6,178
)
Earnings from continuing operations before income taxes
 
 
 
 
 
 
 
 
$
68,151

 
 
 
 
 
 
 
 
 
 
   Segment capital expenditures paid  (3)
$
1,006,129

 
343

 
12,756

 
—

 
1,019,228

Unallocated CSS capital expenditures paid
 
 
 
 
 
 
 
 
7,483

Capital expenditures paid
 
 
 
 
 
 
 
 
$
1,026,711

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the three months ended March 31, 2018
 
 
 
 
 
 
 
 
Revenue from external customers
1,110,528

 
298,970

 
494,707

 
—

 
1,904,205

Inter-segment revenue
132,522

 
—

 
—

 
(132,522
)
 
—

Total revenue
1,243,050

 
298,970

 
494,707

 
(132,522
)
 
1,904,205

 
 
 
 
 
 
 
 
 
 
Segment EBT
54,343

 
13,052

 
25,511

 
(13,272
)
 
79,634

Unallocated CSS
 
 
 
 
 
 
 
 
(10,592
)
Non-operating pension costs  (1)
 
 
 
 
 
 
 
 
(1,222
)
Restructuring and other items, net (2)
 
 
 
 
 
 
 
 
(15,121
)
Earnings from continuing operations before income taxes
 
 
 
 
 
 
 
 
$
52,699

 
 
 
 
 
 
 
 
 
 
   Segment capital expenditures paid   (3)
645,369

 
249

 
12,293

 
—

 
657,911

Unallocated CSS capital expenditures paid
 
 
 
 
 
 
 
 
4,833

Capital expenditures paid
 
 
 
 
 
 
 
 
$
662,744

————————————
(1)
Non-operating pension costs include the amortization of net actuarial loss and prior service costs, interest costs and expected return on plan assets.
(2)
See Note 14 , " Other Items Impacting Comparability ," for additional information.
(3)
Excludes revenue earning equipment acquired under finance leases.





35
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS



The following Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with the unaudited Consolidated Condensed Financial Statements and notes thereto included under Item 1. As discussed in Note 2, effective January 1, 2019, we adopted Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842) using the modified retrospective transition comparative method. We have recast all prior period amounts in this MD&A to conform to the current period presentation based on our adoption of this new accounting standard. Refer to Note 2 , " Recent Accounting Pronouncements ," for additional information on the revised amounts. In addition, reference should be made to our audited Consolidated Financial Statements and notes thereto and related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2018 Annual Report on Form 10-K.

OVERVIEW
Ryder is a global leader in transportation and supply chain management solutions. Our operating segments are aggregated into reportable business segments based upon similar economic characteristics, products, services, customers and delivery methods. We report our financial performance based on three business segments: (1) FMS, which provides full service leasing and leasing with flexible maintenance options, commercial rental, and contract or transactional maintenance services of trucks, tractors and trailers to customers principally in the U.S., Canada and the U.K.; (2) DTS, which provides turnkey transportation solutions in the U.S. that includes dedicated vehicles, drivers and engineering and administrative support; and (3) SCS, which provides integrated logistics solutions, including distribution, management, dedicated transportation and professional services primarily in North America. Dedicated transportation services provided as part of an integrated, multi-service, supply chain solution to SCS customers are reported in the SCS business segment.

We operate in highly competitive markets. Our customers select us based on numerous factors including service quality, price, technology and service offerings. As an alternative to using our services, customers may choose to provide these services for themselves, or may choose to obtain similar or alternative services from other third-party vendors. Our customer base includes enterprises operating in a variety of industries including food and beverage service, transportation and logistics, automotive, retail and consumer goods, industrial, housing, technology, and business and personal services.

In addition, our results of operations and financial condition are influenced by a number of factors including, but not limited to: customer contracting activity and retention, rental demand, used vehicle sales pricing, maintenance costs, depreciation policy changes, currency exchange rate fluctuations, customer preferences, inflation, fuel and energy prices, general economic conditions, insurance costs, interest rates, labor costs, unemployment, tax rates, changes in accounting or regulatory requirements and cybersecurity attacks.

This MD&A includes certain non-GAAP financial measures.  Please refer to the “Non-GAAP Financial Measures” section of this MD&A for information on the non-GAAP measures included in the MD&A, reconciliations to the most comparable GAAP financial measure and the reasons why we believe each measure is useful to investors.


36
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)



Operating results were as follows:
 
Three months ended March 31,
 
Change
 
2019
 
2018
 
2019/2018
 
(In thousands, except per share amounts)
Total revenue
$
2,180,327

 
1,904,205

 
   15
%
Operating revenue (1)
1,759,007

 
1,543,667

 
   14
%



 


 
 



 


 
 
EBT
$
68,151

 
52,699

 
   29
%
Comparable EBT (2)
80,791

 
69,042

 
   17
%
Earnings from continuing operations
45,890

 
37,313

 
   23
%
Comparable earnings from continuing operations (2)
58,462

 
51,099

 
   14
%
Net earnings
45,316

 
36,886

 
   23
%


 

 
 


 

 
 
Earnings per common share (EPS) — Diluted

 

 
 
Continuing operations
$
0.87

 
0.70

 
   24
%
Comparable (2)
1.11

 
0.96

 
   16
%
Net earnings
0.86

 
0.70

 
   23
%
   ————————————
(1)
Non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section of this MD&A for a reconciliation of total revenue to operating revenue and the reasons why management believes this measure is important to investors.
(2)
Non-GAAP financial measures. Refer to the “Non-GAAP Financial Measures” section for a reconciliation of EBT, net earnings and earnings per diluted common share to the comparable measures and the reasons why management believes these measures are important to investors.

Total revenue increased 15% and operating revenue (a non-GAAP measure excluding fuel and subcontracted transportation) increased 14% in the first quarter of 2019 . Revenue grew in all three business segments reflecting new business and higher volumes. SCS total and operating revenue growth also reflects the acquisition of MXD Group, Inc. (MXD), re-branded as Ryder Last Mile, during the second quarter of 2018. EBT increased 29% in the three months ended March 31, 2019 , reflecting revenue growth and improved operating performance.

37
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)




CONSOLIDATED RESULTS

Lease & Related Maintenance and Rental
 
Three months ended March 31,
 
Change
 
2019
 
2018
 
2019/2018
 
(Dollars in thousands)
 
 
Lease & related maintenance and rental revenues
$
899,559

 
824,991

 
   9
%
Cost of lease & related maintenance and rental
664,289

 
615,605

 
   8
%
Gross margin
235,270

 
209,386

 
   12
%
Gross margin %
26
%
 
25
%
 
 

Lease & related maintenance and rental revenues represent revenues from our ChoiceLease and commercial rental product offerings within our FMS business segment. Revenues increased 9% to $900 million in the first quarter of 2019 , driven by ChoiceLease fleet growth and higher prices on replacement vehicles. Lease & related maintenance and rental revenues growth also reflects higher commercial rental revenue driven by higher demand and pricing.

Cost of lease & related maintenance and rental represents the direct costs related to lease & related maintenance and rental revenues. These costs consist of depreciation of revenue earning equipment, maintenance costs (primarily repair parts and labor), and other costs such as licenses, insurance and operating taxes. Cost of lease & related maintenance and rental excludes interest costs from vehicle financing. Cost of lease & related maintenance and rental revenues increased 8% in the first quarter , primarily due to higher depreciation and maintenance costs from larger average lease and rental fleets ( 8% and 11% higher in the first quarter , respectively), as well as higher liability insurance costs related to development of prior period claims, partially offset by a significant maintenance cost recovery item. Cost of lease & related maintenance and rental also increased by $9 million in the first quarter of 2019 , due to higher depreciation as a result of changes in estimated vehicle residual values effective January 1, 2019 , and, to a lesser extent, accelerated depreciation.

Lease & related maintenance and rental gross margin increased 12% in the first quarter of 2019 and gross margin as a percentage of revenue increased to 26% in the first quarter of 2019 . The increase in gross margin dollars and gross margin as a percentage of revenue in the first quarter of 2019 was primarily due to stronger commercial rental demand, as well as the maintenance cost recovery, partially offset by higher depreciation due to vehicle residual value changes.

Services
 
Three months ended March 31,
 
Change
 
2019
 
2018
 
2019/2018
 
(Dollars in thousands)
 


Services revenue
$
1,132,048

 
928,144

 
   22
%
Cost of services
971,690

 
788,771

 
   23
%
Gross margin
160,358

 
139,373

 
   15
%
Gross margin %
14
%
 
15
%
 
 

Services revenue represents all the revenues associated with our DTS and SCS business segments, as well as SelectCare and fleet support services associated with our FMS business segment. Services revenue increased 22% in the first quarter , primarily driven by new business and increased volumes in SCS and DTS. Services revenue also benefited from the MXD acquisition during the second quarter of 2018.

Cost of services represents the direct costs related to services revenue and is primarily comprised of salaries and employee-related costs, subcontracted transportation (purchased transportation from third parties), fuel, vehicle liability costs and maintenance costs. Cost of services increased 23% in the first quarter of 2019 due to higher volumes.

Services gross margin increased 15% in the first quarter of 2019 . Service gross margin as a percentage of revenue decreased to 14% in the first quarter of 2019 . The increase in gross margin dollars reflects benefits from new business and increased volumes in SCS and DTS. The decrease in gross margin as a percentage of revenue reflects a change in the mix of business.

38
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)




Fuel
 
Three months ended March 31,
 
Change
 
2019
 
2018
 
2019/2018
 
(Dollars in thousands)
 
 
Fuel services revenue
$
148,720

 
151,070

 
   (2
)%
Cost of fuel services
143,275

 
146,903

 
   (2
)%
Gross margin
5,445

 
4,167

 
   31
 %
Gross margin %
4
%
 
3
%
 
 

Fuel services revenue represents fuel services provided to our FMS customers. Fuel services revenue decreased 2% in the first quarter , primarily reflecting lower fuel costs passed through to customers, partially offset by higher gallons sold.

Cost of fuel services includes the direct costs associated with providing our customers with fuel. These costs include fuel, salaries and employee-related costs of fuel island attendants and depreciation of our fueling facilities and equipment. Cost of fuel services decreased 2% in the first quarter as a result of lower revenue.

Fuel services gross margin increased 31% and fuel services gross margin as a percentage of revenue increased to 4% in the first quarter of 2019 . Fuel is largely a pass-through to customers for which we realize minimal changes in margin during periods of steady market fuel prices. However, fuel services margin is impacted by sudden increases or decreases in market fuel prices during a short period of time, as customer pricing for fuel is established based on trailing market fuel costs. Fuel services gross margin in the first quarter of 2019 was positively impacted by these price change dynamics as fuel prices fluctuated during the period.

Three months ended March 31,
 
Change

2019
 
2018
 
2019/2018

(Dollars in thousands)
 


Other operating expenses
$
33,626

 
32,975

 
2
%

Other operating expenses include costs related to our owned and leased facilities within the FMS segment, such as facility depreciation, rent, purchased insurance, utilities and taxes. These facilities are utilized to provide maintenance to our ChoiceLease, commercial rental, and SelectCare customers. Other operating expenses increased to $34 million in the first quarter , primarily from growth and additional investments to upgrade our facilities.


Three months ended March 31,
 
Change

2019
 
2018
 
2019/2018

(Dollars in thousands)
 


Selling, general and administrative expenses (SG&A)
$
231,325

 
207,828

 
11
%
Percentage of total revenue
11
%
 
11
%
 
 

SG&A expenses increased 11% in the first quarter and SG&A expenses as a percentage of total revenue remained at 11% . The increase in SG&A expenses primarily reflects higher compensation-related expenses and, to a lesser extent, growth-related investments in sales, marketing and technology.

 
Three months ended March 31,
 
Change
 
2019
 
2018
 
2019/2018
 
(Dollars in thousands)
 
 
Non-operating pension costs
$
6,462

 
1,222

 
NM

Non-operating pension costs includes the components of our net periodic benefit cost other than service cost. These components include interest cost, expected return on plan assets, amortization of actuarial loss and prior service cost. Non-


39
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)




operating pension costs increased $5 million in the first quarter due to unfavorable asset returns in 2018, partially offset by higher interest rates.

 
Three months ended March 31,
 
Change
 
2019
 
2018
 
2019/2018
 
(Dollars in thousands)
 
 
Used vehicle sales, net
$
(8,217
)
 
(7,431
)
 
11
%

Used vehicle sales, net includes gains from sales of used vehicles, selling costs associated with used vehicles and write-downs of vehicles to fair market values. Used vehicle sales, net decreased to an $8 million loss in the first quarter of 2019 , as increased sales of used vehicles at higher prices were offset by higher valuation adjustments on a larger inventory. Global average proceeds per unit in the first quarter increased from the prior year reflecting increased tractor and truck pricing and a higher number of units sold. The increase in tractor pricing was primarily due to a lower average age of vehicles sold, higher mix of retail sales and improved market pricing.

The following table presents the used vehicle pricing changes for the first quarter of 2019 compared with the prior year:
 
Change
 
2019/2018
 
 
Tractors
17
%
Trucks
3
%
 
Three months ended March 31,
 
Change
 
2019
 
2018
 
2019/2018
 
(Dollars in thousands)
 
 
Interest expense
$
55,336

 
38,160

 
45
%
Effective interest rate
3.2
%
 
2.7
%
 
 

Interest expense increased 45% in the first quarter of 2019 , reflecting higher average outstanding debt and a higher effective interest rate. The increase in average outstanding debt reflects higher planned vehicle capital spending. The higher effective interest rate in 2019 reflects the replacement of lower fixed interest rate debt with debt issuances at higher fixed rates as well as the impact on variable rate debt of a higher interest rate environment.

 
Three months ended March 31,
 
Change
 
2019
 
2018
 
2019/2018
 
(Dollars in thousands)
 
 
Miscellaneous income, net
$
8,222

 
2,510

 
NM
  
Miscellaneous income, net consists of investment income on securities used to fund certain benefit plans, interest income,
gains from sales of operating property, foreign currency transaction losses and other non-operating items. Miscellaneous income, increased to $8 million in the first quarter of 2019 . The increase is primarily driven by higher rabbi trust investment income.

 
Three months ended March 31,
 
Change
 
2019
 
2018
 
2019/2018
 
(Dollars in thousands)
 
 
Restructuring and other items, net
$
6,178

 
15,121

 
NM



40
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)




Refer to Note 14 , " Other Items Impacting Comparability ," in the Notes to the Consolidated Condensed Financial Statements for a discussion of restructuring charges and fees, net.

 
Three months ended March 31,
 
Change
 
2019
 
2018
 
2019/2018
 
(Dollars in thousands)
 
 
Provision for income taxes
$
22,261

 
15,386

 
45
%
Effective tax rate from continuing operations
32.7
%
 
29.2
%
 
 

Provision for income taxes increased 45% in the first quarter , reflecting the expiration of certain state net operating losses in 2019 and a one-time beneficial adjustment associated with uncertain tax positions in 2018. In addition, the first quarter 2019 tax rate reflects a $1 million benefit for the alternative minimum tax sequestration reversal.



41
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)




OPERATING RESULTS BY BUSINESS SEGMENT
 
Three months ended March 31,
 
Change
 
2019
 
2018
 
2019/2018
 
(Dollars in thousands)
 
 
Total Revenue:
 
 
 
 
 
Fleet Management Solutions
$
1,351,599

 
1,243,050

 
  9
 %
Dedicated Transportation Solutions
349,621

 
298,970

 
  17

Supply Chain Solutions
635,671


494,707

 
  28

Eliminations
(156,564
)

(132,522
)
 
  (18
)
Total
$
2,180,327


1,904,205

 
  15
 %
Operating Revenue: (1)



 


Fleet Management Solutions
$
1,143,733


1,039,243

 
  10
 %
Dedicated Transportation Solutions
235,620


201,405

 
  17

Supply Chain Solutions
477,089


382,806

 
  25

Eliminations
(97,435
)

(79,787
)
 
  (22
)
Total
$
1,759,007


1,543,667

 
  14
 %
EBT:
 
 
 
 
 
Fleet Management Solutions
$
60,911


54,343

 
  12
 %
Dedicated Transportation Solutions
17,412

 
13,052

 
  33

Supply Chain Solutions
32,317


25,511

 
  27

Eliminations
(17,302
)

(13,272
)
 
  (30
)
 
93,338


79,634

 
  17

Unallocated Central Support Services
(12,547
)

(10,592
)
 
  (18
)
Non-operating pension costs
(6,462
)

(1,222
)
 
NM

Restructuring and other items, net
(6,178
)

(15,121
)
 
NM

Earnings from continuing operations before income taxes
$
68,151


52,699

 
  29
 %
   ————————————
(1)
Non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section of this MD&A for a reconciliation of total revenue to operating revenue, segment total revenue to segment operating revenue for FMS, DTS and SCS, as well as the reasons why management believes these measures are important to investors.

As part of management’s evaluation of segment operating performance, we define the primary measurement of our segment financial performance as “Earnings Before Taxes” (EBT) from continuing operations, which includes an allocation of Central Support Services (CSS), and excludes non-operating pension costs and restructuring and other items, net discussed in Note 14 , " Other Items Impacting Comparability ," in the Notes to Consolidated Condensed Financial Statements. CSS represents those costs
incurred to support all business segments, including human resources, finance and procurement, corporate services and public affairs, information technology, health and safety, legal, marketing and corporate communications.
The objective of the EBT measurement is to provide clarity on the profitability of each segment and, ultimately, to hold leadership of each business segment accountable for their allocated share of CSS costs. Segment results are not necessarily indicative of the results of operations that would have occurred had each segment been an independent, stand-alone entity during the periods presented. Certain costs are not attributable to any segment and remain unallocated in CSS, including costs for investor relations, public affairs and certain executive compensation. See Note 17 , " Segment Reporting ," in the Notes to Consolidated Condensed Financial Statements for a description of the methodology for allocating the remainder of CSS costs to the business segments.
Inter-segment revenue and EBT are accounted for at rates similar to those executed with third parties. EBT related to inter-segment equipment and services billed to DTS and SCS customers (equipment contribution) are included in both FMS and the segment that served the customer and then eliminated (presented as “Eliminations” in the table above). Prior year amounts have been revised to conform to the current period presentation, which excludes EBT from our Singapore operations that will be shut down in 2019.

42
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)




The following table sets forth equipment contribution included in EBT for our DTS and SCS business segments:
 
Three months ended March 31,
 
Change
 
2019
 
2018
 
2019/2018
 
(Dollars in thousands)
 
 
Equipment Contribution:
 
 
 
 
 
    Dedicated Transportation Solutions
$
9,660

 
7,491

 
  29
%
    Supply Chain Solutions
7,642

 
5,781

 
  32

Total (1)
$
17,302

 
13,272

 
  30
%
———————————
(1)
Total amount is included in FMS EBT.

The increase in DTS and SCS equipment contribution for the first quarter of 2019 is primarily driven by new business and higher volumes.

Items excluded from our segment EBT measure and their classification within our Consolidated Condensed Statements of Earnings follow:  
 
 
 
 
Three months ended March 31,
Description
 
Classification
 
2019
 
2018
 
 
 
 
(In thousands)
Non-operating pension costs (1)
 
Non-operating pension costs
 
$
(6,462
)
 
(1,222
)
ERP implementation costs (2)
 
Restructuring and other items, net
 
(3,590
)
 
—

Restructuring and other, net (2)
 
Restructuring and other items, net
 
(2,588
)
 
392

Goodwill impairment (2)
 
Restructuring and other items, net
 
—

 
(15,513
)
 
 
 
 
$
(12,640
)
 
(16,343
)
———————————
(1)
See Note 17 , " Segment Reporting ," in the Notes to Consolidated Condensed Financial Statements for additional information.
(2)
See Note 14 , “ Other Items Impacting Comparability ,” in the Notes to Consolidated Condensed Financial Statements for a discussion of adjustments.



43
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)




Fleet Management Solutions
  
Three months ended March 31,
 
Change
  
2019
 
2018
 
2019/2018
 
(Dollars in thousands)
 

ChoiceLease
$
748,579


690,902

 
  8
%
SelectCare
135,779


121,873

 
  11

Commercial Rental
236,148


204,530

 
  15

Other
23,227


21,938

 
  6

Fuel services revenue
207,866


203,807

 
  2

FMS total revenue (1)
$
1,351,599


1,243,050

 
  9
%
 
 
 
 
 
 
 FMS operating revenue (2)
$
1,143,733


1,039,243

 
  10
%
 
 
 
 
 
 
FMS EBT
$
60,911


54,343

 
  12
%
FMS EBT as a % of FMS total revenue
4.5
%

4.4
%
 
  10 bps
FMS EBT as a % of FMS operating revenue (2)
5.3
%

5.2
%
 
  10 bps
————————————
(1)
Includes intercompany fuel sales from FMS to DTS and SCS.
(2)
Non-GAAP financial measures. Reconciliations of FMS total revenue to FMS operating revenue, FMS EBT as a % of FMS total revenue to FMS EBT as a % of FMS operating revenue, as well as the reasons why management believes these measures are important to investors are included in the “Non-GAAP Financial Measures” section of this MD&A.


The following table summarizes the components of the change in FMS revenue on a percentage basis versus the prior year:
 
Three months ended March 31, 2019
 
Total
 
Operating (1)
Organic, including price and volume
9
 %
 
11
 %
Fuel
1

 
—

Foreign exchange
(1
)
 
(1
)
Net increase
9
 %
 
10
 %
   ————————————
(1)
Non-GAAP financial measure. A reconciliation of FMS total revenue to FMS operating revenue as well as the reasons why management believes this measure is important to investors is included in the "Non-GAAP Financial Measures" section of this MD&A.

FMS total revenue increased to $1.35 billion in the first quarter primarily due to higher operating revenue. FMS operating revenue in the first quarter increased to $1.14 billion primarily from growth in the ChoiceLease and commercial rental product lines.

ChoiceLease revenue increased 8% in the first quarter due to a larger average fleet size and higher prices on replacement vehicles. We expect favorable ChoiceLease revenue comparisons to continue through the end of the year based on strong sales activity. Commercial rental revenue increased 15% in the first quarter due to higher demand and pricing. We expect favorable commercial rental revenue comparisons through the end of the year, however, at a declining growth rate compared to the growth we experienced in the first first quarter. SelectCare revenue increased 11% in the first quarter due to increased volumes. Fuel services revenue increased 2% in the first quarter primarily reflecting higher gallons sold, partially offset by lower fuel costs passed through to customers.






44
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)




The following table provides commercial rental statistics on our global fleet:  
 
Three months ended March 31,
 
Change
 
2019
 
2018
 
2019/2018
 
(Dollars in thousands)
 
 
Rental revenue from non-lease customers
$
129,548

 
120,700

 
7
%
Rental revenue from lease customers (1)
$
106,600

 
83,830

 
27
%
Average commercial rental power fleet size — in service (2) (3)
34,700

 
30,380

 
14
%
Commercial rental utilization — power fleet (2)
74.9
%

74.8
%
 
10 bps
————————————
(1)
Represents revenue from rental vehicles provided to our existing ChoiceLease customers, generally in place of a lease vehicle.
(2)
Number of units rounded to nearest hundred and calculated using quarterly average unit counts.
(3)
Excluding trailers.

FMS EBT increased 12% in the first quarter , reflecting ChoiceLease growth and, to a lesser extent, commercial rental growth. Lease results benefited from fleet growth, reflecting strong outsourcing trends and our sales and marketing initiatives. Commercial rental performance improved due to stronger demand and higher pricing. Rental power fleet utilization was 74.9% for the first quarter , consistent with the prior year. Both lease and rental performance benefited from a significant maintenance cost recovery item. These benefits were offset by higher depreciation of $9 million due to vehicle residual value changes implemented January 1, 2019, and accelerated depreciation, as well as higher liability insurance costs related to development of prior years' claims. In addition, overheads were higher, reflecting growth-related investments in sales, marketing and technology. Used vehicle results slightly declined from the prior year as increased sales of used vehicles at improved prices were offset by higher valuation adjustments on a larger inventory.




























45
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)




Our global fleet of revenue earning equipment, SelectCare vehicles including vehicles under on-demand maintenance is summarized as follows (number of units rounded to the nearest hundred):
 
 
 
 
 
 
 
Change
 
March 31, 2019
 
December 31, 2018
 
March 31, 2018
 
March 2019/Dec. 2018
 
March 2019/March 2018
End of period vehicle count
 
 
 
 
 
 
 
 
 
By type:
 
 
 
 
 
 
 
 
 
Trucks (1)
83,000

 
81,700

 
78,200

 
  2
 %
 
  6
 %
Tractors (2)
78,400

 
74,000

 
67,100

 
  6

 
  17

Trailers (3)
45,000

 
44,700

 
42,800

 
  1

 
  5

Other
1,200

 
1,200

 
1,200

 
—

 
—

Total
207,600

 
201,600

 
189,300

 
  3
 %
 
  10
 %
 
 
 
 
 
 
 
 
 
 
By ownership:
 
 
 
 
 
 
 
 
 
Owned
206,200

 
200,200

 
187,900

 
  3
 %
 
  10
 %
Leased
1,400

 
1,400

 
1,400

 
—

 
—

Total
207,600

 
201,600

 
189,300

 
  3
 %
 
  10
 %
 
 
 
 
 
 
 
 
 
 
By product line:
 
 
 
 
 
 
 
 
 
ChoiceLease
153,500

 
149,300

 
140,800

 
  3
 %
 
  9
 %
Commercial rental
43,800

 
42,600

 
39,300

 
  3

 
  11

  Service vehicles and other
2,700

 
2,800

 
3,200

 
  (4
)
 
  (16
)
Active units
200,000

 
194,700

 
183,300

 
  3

 
  9

Held for sale
7,600

 
6,900

 
6,000

 
  10

 
  27

Total
207,600

 
201,600

 
189,300

 
  3
 %
 
  10
 %
 
 
 
 
 
 
 
 
 
 
Customer vehicles under SelectCare contracts (4)
55,900

 
56,300

 
54,500

 
  (1
)%
 
  3
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarterly average vehicle count
 
 
 
 
 
 
 
 
 
By product line:
 
 
 
 
 
 
 
 
 
ChoiceLease
151,400

 
147,000

 
140,100

 
  3
 %
 
  8
 %
Commercial rental
43,000

 
42,600

 
38,600

 
  1

 
  11

Service vehicles and other
2,800

 
2,900

 
3,300

 
  (3
)
 
  (15
)
Active units
197,200

 
192,500

 
182,000

 
  2

 
  8

Held for sale
7,300

 
6,600

 
6,000

 
  11

 
  22

Total
204,500

 
199,100

 
188,000

 
  3
 %
 
  9
 %
 
 
 
 
 
 
 
 
 
 
Customer vehicles under SelectCare contracts (4)
56,200

 
56,400

 
54,200

 
—
 %
 
  4
 %
 
 
 
 
 
 
 
 
 
 
Customer vehicles under SelectCare on-demand (5)
9,000

 
8,600

 
8,100

 
  5
 %
 
  11
 %
 
 
 
 
 
 
 
 
 
 
Total vehicles serviced
269,700

 
264,100

 
250,300

 
  2
 %
 
  8
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
———————————
(1)
Generally comprised of Class 1 through Class 7 type vehicles with a Gross Vehicle Weight (GVW) up to 33,000 pounds.
(2)
Generally comprised of over the road on highway tractors and are primarily comprised of Class 8 type vehicles with a GVW of over 33,000 pounds.
(3)
Generally comprised of dry, flatbed and refrigerated type trailers.
(4)
Excludes customer vehicles under SelectCare on-demand contracts.
(5)
Comprised of the number of unique vehicles serviced under on-demand maintenance agreements for the quarterly periods. This does not represent averages for the periods. Vehicles included in the count may have been serviced more than one time during the respective period.
Note: Quarterly and year-to-date amounts were computed using a 6-point average based on monthly information.  

46
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)



 
The following table provides a breakdown of our non-revenue earning equipment included in our global fleet count (number of units rounded to nearest hundred):
 
 
 
 
 
 
 
Change
 
March 31,
2019
 
December 31,
2018
 
March 31,
2018
 
March 2019/Dec. 2018
 
March 2019/March 2018
Not yet earning revenue (NYE)
5,200
 
4,500
 
3,800
 
  16
%
 
  37
%
No longer earning revenue (NLE):
 
 
 
 
 
 
 
 
 
Units held for sale
7,600
 
6,900
 
6,000
 
10

 
27

Other NLE units
6,200
 
4,300
 
4,800
 
44

 
29

Total
19,000
 
15,700
 
14,600
 
  21
%
 
  30
%

NYE units represent new vehicles on hand that are being prepared for deployment to a lease customer or into the rental fleet. Preparations include activities such as adding lift gates, paint, decals, cargo area and refrigeration equipment. NYE units increased 37% compared to March 31, 2018 , reflecting lease fleet growth. NLE units represent vehicles held for sale and vehicles for which no revenue has been earned in the previous 30 days. Accordingly, these vehicles may be temporarily out of service, being prepared for sale or awaiting redeployment. NLE units increased 28% compared to March 31, 2018 , reflecting higher used vehicle inventories. We expect NLE levels to increase through the end of the year as a result of higher expected used vehicle inventories driven by the lease vehicle replacement cycle.


Dedicated Transportation Solutions
 
Three months ended March 31,
 
Change
 
2019
 
2018
 
2019/2018
 
(Dollars in thousands)
 
DTS total revenue
$
349,621

 
298,970

 
17
%
 
 
 
 
 
 
DTS operating revenue (1)
$
235,620


201,405

 
17
%
 
 
 
 
 
 
DTS EBT
$
17,412

 
13,052

 
33
%
DTS EBT as a % of DTS total revenue
5.0
%
 
4.4
%
 
60 bps
DTS EBT as a % of DTS operating revenue (1)
7.4
%
 
6.5
%
 
90 bps
 
 
 
 
 
 
Memo:
 
 
 
 
 
Average fleet
9,500

 
8,500

 
12
%
————————————
(1)
Non-GAAP financial measures. Reconciliations of DTS total revenue to DTS operating revenue, DTS EBT as a % of DTS total revenue to DTS EBT as a % of DTS operating revenue, as well as the reasons why management believes these measures are important to investors are included in the “Non-GAAP Financial Measures” section of this MD&A.

47
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)




The following table summarizes the components of the change in DTS revenue on a percentage basis versus the prior year:
 
Three months ended March 31, 2019
 
Total
 
Operating (1)
Organic, including price and volume
16
%
 
17
%
Fuel
1

 
—

Net increase
17
%
 
17
%
   ————————————
(1)
Non-GAAP financial measure. A reconciliation of DTS total revenue to DTS operating revenue, as well as the reasons why management believes this measure is important to investors is included in the "Non-GAAP Financial Measures" section of this MD&A.

DTS total revenue and DTS operating revenue both increased 17% in the first quarter reflecting new business, customer expansions and increased volumes. We expect revenue comparisons to remain favorable through the end of the year based on strong sales activity but to a lesser extent than experienced in the first quarter. DTS EBT increased 33% in the first quarter due to revenue growth, improved operating performance and favorable insurance results related to development of prior years' claims.

Supply Chain Solutions
 
Three months ended March 31,
 
Change
 
2019
 
2018
 
2019/2018
 
(Dollars in thousands)
 
Automotive
$
176,525

 
142,980

 
23
%
Technology and healthcare
78,751

 
71,530

 
10

CPG and Retail
178,472

 
129,310

 
38

Industrial and other
43,341

 
38,986

 
11

Subcontracted transportation
127,995


86,861

 
47

Fuel
30,587


25,040

 
22

SCS total revenue
$
635,671


494,707

 
28
%
 
 
 
 
 
 
SCS operating revenue (1)
$
477,089


382,806

 
25
%
 
 
 
 
 
 
SCS EBT
$
32,317


25,511

 
27
%
SCS EBT as a % of SCS total revenue
5.1
%

5.2
%
 
(10) bps
SCS EBT as a % of SCS operating revenue (1)
6.8
%

6.7
%
 
10 bps
 
 
 
 
 
 
Memo:
 
 
 
 

Average fleet
9,700

 
8,400

 
15
%
————————————
(1)
Non-GAAP financial measures. Reconciliations of SCS total revenue to SCS operating revenue, SCS EBT as a % of SCS total revenue to SCS EBT as a % of SCS operating revenue, as well as the reasons why management believes these measures are important to investors are included in the “Non-GAAP Financial Measures” section of this MD&A.



 

48
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)




The following table summarizes the components of the change in SCS revenue on a percentage basis versus the prior year:
 
Three months ended March 31, 2019
 
Total
 
Operating (1)
Organic, including price and volume
18
 %
 
20
 %
Fuel
1

 
—

Acquisitions
10

 
6

Foreign exchange
(1
)
 
(1
)
Net increase
28
 %

25
 %
————————————
(1)
Non-GAAP financial measure. A reconciliation of SCS total revenue to SCS operating revenue, as well as the reasons why management believes this measure is important to investors is included in the "Non-GAAP Financial Measures" section of this MD&A.

SCS total revenue increased 28% and SCS operating revenue increased 25% in the first quarter largely reflecting new business, increased volumes and higher pricing. Total and operating revenue growth also reflects the acquisition of MXD during the second quarter of 2018. We expect revenue comparisons to remain favorable through the first half of this year, with negative growth towards the second half of the year due to the timing of lost business. SCS EBT increased 27% in the first quarter driven by revenue growth.

Central Support Services
 
Three months ended March 31,
 
Change
 
2019
 
2018
 
2019/2018
 
(Dollars in thousands)
 
 
Human resources
$
5,280

 
4,991

 
6
%
Finance and procurement
18,007

 
17,141

 
5

Corporate services and public affairs
2,320

 
2,300

 
1

Information technology
25,638

 
20,766

 
23

Legal and safety
6,947

 
6,286

 
11

Marketing
4,732

 
4,070

 
16

Other
9,210

 
6,841

 
35

Total CSS
72,134

 
62,395

 
16
%
Allocation of CSS to business segments
(59,587
)

(51,803
)
 
15

Unallocated CSS
$
12,547


10,592

 
18
%


Total CSS costs increased 16% in the first quarter primarily reflecting investments in technology and higher compensation-related costs. Unallocated CSS increased to $13 million in the first quarter .

49
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)



                                                                                                                                                                                                                                                                                                                                                                                                                                    
FINANCIAL RESOURCES AND LIQUIDITY
 
Cash Flows
 
The following is a summary of our cash flows from continuing operations:
 
 
Three months ended March 31,
 
2019
 
2018
 
(In thousands)
Net cash provided by (used in):
 
 
 
Operating activities
$
485,330

 
336,850

Financing activities
434,288

 
229,603

Investing activities
(923,244
)
 
(572,788
)
Effect of exchange rates on cash, cash equivalents, and restricted cash
(1,551
)
 
3,519

Net change in cash, cash equivalents, and restricted cash
$
(5,177
)
 
(2,816
)
 
Cash provided by operating activities increased to $485 million in the three months ended March 31, 2019 , compared with $337 million in 2018 , reflecting higher earnings excluding non-cash items, primarily depreciation and deferred tax expense. Cash provided by financing activities increased to $434 million in the three months ended March 31, 2019 , compared with $230 million in 2018, due to higher borrowing needs. Cash used in investing activities increased to $923 million in the three months ended March 31, 2019 , compared with $573 million in 2018 , primarily due to increased capital expenditures.
 
The following table shows our free cash flow computation:
 
Three months ended March 31,
 
2019
 
2018
 
(In thousands)
Net cash provided by operating activities from continuing operations
485,330


336,850

Sales of revenue earning equipment (1)
101,549


89,023

Sales of operating property and equipment (1)
1,918


933

Total cash generated (2)
588,797


426,806

Purchases of property and revenue earning equipment (1)
(1,026,711
)

(662,744
)
Free cash flow (2)
$
(437,914
)

(235,938
)
 
 
 
 
Memo:
 
 
 
Net cash provided by financing activities
$
434,288

 
229,603

Net cash used in investing activities
$
(923,244
)
 
(572,788
)
———————————
(1)
Included in cash flows from investing activities.
(2)
Non-GAAP financial measures. Reconciliations of net cash provided by operating activities to total cash generated and to free cash flow are set forth in this table. Refer to the “Non-GAAP Financial Measures” section of this MD&A for the reasons why management believes these measures are important to investors.


50
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)




The following table provides a summary of capital expenditures:
 
Three months ended March 31,
 
2019
 
2018
 
(In thousands)
Revenue earning equipment:
 
 
 
ChoiceLease
$
817,027

 
418,255

Commercial rental
256,671

 
255,507

 
1,073,698

 
673,762

Operating property and equipment
40,066

 
37,158

Total capital expenditures
1,113,764


710,920

Changes in accounts payable related to purchases of revenue earning equipment
(87,053
)
 
(48,176
)
Cash paid for purchases of property and revenue earning equipment
$
1,026,711


662,744

   
Capital expenditures increased 57% to $1.11 billion in the three months ended March 31, 2019 , reflecting planned higher investments in the ChoiceLease fleet. We expect full-year 2019 capital expenditures to be approximately $3.6 billion . We expect to fund 2019 capital expenditures primarily with internally generated funds and additional debt financing.

Financing and Other Funding Transactions

We utilize external capital primarily to support working capital needs and growth in our asset-based product lines. The variety of debt financing alternatives typically available to fund our capital needs include commercial paper, long-term and medium-term public and private debt, asset-backed securities, bank term loans, leasing arrangements and bank credit facilities. Our principal sources of financing are issuances of commercial paper and medium-term notes.

Our ability to access unsecured debt in the capital markets is impacted by both our short-term and long-term debt ratings. These ratings are intended to provide guidance to investors in determining the credit risk associated with particular Ryder securities based on current information obtained by the rating agencies from us or from other sources. Lower ratings generally result in higher borrowing costs, as well as reduced access to unsecured capital markets. A significant downgrade of our short-term debt ratings would impair our ability to issue commercial paper and likely require us to rely on alternative funding sources. A significant downgrade would not affect our ability to borrow amounts under our revolving credit facility described below, assuming ongoing compliance with the terms and conditions of the credit facility.

Our debt ratings and rating outlooks at March 31, 2019 , were as follows:
 
Rating Summary
 
 
 
Short-Term
 
Long-Term
 
Outlook
Fitch Ratings
F-2
 
A-
  
Stable
Standard & Poor’s Ratings Services
A-2
 
BBB+
  
Stable
Moody’s Investors Service
P-2
 
Baa1
  
Stable
DBRS
R-1 (Low)
 
A (Low)
 
Stable
 
Cash and cash equivalents totaled $63 million as of March 31, 2019 . As of March 31, 2019 , approximately $15 million was held outside the U.S. and is available to fund operations and other growth of non-U.S. subsidiaries. If we decide to repatriate cash and cash equivalents held outside the U.S., we may be subject to additional income taxes and foreign withholding taxes. However, our intent is to permanently reinvest these foreign amounts outside the U.S. and our current plans do not demonstrate a need to repatriate these foreign amounts to fund our U.S. operations.

We believe that our operating cash flows, together with our access to the public unsecured bond market, commercial paper market and other available debt financing, will be adequate to meet our operating, investing and financing needs in the foreseeable future. However, there can be no assurance that unanticipated volatility and disruption in the public unsecured debt market or the commercial paper market would not impair our ability to access these markets on terms commercially acceptable to us or at all. If we cease to have access to public bonds, commercial paper and other sources of unsecured borrowings, we


51
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)




would meet our liquidity needs by drawing upon contractually committed lending agreements and/or by seeking other funding sources.

As of March 31, 2019 , we had the following amounts available to fund operations under the following facilities:
 
(In millions)
Global revolving credit facility
$572
Trade receivables program
$225
 
See Note 7 , " Debt ", in the Notes to Consolidated Condensed Financial Statements for a discussion of these debt facilities.

The following table shows the movements in our debt balance:
 
Three months ended March 31,
 
2019
 
2018
 
(In thousands)
 
 
 
 
Debt balance at January 1
$
6,649,277

 
5,440,006

Cash-related changes in debt:
 
 
 
Net change in commercial paper borrowings and revolving credit facilities
158,258

 
237,960

Proceeds from issuance of medium-term notes
596,274

 
446,500

Proceeds from issuance of other debt instruments
203,026

 
—

Retirement of medium term notes
(250,000
)
 
(350,000
)
Other debt repaid
(228,411
)
 
(64,299
)
Debt issuance costs paid
(1,006
)
 
(999
)
 
478,141

 
269,162

Non-cash changes in debt:
 
 
 
Fair value adjustment on notes subject to hedging
3,870

 
(7,364
)
Addition of finance lease obligations
2,026

 
2,259

Changes in foreign currency exchange rates and other non-cash items
9,855

 
4,256

Total changes in debt
493,892

 
268,313

Debt balance at March 31
$
7,143,169

 
5,708,319


In accordance with our funding philosophy, we attempt to align the aggregate average remaining re-pricing life of our debt with the aggregate average remaining re-pricing life of our assets. We utilize both fixed-rate and variable-rate debt to achieve this alignment and generally target a mix of 20% - 40% variable-rate debt as a percentage of total debt outstanding. The variable-rate portion of our total debt (including notional value of swap agreements) was 25% and 28% as of March 31, 2019 and December 31, 2018 .

Refer to Note 7 , “ Debt ,” in the Notes to Consolidated Condensed Financial Statements for further discussion around the global revolving credit facility, the trade receivables program, the issuance of medium-term notes under our shelf registration statement, asset-backed financing obligations and debt maturities.

Ryder’s debt to equity ratios were 278% and 262% as of March 31, 2019 and December 31, 2018 , respectively. The debt to equity ratio represents total debt divided by total equity.


52
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)




Pension Information

The funded status of our pension plans is dependent upon many factors, including returns on invested assets and the level of certain market interest rates. We review pension assumptions regularly and we may, from time to time, make voluntary contributions to our pension plans, which exceed the amounts required by statute. In 2019 , the expected total contributions to our pension plans are approximately $ 34 million . During the three months ended March 31, 2019 , we contributed $8 million to our pension plans. Changes in interest rates and the market value of the securities held by the plans during 2019 could materially change, positively or negatively, the funded status of the plans and affect the level of pension expense and contributions in 2019 and beyond. See Note 13 , “ Employee Benefit Plans ,” in the Notes to Consolidated Condensed Financial Statements for additional information.

Share Repurchases and Cash Dividends

See Note 9 , “ Share Repurchase Programs ,” in the Notes to Consolidated Condensed Financial Statements for a discussion of share repurchases.

In February 2019 and 2018, our Board of Directors declared quarterly cash dividends of $0.54 and $0.52 per share of common stock, respectively. The dividends were paid during the first quarter of each respective year.



RECENT ACCOUNTING PRONOUNCEMENTS

See Note 2 , “ Recent Accounting Pronouncements ," in the Notes to Consolidated Condensed Financial Statements for a discussion of recent accounting pronouncements.


53
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)



 
NON-GAAP FINANCIAL MEASURES

This Quarterly Report on Form 10-Q includes information extracted from consolidated condensed financial information but not required by generally accepted accounting principles (GAAP) to be presented in the financial statements. Certain elements of this information are considered “non-GAAP financial measures” as defined by SEC rules. Non-GAAP financial measures should be considered in addition to, but not as a substitute for or superior to, other measures of financial performance or liquidity prepared in accordance with GAAP. Also, our non-GAAP financial measures may not be comparable to financial measures used by other companies. We provide a reconciliation of each of these non-GAAP financial measures to the most comparable GAAP measure in this non-GAAP financial measures section. We also provide the reasons why management believes each non-GAAP financial measure is useful to investors in this section.
Specifically, we refer to the following non-GAAP financial measures in this Form 10-Q:
Non-GAAP Financial Measure
Comparable GAAP Measure
Operating Revenue Measures :
 
Operating Revenue
Total Revenue
FMS Operating Revenue
FMS Total Revenue
DTS Operating Revenue
DTS Total Revenue
SCS Operating Revenue
SCS Total Revenue
FMS EBT as a % of FMS Operating Revenue
FMS EBT as a % of FMS Total Revenue
DTS EBT as a % of DTS Operating Revenue
DTS EBT as a % of DTS Total Revenue
SCS EBT as a % of SCS Operating Revenue
SCS EBT as a % of SCS Total Revenue
Comparable Earnings Measures :
 
Comparable Earnings Before Income Tax
Earnings Before Income Tax
Comparable Earnings
Earnings from Continuing Operations
Comparable EPS
EPS from Continuing Operations
Cash Flow Measures :
 
Total Cash Generated and Free Cash Flow
Cash Provided by Operating Activities









54
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)




Set forth in the table below is an overview of each non-GAAP financial measure and why management believes that the presentation of each non-GAAP financial measure provides useful information to investors. See reconciliations for each of these measures following this table.
Operating Revenue Measures :
 
 
 
Operating Revenue
FMS Operating Revenue
DTS Operating Revenue
SCS Operating Revenue
FMS EBT as a % of FMS Operating Revenue
DTS EBT as a % of DTS Operating Revenue
SCS EBT as a % of SCS Operating Revenue
Operating revenue is defined as total revenue for Ryder System, Inc. or each business segment (FMS, DTS and SCS), respectively, excluding any (1) fuel and (2) subcontracted transportation. We believe operating revenue provides useful information to investors as we use it to evaluate the operating performance of our core businesses and as a measure of sales activity at the consolidated level for Ryder System, Inc., as well as for each of our business segments. We also use segment EBT as a percentage of segment operating revenue for each business segment for the same reason. Note: FMS EBT, DTS EBT and SCS EBT, our primary measures of segment performance, are not non-GAAP measures.
Fuel : We exclude FMS, DTS and SCS fuel from the calculation of our operating revenue measures, as fuel is an ancillary service that we provide our customers, which is impacted by fluctuations in market fuel prices, and the costs are largely a pass-through to our customers, resulting in minimal changes in our profitability during periods of steady market fuel prices. However, profitability may be positively or negatively impacted by rapid changes in market fuel prices during a short period of time, as customer pricing for fuel services is established based on trailing market fuel costs.
Subcontracted transportation : We also exclude subcontracted transportation from the calculation of our operating revenue measures, as these services are also typically a pass-through to our customers and, therefore, fluctuations result in minimal changes to our profitability. While our DTS and SCS business segments subcontract certain transportation services to third party providers, our FMS business segment does not engage in subcontracted transportation and, therefore, this item is not applicable to FMS.
Comparable Earnings Measures :
 
 
 
Comparable earnings before income tax (EBT)
Comparable earnings
Comparable earnings per diluted common share (EPS)

Comparable EBT, comparable earnings and comparable EPS are defined, respectively, as GAAP EBT, earnings and EPS, all from continuing operations, excluding (1) non-operating pension costs and (2) any other significant items that are not representative of our business operations. We believe these comparable earnings measures provide useful information to investors and allow for better year-over-year comparison of operating performance.
Non-Operating Pension Costs : Our comparable earnings measures exclude non-operating pension costs, which include the amortization of net actuarial loss and prior service cost, interest cost and expected return on plan assets components of pension and postretirement benefit costs. We exclude non-operating pension costs because we consider these to be impacted by financial market performance and outside the operational performance of our business.
Other Significant Items : Our comparable earnings measures also exclude other significant items that are not representative of our business operations as detailed in the reconciliation table below - page 57. These other significant items vary from period to period and, in some periods, there may be no such significant items.

Calculation of comparable tax rate : The comparable provision for income taxes is computed using the same methodology as the GAAP provision for income taxes. Income tax effects of non-GAAP adjustments are calculated based on the statutory tax rates of the jurisdictions to which the non-GAAP adjustments relate.


55
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)



Cash Flow Measures :
 
 
 
Total Cash Generated
Free Cash Flow

We consider total cash generated and free cash flow to be important measures of comparative operating performance, as our principal sources of operating liquidity are cash from operations and proceeds from the sale of revenue earning equipment.
Total Cash Generated : Total cash generated is defined as the sum of (1) net cash provided by operating activities, (2) net cash provided by the sale of revenue earning equipment, (3) net cash provided by the sale of operating property and equipment and (4) other cash inflows from investing activities. We believe total cash generated is an important measure of total cash flows generated from our ongoing business activities.
Free Cash Flow : We refer to the net amount of cash generated from operating activities and investing activities (excluding changes in restricted cash and acquisitions) from continuing operations as “free cash flow”. We calculate free cash flow as the sum of (1) net cash provided by operating activities, (2) net cash provided by the sale of revenue earning equipment, (3) net cash provided by the sale of operating property and equipment, (4) other cash inflows from investing activities, less (5) purchases of property and revenue earning equipment. We believe free cash flow provides investors with an important perspective on the cash available for debt service and for shareholders, after making capital investments required to support ongoing business operations. Our calculation of free cash flow may be different from the calculation used by other companies and, therefore, comparability may be limited.





























56
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)




The following table provides a reconciliation of GAAP earnings before taxes (EBT), earnings, and earnings per diluted share (EPS) from continuing operations to comparable EBT, comparable earnings and comparable EPS from continuing operations for the three months ended March 31, 2019 and 2018 . Certain items included in EBT, earnings and diluted EPS from continuing operations have been excluded from our comparable EBT, comparable earnings and comparable diluted EPS measures. The following table lists a summary of these items, which are discussed in more detail throughout our MD&A and within the Notes to Consolidated Condensed Financial Statements:
 
EBT
 
Earnings
 
Diluted EPS
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
Three months ended March 31,
(In thousands, except per share amounts)
EBT/Earnings/EPS
$
68,151

 
52,699

 
$
45,890

 
37,313

 
$
0.87

 
0.70

Non-operating pension costs
6,462

 
1,222

 
4,562

 
598

 
0.09

 
0.01

ERP implementation costs (1)
3,590

 
—

 
2,660

 
—

 
0.05

 
—

Restructuring and other, net (1)
2,588

 
(392
)
 
1,842

 
(423
)
 
0.04

 
—

Goodwill impairment (1)
—

 
15,513

 
—

 
15,513

 
—

 
0.29

Tax adjustments (2)
—

 
—

 
3,508

 
(1,902
)
 
0.06

 
(0.04
)
Comparable EBT/Earnings/EPS
$
80,791

 
69,042

 
$
58,462

 
51,099

 
$
1.11

 
0.96


(1) Refer to Note 14 , “ Other Items Impacting Comparability ,” in the Notes to Consolidated Condensed Financial Statements for additional information.
(2) In the first quarter of 2019, we recorded a $5 million charge to our tax provision for income taxes due to expiring state net operating losses, never
previously benefited in the tax rate, offset by a $1 million benefit to our provision due to a tax law change. In the first quarter of 2018, we determined that certain uncertain tax positions should have been reversed in prior periods when the statutes of limitations expired and recorded a $3 million benefit to our provision for income taxes. In the first quarter of 2018, we also recorded a $1 million deferred tax liability adjustment related to the prior provisional estimate from Tax Reform.
 
The following table provides a reconciliation of the provision for income taxes to the comparable provision for income taxes:
 
Three months ended March 31,
 
2019
 
2018
 
(Dollars in thousands)
Provision for income taxes (1)
$
(22,261
)
 
(15,386
)
Income tax effects of non-GAAP adjustments (1)
(68
)
 
(2,557
)
Comparable provision for income taxes (1)
$
(22,329
)
 
(17,943
)
————————————
(1)
The comparable provision for income taxes is computed using the same methodology as the GAAP provision of income taxes. Income tax effects of non-GAAP adjustments are calculated based on statutory tax rates of the jurisdictions to which the non-GAAP adjustments related.
















57
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)




The following table provides a numerical reconciliation of net cash provided by operating activities to total cash generated and free cash flow:
 
Three months ended March 31,
 
2019
 
2018
 
(In thousands)
Net cash provided by operating activities from continuing operations
$
485,330

 
336,850

Sales of revenue earning equipment (1)
101,549

 
89,023

Sales of operating property and equipment (1)
1,918

 
933

Total cash generated
588,797

 
426,806

Purchases of property and revenue earning equipment (1)
(1,026,711
)
 
(662,744
)
Free cash flow
$
(437,914
)
 
(235,938
)
 
 
 
 
Memo:
 
 
 
Net cash provided by financing activities
$
434,288

 
229,603

Net cash used in investing activities
(923,244
)
 
(572,788
)
————————————
(1)
Included in cash flows from investing activities.

The following table provides a reconciliation of total revenue to operating revenue:
 
Three months ended March 31,
 
2019
 
2018
 
(In thousands)
Total revenue
$
2,180,327

 
1,904,205

Fuel
(216,543
)
 
(209,961
)
Subcontracted transportation
(204,777
)
 
(150,577
)
Operating revenue
$
1,759,007

 
1,543,667


The following table provides a reconciliation of FMS total revenue to FMS operating revenue:
 
Three months ended March 31,
 
2019
 
2018
 
(In thousands)
FMS total revenue
$
1,351,599

 
1,243,050

Fuel (1)
(207,866
)
 
(203,807
)
FMS operating revenue
$
1,143,733

 
1,039,243

 
 
 
 
FMS EBT
$
60,911

 
54,343

FMS EBT as a % of FMS total revenue
4.5
%
 
4.4
%
FMS EBT as a % of FMS operating revenue
5.3
%
 
5.2
%
————————————
(1)
Includes intercompany fuel sales from FMS to DTS and SCS.







58
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)




The following table provides a reconciliation of DTS total revenue to DTS operating revenue:
 
Three months ended March 31,
 
2019
 
2018
 
(In thousands)
DTS total revenue
$
349,621

 
298,970

Subcontracted transportation
(76,782
)
 
(63,716
)
Fuel
(37,219
)
 
(33,849
)
DTS operating revenue
$
235,620

 
201,405

 
 
 
 
DTS EBT
$
17,412

 
13,052

DTS EBT as a % of DTS total revenue
5.0
%
 
4.4
%
DTS EBT as a % of DTS operating revenue
7.4
%
 
6.5
%

The following table provides a reconciliation of SCS total revenue to SCS operating revenue:
 
Three months ended March 31,
 
2019
 
2018
 
(In thousands)
SCS total revenue
$
635,671

 
494,707

Subcontracted transportation
(127,995
)
 
(86,861
)
Fuel
(30,587
)
 
(25,040
)
SCS operating revenue
$
477,089

 
382,806

 
 
 
 
SCS EBT
$
32,317

 
25,511

SCS EBT as a % of SCS total revenue
5.1
%
 
5.2
%
SCS EBT as a % of SCS operating revenue
6.8
%
 
6.7
%



59
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)



FORWARD-LOOKING STATEMENTS

Forward-looking statements (within the meaning of the Federal Private Securities Litigation Reform Act of 1995) are statements that relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends concerning matters that are not historical facts. These statements are often preceded by or include the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “will,” “may,” “could,” “should” or similar expressions. This Quarterly Report on Form 10-Q contains forward-looking statements including, but not limited to, statements regarding:

•
our expectations in our FMS business segment regarding anticipated ChoiceLease revenue and fleet growth and commercial rental revenue and demand;
•
our expectations in our DTS and SCS business segments regarding anticipated operating revenue trends, sales activity and growth rates;
•
our expectations of the long-term residual values of revenue earning equipment;
•
the anticipated increase in NLE vehicles in inventory through the end of the year;
•
the expected pricing and inventory levels for used vehicles;
•
our expectations of operating cash flow and capital expenditures through the end of 2019 ;
•
the adequacy of our accounting estimates and reserves for pension expense, compensation expense and employee benefit plan obligations, depreciation and residual value guarantees and income taxes;
•
the anticipated timing of payment of restructuring liabilities;
•
the adequacy of our fair value estimates of employee incentive awards under our share-based compensation plans, publicly traded debt and other debt;
•
our beliefs regarding the default risk of our direct financing lease receivables;
•
our ability to fund all of our operating, investing and financial needs for the foreseeable future through internally generated funds and outside funding sources;
•
the anticipated impact of fuel price fluctuations;
•
our expectations as to return on pension plan assets, future pension expense and estimated contributions;
•
our expectations regarding the scope, anticipated outcomes and the adequacy of our loss provisions with respect to certain claims, proceedings and lawsuits;
•
our expectations about the need to repatriate foreign cash to the U.S.;
•
our ability to access commercial paper and other available debt financing in the capital markets;
•
our expectations regarding the future use and availability of funding sources; and
•
the anticipated impact of recent accounting pronouncements.


60
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)



These statements, as well as other forward-looking statements contained in this Quarterly Report, are based on our current plans and expectations and are subject to risks, uncertainties and assumptions. We caution readers that certain important factors could cause actual results and events to differ significantly from those expressed in any forward-looking statements. These risk factors include, but are not limited to, the following:

•
Market Conditions:
 
Ÿ
 
Changes in general economic and financial conditions in the U.S. and worldwide leading to decreased demand for our services, lower profit margins, increased levels of bad debt and reduced access to credit and financial markets
 
Ÿ
 
Decreases in freight demand which would impact both our transactional and variable-based contractual business
 
Ÿ
 
Changes in our customers’ operations, financial condition or business environment that may limit their demand for, or ability to purchase, our services
 
Ÿ
 
Decreases in market demand affecting the commercial rental market and used vehicle sales as well as global economic conditions
 
Ÿ
 
Volatility in customer volumes and shifting customer demand in the industries serviced by our SCS business
 
Ÿ
 
Changes in current financial, tax or regulatory requirements that could negatively impact our financial results
•
Competition:
 
Ÿ
 
Advances in technology may impact demand for our services or may require increased investments to remain competitive, and our customers may not be willing to accept higher prices to cover the cost of these investments
 
Ÿ
 
Competition from other service providers, some of which have greater capital resources or lower capital costs, or from our customers, who may choose to provide services themselves
 
Ÿ
 
Continued consolidation in the markets in which we operate which may create large competitors with greater financial resources
 
Ÿ
 
Our inability to maintain current pricing levels due to economic conditions, demand for services, customer acceptance or competition

61
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)



•
Profitability:
 
Ÿ
 
Our inability to obtain adequate profit margins for our services
 
Ÿ
 
Lower than expected sales volumes or customer retention levels
 
Ÿ
 
Decreases in commercial rental fleet utilization and pricing
 
Ÿ
 
Lower than expected used vehicle sales pricing levels and fluctuations in the anticipated proportion of retail versus wholesale sales
 
Ÿ
 
Loss of key customers in our DTS and SCS business segments
 
Ÿ
 
Our inability to adapt our product offerings to meet changing consumer preferences on a cost-effective basis
 
Ÿ
 
The inability of our legacy information technology systems to provide timely access to data
 
Ÿ
 
Sudden changes in fuel prices and fuel shortages
 
Ÿ
 
Higher prices for vehicles, diesel engines and fuel as a result of new environmental standards
 
Ÿ
 
Higher than expected maintenance costs and lower than expected benefits associated with our maintenance initiatives
 
Ÿ
 
Our inability to successfully execute our asset management initiatives, maintain our fleet at normalized levels and right-size our fleet in line with demand
 
Ÿ
 
Our inability to redeploy vehicles and prepare vehicles for sale in a cost-efficient manner
 
Ÿ
 
Our key assumptions and pricing structure of our DTS and SCS contracts prove to be inaccurate
 
Ÿ
 
Increased unionizing, labor strikes and work stoppages
 
Ÿ
 
Difficulties in attracting and retaining drivers and technicians due to driver and technician shortages, which may result in higher costs to procure drivers and technicians and higher turnover rates affecting our customers
 
Ÿ
 
Our inability to manage our cost structure
 
Ÿ
 
Our inability to limit our exposure for customer claims
 
Ÿ
 
Unfavorable or unanticipated outcomes in legal or regulatory proceedings or uncertain positions
 
Ÿ
 
Business interruptions or expenditures due to severe weather or natural occurrences













62
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)



•
Financing Concerns:
 
Ÿ
 
Higher borrowing costs and possible decreases in available funding sources
 
Ÿ
 
Unanticipated interest rate and currency exchange rate fluctuations
 
Ÿ
 
Negative funding status of our pension plans caused by lower than expected returns on invested assets and unanticipated changes in interest rates
 
Ÿ
 
Withdrawal liability as a result of our participation in multi-employer plans
 
Ÿ
 
Instability in U.S. and worldwide credit markets, resulting in higher borrowing costs and/or reduced access to credit
•
Accounting Matters:
 
Ÿ
 
Impact of unusual items resulting from ongoing evaluations of business strategies, asset or expense valuations, acquisitions, divestitures and our organizational structure
 
Ÿ
 
Reductions in residual values or useful lives of revenue earning equipment and changes to depreciation policy
 
Ÿ
 
Increases in compensation levels, retirement rate and mortality resulting in higher pension expense; regulatory changes affecting pension estimates, accruals and expenses
 
Ÿ
 
Increases in health care costs resulting in higher insurance costs
 
Ÿ
 
Changes in accounting rules, assumptions and accruals
 
Ÿ
 
Impact of actual insurance claim and settlement activity compared to historical loss development factors used to project future development
•
Other risks detailed from time to time in our SEC filings including our 2018 Annual Report on Form 10-K.

New risk factors emerge from time to time and it is not possible for management to predict all such risk factors or to assess the impact of such risk factors on our business. As a result, no assurance can be given as to our future results or achievements. You should not place undue reliance on the forward-looking statements contained herein, which speak only as of the date of this Quarterly Report. We do not intend, or assume any obligation, to update or revise any forward-looking statements contained in this Quarterly Report, whether as a result of new information, future events or otherwise.



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes to Ryder’s exposures to market risks since December 31, 2018 . Please refer to the 2018 Annual Report on Form 10-K for a complete discussion of Ryder’s exposures to market risks.


63


ITEM 4. CONTROLS AND PROCEDURES


Evaluation of Disclosure Controls and Procedures

As of the end of the first quarter of 2019 , we carried out an evaluation, under the supervision and with the participation of management, including Ryder’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Ryder’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of the end of the first quarter of 2019 , Ryder’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) were effective.

Changes in Internal Controls over Financial Reporting

Beginning January 1, 2019, we adopted ASU No. 2016-02, “Leases (Topic 842)” and related amendments (collectively, the “new lease standard”). As a result of our adoption of the new lease standard, we implemented significant new lease accounting systems, processes and internal controls over lease accounting to assist us in the application of the new lease standard. During the three months ended March 31, 2019 , there were no other changes in Ryder’s internal control over financial reporting that have materially affected or are reasonably likely to materially affect such internal control over financial reporting.



PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS

Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 21, 2019, contains a discussion of our risk factors. Our operations could also be affected by additional risk factors that are not presently known to us or by factors that we currently consider immaterial to our business. To our knowledge and except to the extent additional factual information disclosed in this Quarterly Report on Form 10-Q relates to such risk factors, there have been no material changes in the risk factors described in "Item 1A. Risk Factors" in our Form 10-K for the year ended December 31, 2018, filed with the SEC on February 21, 2019.


ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information with respect to purchases we made of our common stock during the three months ended March 31, 2019 :
 
Total Number
of Shares
Purchased (1)
 
Average Price
Paid per Share
 
Total Number  of
Shares
Purchased as
Part of Publicly
Announced
Programs
 
Maximum
Number of
Shares That May
Yet Be
Purchased
Under the
Anti-Dilutive
Program (2)
January 1 through January 31, 2019
502

 
$
50.02

 
—

 
1,075,181

February 1 through February 28, 2019
170,574

 
61.83

 
112,922

 
962,259

March 1 through March 31, 2019
113,100

 
62.16

 
112,922

 
849,337

Total
284,176

 
$
61.94

 
225,844

 
 
  ————————————
(1)
During the three months ended March 31, 2019 , we purchased an aggregate of 58,332 shares of our common stock in employee-related transactions. Employee-related transactions may include: (i) shares of common stock withheld as payment for the exercise price of options exercised or to satisfy the employees' tax withholding liability associated with our share-based compensation programs and (ii) open-market purchases by the trustee of Ryder’s deferred compensation plans relating to investments by employees in our stock, one of the investment options available under the plans.

(2)
In December 2017, our Board of Directors authorized a share repurchase program intended to mitigate the dilutive impact of shares issued under our employee stock plans (the program). Under the program, management is authorized to repurchase up to 1.5 million shares of common stock, the sum of which will not exceed the number of shares issued to employees under the Company’s employee stock plans from December 31, 2017 to December 13, 2019. Share repurchases of common stock are made periodically in open-market transactions and are subject to market conditions, legal requirements and other factors. Management may establish prearranged written plans for the Company under Rule 10b5-1 of the Securities Exchange Act of 1934 as part of the program, which allow for share repurchases during Ryder’s quarterly blackout periods as set forth in the trading plan.

64


ITEM 6. EXHIBITS

Exhibit Number
 
Description
 
 
 
3.1
 

 
 
 
3.2
 
 
 
 
10.1
 
 
 
 
10.2
 

 
 
 
10.3
 
 
 
 
10.4
 
 
 
 
10.5
 
 
 
 
10.6
 
 
 
 
10.7
 
 
 
 
10.8
 
 
 
 
10.9
 
 
 
 
31.1
 
 
 
 
31.2
 
 
 
 
32
 
 
 
 





65


SIGNATURE


Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
RYDER SYSTEM, INC.
 
(Registrant)
 
 
 
Date: May 8, 2019
By:
/s/ Scott Parker
 
 
Scott Parker
 
 
Executive Vice President and Chief Financial Officer
 
 
(Principal Financial Officer)
 
 
 
Date: May 8, 2019
By:
/s/ Frank Mullen
 
 
Frank Mullen
 
 
Vice President and Controller
 
 
(Principal Accounting Officer)
 
 
 

66
Exhibit 3.1

RESTATED ARTICLES OF INCORPORATION
OF
RYDER SYSTEM, INC.
(Conformed copy incorporating all amendments through May 3, 2019)
The within Restated Articles of Incorporation were duly adopted by the Board of Directors of this Corporation on November 8, 1985. The said Restated Articles of Incorporation only restate and integrate the Articles of Incorporation of this Corporation, as originally filed with the Secretary of State of the State of Florida on March 22, 1955, together with all duly adopted amendments thereto and do not further amend the provisions of the Articles of Incorporation of this Corporation as heretofore amended; and there is no discrepancy between the provisions of the within Restated Articles of Incorporation and the provisions of the Articles of Incorporation of this Corporation as originally filed and heretofore amended, except that the Restated Articles of Incorporation omit Article VII, Article X, Article XI and Article XII of the Articles of Incorporation of this Corporation as originally filed, which Articles specify the amount of capital to begin the business, name the initial board of directors, officers, and subscribers for shares.
ARTICLE I
NAME OF CORPORATION
The name of this Corporation shall be:
RYDER SYSTEM, INC.
ARTICLE II
GENERAL NATURE OF BUSINESS
The general nature of the business and the objects and purposes proposed to be transacted and carried on, are to do any and all of the things herein mentioned as fully and to the same extent as natural persons might or could do, and in connection therewith to have all powers given and granted unto corporations under Chapter 608.13 of the Compiled General Laws of Florida, 1959, and to any other rights and powers vested in corporation, for profit under Chapter 28170 of the Laws of Florida, 1959, or as may be granted under any amendments thereto at any time hereafter. Without excluding any of the general powers or rights to conduct the general nature of the business or businesses above described, this Corporation shall specifically have the right to buy and sell real estate, engage in the business of common carrier by motor vehicle, to lease and rent motor vehicles and other equipment, to buy and hold stocks in other corporations, to render management services and to perform each and every act authorized for corporations under the laws of the State of Florida, not specifically reserved for special and chartered corporations such as banking and trust companies or other corporations which require special incorporation and approval under the other statutes of this State.
ARTICLE III
CAPITAL STOCK
1.    The total number of shares of capital stock which the Corporation shall have authority to issue is 403,800,917 shares, of which a maximum of 400,000,000 shares shall be common stock having a par value of $.50 each (hereinafter called "Common Stock"), and a maximum of 3,800,917 shares shall be preferred stock, without par value (hereinafter called "Preferred Stock"). Any stock of this Corporation having any preference or priority over the Common Stock whether presently authorized or outstanding is sometimes hereinafter called “Preference Stock”.
2.    The shares of Preferred Stock may be divided and issued in series from time to time, as herein provided, each of such series to be distinctly designated.
3.    The holders of Preferred Stock shall have such relative rights with regard to voting power as shall be stated with respect to each of such series in the resolutions providing for the issue of such stock adopted by the Board of Directors of this Corporation except for the holders of the Series A Preferred Stock and the Series B Preferred Stock hereinafter referred to, who shall be entitled to two votes for each share held; and except as otherwise stated in this paragraph or by law provided, shall vote with the Common Stock as one class.
So long as any shares of Preferred Stock are outstanding and unless the vote or consent of a greater number of shares of Preferred Stock shall then be required by law, the consent of the holders of a majority of the Preferred Stock of each series at the time outstanding given in person or by proxy either in writing or at a meeting or meetings at which the holders of each such series of Preferred Stock shall vote separately as a class shall (except as hereinafter in this paragraph provided) be necessary for effecting or validating any one or more of the following:


Exhibit 3.1

(a) The authorization or creation of any additional class of Preference Stock ranking equal to or prior to the Preferred Stock either as to payment of dividends or the distribution of assets, or any stock or obligation convertible into or evidencing the right to purchase any Preference Stock of such additional class; or the authorization of any increase in authorized amounts of any such additional class of Preference Stock or such obligations.
(b)    Any increase in the amount of the total authorized shares of Preferred Stock.
(c)    The amendment, alteration or repeal of any of the provisions hereof pertaining to the rights, privileges or preferences of such series of Preferred Stock; provided, however, no such consent shall be required in connection with any reduction of the authorized amount of Preferred Stock of such series not in excess of any amount of such series to be retired or redeemed and not previously made the basis for any such reduction.
(d)    The merger or consolidation of the Corporation with or into any other corporation or the sale of all or substantially all of the assets of the Corporation in exchange for stock or securities of another corporation unless (1) the resulting or surviving corporation will have, after such merger or consolidation or sale of assets, no stock either authorized or outstanding (except such stock of the Corporation as may have been authorized or outstanding immediately preceding such merger, consolidation or sale of such stock of the resulting or surviving corporation as may be issued in exchange therefor) ranking prior to the Preferred Stock, or to the stock of the resulting or surviving corporation issued in exchange therefor, in respect of payment of dividends or distribution of assets, and (2) the merger or consolidation results in no change in the rights, privileges or preferences of such series of Preferred Stock or the resulting or surviving corporation issued in exchange therefor.
4.    There is hereby created a series of Preferred Stock designated as “Series A $5 Cumulative Convertible Preferred Stock”, without par value, consisting of 190,012 shares of the Preferred Stock and hereinafter called “Series A Preferred Stock”. Except as to voting rights, which are set forth above, the rights, powers, preferences and privileges of the Series A Preferred Stock and the qualifications, limitations and restrictions thereof shall be as follows:
(a)    Dividends. The holders of the Series A Preferred Stock shall be entitled to receive, but only when and as declared by the Board of Directors out of funds legally available for the payment of dividends, cash dividends at the rate of $5 per annum per share, and no more, payable quarterly on the first business day following the last day of the months of March, June, September and December of each year for the respective three-month periods ending with such months. The Board of Directors may fix in advance a date not more than 15 days nor less than 5 days preceding any dividend payment date as a record date for determination of the holders of the Series A Preferred Stock entitled to receive any such dividend. Dividends shall accrue on each share of the Series A Preferred Stock from the date of original issue and shall be cumulative quarterly, so that if at any time dividends at the rate of $5 per annum on each share dividends at the rate of $5 per annum on each share shall not have been declared and paid, or set apart for payment, for all preceding quarterly dividend periods from and after the date of issue, the deficiency shall be declared and paid, or set apart for payment, but without interest, before any cash dividend shall be declared and paid, or set apart for payment, on the Common Stock or on any class of stock ranking junior to the Series A Preferred Stock, and before any assets which are by law available for the payment of dividends shall be paid or set apart for the purchase or redemption of any shares of Preferred Stock or for the purchase or redemption of any shares of any class of stock ranking junior to the Series A Preferred Stock.
(b)    Redemption. The Corporation, by action of its Board of Directors, may redeem, out of any of its funds which may be lawfully used therefor, all or any part of the Series A Preferred Stock, at any time or from time to time, but in no event less than five years from the issuance of any of such shares, at a redemption price equal to $100 per share plus all unpaid dividends accrued to the redemption date. In the event the Corporation shall determine to redeem less than all of the shares of Series A Preferred Stock then outstanding, the Board of Directors shall determine the shares of Series A Preferred Stock so to be redeemed by lot or pro rate or by any other means which the Board of Directors deems equitable. Notice of any proposed redemption of the Series A Preferred Stock shall be given by the Corporation by mailing a copy of such notice at least 30 days prior to the date fixed for such redemption to the holders of record of the Series A Preferred Stock to be redeemed at their respective addresses appearing on the books of the Corporation and by the publication of such notice once a week for two successive weeks in a newspaper or general circulation, published in English, in the City of Detroit, Michigan, the first publication to be made not less than 30 days before the date fixed for redemption. Each such notice of redemption shall specify the date fixed for redemption, the redemption price, and the place where payment of the redemption price is to be made, and shall also state the date on which the right to convert the shares of Series A Preferred Stock to be redeemed will terminate and the current rate at which shares of said Series A Preferred Stock may be converted into Common Stock as hereinafter provided. If such notice of redemption shall have been duly given as aforesaid and if on or before the redemption date specified in such notice all funds necessary for such


Exhibit 3.1

redemption shall have been set aside by the Corporation separate and apart from its other funds in trust for the pro rata benefit of the holders of the shares so called for redemption so as to be and continue to be available therefor, then from and after the redemption date, notwithstanding that any certificate for shares of Series A Preferred Stock so called for redemption shall not have been surrendered for cancellation, the shares represented thereby shall no longer be deemed to be outstanding, the rights to receive dividends thereon shall cease to accrue from and after the date of redemption so designated and all rights with respect to such shares so called for redemption shall forthwith on such redemption date cease and terminate except for the right of the holders thereof to receive the redemption price of such shares but without interest thereon.
(c)    Rights on Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of the Series A Preferred Stock shall be entitled to be paid in full, out of the assets of the Corporation available for distribution to the stockholders, the sum of $100 per share, plus an amount equal to all accrued and unpaid dividends to the time of such payment, before any of the assets of the Corporation shall be distributed to the holders of the Common Stock or of any other stock ranking junior to the Series A Preferred Stock. If upon any such dissolution, liquidation or winding up of the Corporation the assets distributable among the holders of the stock of the Corporation shall be insufficient to permit the payment in full of the preferential amounts payable as aforesaid to the holders of the Series A Preferred Stock and the payment in full of the preferential amounts payable to the holders of all other Preference Stock ranking on a parity with respect to liquidation with the Series A Preferred Stock (which preferential amounts shall have been fixed in the Certificate of Incorporation of the Corporation or determined by the Board of Directors of the Corporation at or before the issuance of such other class or series of Preference Stock), then all of such assets of the Corporation shall be distributed among the holders of all of such Preference Stock then outstanding, ratably in proportion to the full preferential amounts to which they shall be entitled respectively. A consolidation or merger of the Corporation with or into any other corporation, or the sale or transfer by the Corporation of all or any part of its assets in exchange for stock or other securities of the purchaser, shall not be deemed to be a liquidation or dissolution for the purposes of this subparagraph.
(d)    Conversion Privilege. Each holder of a share of Series A Preferred Stock shall have the right at any time, or as to any such share called for redemption, at any time prior to the close of business on the third business day preceding the date fixed for redemption, to convert such share into fully paid and non-assessable shares of Common Stock of the Corporation upon the following terms and conditions:
(i)    In order to exercise the conversion privilege, the holder of any shares of Series A Preferred Stock to be converted shall surrender the certificate or certificates therefor to the transfer agent of the Corporation for such Preferred Stock at offices which the Corporation shall cause to be maintained in the Borough of Manhattan, City of New York, duly endorsed or assigned (unless such endorsement or assignment be waived by the Corporation), together with a written request for conversion.
As soon as practicable after the surrender of such certificates as provided above, the Corporation shall cause to be issued and delivered, at the office of such transfer agent, to or on the order of the holder of the certificates thus surrendered, a certificate or certificates for the number of full shares of Common Stock issuable hereunder upon the conversion of such Preferred Stock, and cash, as provided in subparagraph (v) hereof, in respect of any fraction of a share of Common Stock, issuable upon such conversion. Such conversion shall be deemed to have been effected on the date on which the certificates for such Preferred Stock have been surrendered as provided above, and the person in whose name any certificate or certificates for shares of Common Stock are issuable upon such conversion shall be deemed to have become on such date the holder of record of the shares represented thereby.
(ii)    No adjustment or allowances shall be made for dividends on Preferred Stock surrendered for conversion, whether accrued, accumulated or otherwise.
(iii)    Each share of Series A Preferred Stock shall initially be convertible into two and one-half (2.5) shares of Common Stock, par value One Dollar and Twenty-Five Cents ($1.25) each, of the Corporation, and such conversion ratio shall continue until adjusted as hereinafter provided:
(A)    In the event of reduction or split of the Common Stock or the issuance of any stock dividend by the Corporation in shares of Common Stock, the conversion ratio shall be adjusted accordingly, and such adjustment shall become effective immediately after the opening of business on the day following the record date for the determination of stockholders entitled to receive such dividend or to receive or be affected by such split or reduction, as the case may be.


Exhibit 3.1

(B)    In the case of any other recapitalization or reclassification of the Common Stock, or any consolidation or merger of the Corporation with or into another corporation, or in case of any sale or conveyance to another corporation of all or substantially all of the property of the Corporation, the holder of each share of Series A Preferred Stock then outstanding shall have the right thereafter, so long as his conversion right hereunder shall exist, to convert such share into the kind and amount of shares of stock and other securities and property receivable upon such recapitalization, reclassification, consolidation, merger, sale or conveyance by the holder of the number of shares of Common Stock (whether whole or fractional) of the Corporation into which such share of Series A Preferred Stock might have been converted immediately prior to such recapitalization, reclassification, consolidation, merger, sale or conveyance; and effective provisions shall be made in the Certificate of Articles of Organization or Incorporation of the resulting or surviving corporation or otherwise so that the provisions set forth herein for the protection of the conversion rights of the Series A Preferred Stock shall thereafter be applicable, as nearly as reasonably may be, to any such other shares of stock and other securities and property deliverable upon conversion at the Series A Preferred Stock remaining outstanding or other convertible preferred stock received by the holders in place thereof; and any such resulting or surviving corporation shall expressly assume the obligation to deliver, upon the exercise of the conversion privilege, such shares, securities or property as the holders of the Series A Preferred Stock remaining outstanding or other convertible preferred stock received by the holders in place thereof shall be entitled to receive pursuant to the provisions hereof, and to make provisions for protection of the conversion right as above provided.
(C)    Any conversion ratio determined or adjusted as herein provided shall remain in effect until further adjustment as required herein.
(iv)    If the Corporation shall grant to the holders of its Common Stock any rights to subscribe for or purchase any shares of capital stock of any class or any securities convertible into shares of capital stock of any class, it shall afford the holders of the Series A Preferred Stock the same rights with respect to such grant as they would have been entitled to receive as holders of the Common Stock had they converted their shares of Series A Preferred Stock into shares of Common Stock as of the record date for the granting of such rights.
(v)    No fractional shares of Common Stock shall be issued upon conversion of any Preferred Stock, but in lieu of fractional shares the Corporation shall pay an amount in cash equal to the current market value of such fractional interest, computed on the basis of the last reported sale price of the Common Stock on the New Stock Exchange prior to the date of conversion.
(vi)    After any adjustment of the conversion rate has been made pursuant to subparagraph (iii) hereof, the Corporation shall, as soon as possible and in any event no later than 30 days after such adjustment, file with each transfer agent of such Preferred Stock and the Common Stock a certificate signed by the President or a Vice President of the Corporation, setting forth in reasonable detail the facts requiring the adjustment of the conversion rate and specifying the adjusted conversion rate (or, if the adjustment results in a change in the kind of securities or other property issuable, specifying such securities or other property).
(vii)    As long as any of the Series A Preferred Stock remains outstanding, the Corporation shall take all steps necessary to reserve and keep available a number of its authorized but unissued shares of Common Stock sufficient for issuance upon conversion of all outstanding shares of such Preferred Stock.
(viii)    In case of the voluntary dissolution, liquidation, or winding up of the Corporation, all conversion rights of the holders of the Series A Preferred Stock shall terminate on a date fixed by the Board of Directors but not more than 30 days prior to the record date for determining the holders of the Common Stock entitled to receive any distribution upon such dissolution, liquidation, or winding up. The Corporation shall cause notice of the proposed action, and of the date of termination of conversion rights, to be mailed to the holders, of record of the Series A Preferred Stock not later than 30 days prior to the date of such termination, and shall promptly give similar notice to each transfer agent for such Preferred Stock and for the Common Stock. Such notice shall also state the conversion rate then in effect. A consolidation or merger of the Corporation with or into any other corporation or a sale of all or substantially all of the assets of the Corporation for stock or securities of another corporation shall not constitute a dissolution, liquidation or winding up of the Corporation for the purposes of this subparagraph.


Exhibit 3.1

(ix)    All certificates of Series A Preferred Stock surrendered for conversion as provided herein shall be cancelled and retired in the manner provided by law and no further Preferred Stock shall be issued in lieu thereof.
(x)    The exercise of the conversion privilege shall be subject to such regulations, not inconsistent with the foregoing provisions, as may from time to time be adopted by the Board of Directors of the Corporation.
(xi)    All shares of Common Stock issued upon the conversion of the Series A Preferred Stock shall be validly issued and outstanding and fully paid and non-assessable, and the Corporation shall pay all issue taxes payable in respect thereof. The Corporation shall not be required, however, to pay any tax imposed in connection with any transfer involved in the issuance and delivery of certificates of Common Stock in a name other than that of the holder of the Preferred Stock converted.
(e)    Sinking Fund. The shares of Series A Preferred Stock shall not be entitled to the benefit of any sinking fund to be applied to the purchase or redemption of such Preferred Stock.
5.    The voting rights, except as to holders of Series A Preferred Stock and Series B Preferred Stock, which shall be as stated in Paragraph 3 of this Article III, and the designations, preferences and other rights and limitations or restrictions of the one or more series of Preferred Stock other than Series A Preferred Stock shall be such as may be fixed by the Board of Directors (authority so to do being hereby expressly granted) and stated and expressed in a resolution or resolutions adopted by the Board of Directors providing for the issue of Preferred Stock of such other series. Such resolution or resolutions shall (a) fix the designation of such series; (b) fix the number of shares to be included in such series; (c) fix the dividend rights of holders of shares of such series including the dividend rate, the dividend periods and payment dates, the conditions upon which the dividends will be paid and whether the dividends shall be cumulative; (d) fix the voting rights of holders of shares of such series; (e) fix the price at which and the terms on which stock of such series may be redeemed if the shares of such other series are to be redeemable, including the terms and amounts of any sinking fund for the purchase or redemption of shares of such series; (f) fix the amount ($100 per share unless the Board of Directors shall fix a lesser amount) which shall be paid to the holders of the shares of such other series in case of dissolution or any distribution of assets; and (g) fix the rights, if any, of the holders of shares of such other series to convert the same into or purchase Common Stock.
All shares of any one series of Preferred Stock shall be identical with each other in all respects except that shares of any one series issued at different times may differ as to the date from which dividends thereon shall accumulate and the date from which the shares may be redeemed; and all series of Preferred Stock shall be identical in all respect except as to voting rights of holders of Series A Preferred Stock and Series B Preferred Stock set forth in Paragraph 3 and except as to the designations, voting rights, preferences, and other rights and limitations or restrictions of other series of Preferred Stock which pursuant to this Paragraph 5 may be specified with respect to each series by the respective resolutions of the Board of Directors providing for such Series, and shall rank equally.
5.1    There is hereby created a series of Preferred Stock designated as “Series B $1.76 Cumulative Convertible Preferred Stock” without par value, consisting of 9,091 shares of the Preferred Stock and hereinafter called “Series B Preferred Stock”. Except as to voting rights, which are set forth in Article III, Paragraph 3 of the Certificate of Incorporation of the Corporation, the rights, powers, preferences and privileges of the Series B Preferred Stock and the qualifications, limitations and restrictions thereof shall be as follows:
(a)    Dividends. The holders of the Series B Preferred Stock shall be entitled to receive, but only when and as declared by the Board of Directors out of funds legally available for the payment of dividends, cash dividends at the rate of $1.76 per annum per share, and no more, payable quarterly on the first business day following the last day of the months of March, June, September and December of each year for the respective three-month periods ending with such months. The Board of Directors may fix in advance a date not more than 15 days nor less than 5 days preceding any dividend payment date as a record date for determination of the holders of the Series B Preferred Stock entitled to receive any such dividend. Dividends shall accrue on each share of the Series B Preferred Stock from the date of original issue and shall be cumulative quarterly, so that if at any time dividends at the rate of $1.76 per annum on each share shall not have been declared and paid, or set apart for payment, for all preceding quarterly dividend periods from and after the date of issue, the deficiency shall be declared and paid, or set apart for payment, but without interest, before any cash dividend shall be declared and paid, or set apart for payment on the Common Stock or on any class of stock ranking junior to the Series B Preferred Stock, and before any assets which are by law available for the payment of dividends shall be paid or set apart for the purchase or redemption of any shares of any class of stock ranking junior to the Series B Preferred Stock.


Exhibit 3.1

(b)    Redemption
(i)    The Corporation, by action of its Board of Directors, may redeem, out of any of its funds which may be lawfully used therefor, all or any part of the Series B Preferred Stock, at any time or from time to time, but in no event less than five years from the issuance of any of such shares, at a redemption price equal to $44.00 per share plus all unpaid dividends accrued to the redemption date. In the event the Corporation shall determine to redeem less than all the shares of Series B Preferred Stock then outstanding, the Board of Directors shall determine the shares of Series B Preferred Stock so to be redeemed by lot or pro rata or by any other means which the Board of Directors deems equitable. Notice of any proposed redemption of the Series B Preferred Stock shall be given by the Corporation by mailing a copy of such notice at least 30 days prior to the date fixed for such redemption to the holders of record of the Series B Preferred Stock to be redeemed at their respective addresses appearing on the books of the Corporation and by publication of such notice once a week for two successive weeks in a newspaper of general circulation, published in English, in the City of Miami, Florida, the first publication to be made not less than 30 days before the date fixed for redemption. Each such notice of redemption shall specify the date fixed for redemption, the redemption price, and the place where payment of the redemption price is to be made, and shall also state the date on which the right to convert the shares of Series B Preferred Stock to be redeemed shall terminate and the current rate at which shares of said Series B Preferred Stock may be converted into Common Stock shall have been duly given as aforesaid and if on or before the redemption date specified in such notice all funds necessary for such redemption shall have been set aside by the Corporation separate and apart from its other funds in trust for the pro rata benefit of the holders of the shares so called for redemption so as to be and continue to be available therefor, then from and after the redemption date, notwithstanding that any certificate for shares of Series B Preferred Stock so called for redemption shall not have been surrendered for cancellation, the shares represented thereby shall no longer be deemed to be outstanding, the rights to receive dividends thereon shall cease to accrue from and after the date of redemption so designated and all rights with respect to such shares so called for redemption shall forthwith on such redemption date cease and terminate except for the right to the holders thereof to receive the redemption price of such shares but without interest thereon.
(ii)    The Corporation, by action of its Board of Directors, may redeem all of the shares of Series B Preferred Stock at any time during the five year period commencing with the issuance of such shares by issuing in exchange therefor shares of the Common Stock of the Corporation in compliance with the requirements of Section 608.15 and 608.18(7)(b) Florida Statutes, provided, however, that such redemption may be made only if (A) the closing price per share of the Corporation’s Common Stock on the New York Stock Exchange for each of the 30 business days preceding the giving of notice of such redemption, equals or exceeds an amount determined by dividing $88.00 by the number of shares of Common Stock of the Corporation into which each share of such Series B Preferred Stock is convertible pursuant to subparagraph (d) (iii) of this paragraph 5.1 at the date of the notice of such redemption; and (B) the Corporation pays or provides for the payment of all dividends on the Series B Preferred Stock accumulated and accrued through the effective date of redemption.
Notice of any such redemption of the Series B Preferred Stock shall be given by Corporation by mailing a copy of such notice to the holders of record of the Series B Preferred Stock at their respective addresses appearing on the books of the Corporation. The effective date of such redemption (hereinafter called “effective date”) shall be the last day of the calendar quarter in which such notice is given.
Each of the shares of Series B Preferred Stock issued and outstanding on the effective date, shall upon said effective date forthwith be converted into the number of fully paid and non-assessable shares of Common Stock of the Corporation as shall be determined by the conversion ratio in effect on the effective date under the provisions of subparagraph (d) (iii) of this paragraph 5.1 and each holder of shares of Series B Preferred Stock shall, upon surrender of his certificate or certificates for the same to the transfer agent of the Corporation for such Series B Preferred Stock at offices which the Corporation shall cause to be maintained in the City of Miami, State of Florida, receive in exchange therefor certificates representing the number of whole shares of Common Stock of the Corporation into which such shares of Series B Preferred Stock issued and outstanding upon said effective date shall be deemed to represent the shares of Common Stock of the Corporation into which such shares of Series B Preferred Stock issued and outstanding upon said effective date have been converted.
No fractional shares shall be issued upon the redemption of the Series B Preferred Stock under this subparagraph (b)(ii) but in lieu of fractional shares the Corporation shall pay an amount in cash equal to the current market value of the Common Stock on the New York Stock Exchange prior to the effective date of the redemption.


Exhibit 3.1

Upon the effective date of redemption under this subparagraph (b) (ii), the Series B Preferred Stock shall be deemed cancelled and retired and no further shares of Series B Preferred Stock shall be issued in lieu thereof.
All shares of Common Stock issued upon the redemption of the Series B Preferred Stock shall be validly issued and outstanding and fully paid and non-assessable, and the Corporation shall pay all issue taxes payable in respect thereof.
(c)    Rights on Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of the Series B Preferred Stock shall be entitled to be paid in full, out of the assets of the Corporation available for distribution to stockholders, the sum of $44.00 per share, plus an amount equal to all accrued and unpaid dividends to the time of such payment, before any of the assets of the Corporation shall be distributed to the holders of the Common Stock or of any other stock ranking junior to the Series B Preferred Stock. If upon any such dissolution, liquidation or winding up of the Corporation the assets distributable among the holders of the stock of the Corporation shall be insufficient to permit the payment in full of the preferential amounts payable as aforesaid to the holders of the Series B Preferred Stock and the payment in full of the preferential amounts payable to the holders of all other Preference Stock ranking on a parity with respect to liquidation with the Series B Preferred Stock (which preferential amounts shall have been fixed in the Certificate of Incorporation of the Corporation or determined by the Board of Directors of the Corporation at or before the issuance of such other class or series of Preference Stock), then all such assets of the Corporation shall be distributed among the holders of all of such Preference Stock then outstanding, ratably in proportion to the full preferential amounts to which they shall be entitled respectively. A consolidation or merger of the Corporation with or into any other corporation, or the sale or transfer by the Corporation of all or any part of its assets in exchange for stock or other securities of the purchaser, shall not be deemed to be a liquidation or dissolution for the purposes of this subparagraph.
(d)    Conversion Privilege. Each holder of a share of Series B Preferred Stock shall have the right at any time, or, as to any such share called for redemption, at any time prior to the close of business on the third business day preceding the date fixed for redemption, to convert such share into fully paid and non-assessable shares of Common Stock of the Corporation upon the following terms and conditions:
(i)    In order to exercise the conversion privilege, the holder of any shares of Series B Preferred Stock to be converted shall surrender the certificate or certificates therefor to the transfer agent of the Corporation for such Preferred Stock at offices which the Corporation shall cause to be maintained in the City of Miami, State of Florida, duly endorsed or assigned (unless such endorsement or assignment be waived by the Corporation), together with a written request for conversion.
As soon as practicable after the surrender of such certificates as provided above, the Corporation shall cause to be issued and delivered, at the office of such transfer agent, to or on the order of the holder of the certificates thus surrendered, a certificate or certificates for the number of full shares of Common Stock issuable hereunder upon the conversion of such Preferred Stock, and cash, as provided in subparagraph (v) hereof, in respect of any fraction of a share of Common Stock, issuable upon such conversion. Such conversion shall be deemed to have been effected on the date on which the certificates for such Preferred Stock have been surrendered as provided above, and the person in whose name any certificate or certificates for shares of Common Stock are issuable upon such conversion shall be deemed to have become on such date the holder of record of the shares represented thereby.
(ii)    No adjustment or allowance shall be made for dividends on Preferred Stock surrendered for conversion, whether accrued, accumulated or otherwise.
(iii)    The conversion ratio at which Common Stock, par value $1.25, of the Corporation shall be issuable upon conversion of the Series B Preferred Stock shall be as follows (subject to adjustment as hereinafter provided);
.909 shares of Common Stock ($1.25 par value) for each share of Preferred Stock with respect to any conversion during the period commencing January 31, 1970 and ending January 30, 1971;


Exhibit 3.1

.826 shares of Common Stock ($1.25 par value) for each share of Series B Preferred Stock with respect to any conversion during the period commencing January 31, 1971 and ending January 30, 1973;
.751 shares of Common Stock ($1.25 par value) for each share of Series B Preferred Stock with respect to any conversion during the period commencing January 31, 1973 and ending January 30, 1975;
.683 shares of Common Stock ($1.25 par value) for each share of Series B Preferred Stock with respect to any conversion during the period commencing January 31, 1975 and ending January 30, 1977;
.621 shares of Common Stock ($1.25 par value) for each share of Series B Preferred Stock with respect to any conversion on or after January 31, 1977.
(A)    In the event of reduction or split of the Common Stock or the issuance of any stock dividend by the Corporation in shares of Common Stock, the conversion ratio shall be adjusted accordingly, and such adjustment shall become effective immediately after the opening of business on the day following the record date for the determination of Stockholders entitled to receive such dividend or to receive or be affected by such split or reduction, as the case may be.
(B)    In the case of any other recapitalization or reclassification of the Common Stock, or any consolidation or merger of the Corporation with or into another corporation, or in case of any sale or conveyance to another corporation of all or substantially all of the property of the Corporation, the holder of each share of Series B Preferred Stock then outstanding shall have the right thereafter, so long as his conversion right hereunder shall exist, to convert such share into the kind and amount of shares of stock and other securities and property receivable upon such recapitalization, reclassification, consolidation, merger, sale or conveyance by the holder of the number of shares of Common Stock (whether whole or fractional) of the Corporation into which such share of Series B Preferred Stock might have been converted immediately prior to such recapitalization, reclassification, consolidation, merger, sale or conveyance; and effective provisions shall be made in the Certificate or Articles of Organization or Incorporation of the resulting or surviving corporation or otherwise so that the provisions set forth herein for the protection of the conversion rights of Series B Preferred Stock shall thereafter be applicable, as nearly as reasonably may be, to any such other shares of stock and other securities and property deliverable upon conversion of the Series B Preferred Stock remaining outstanding or other Convertible Preferred Stock received by the holders in place thereof; and any such resulting or surviving corporation shall expressly assume the obligation to deliver, upon the exercise of the conversion privilege, such shares, securities or property as the holders of the Series B Preferred Stock remaining outstanding or other Convertible Preferred Stock received by the holders in place thereof shall be entitled to receive pursuant to the provisions hereof, and to make provisions for protection of the conversion right as above provided.
(C)    Any conversion ratio determined or adjusted as herein provided shall remain in effect until further adjustment as required herein.
(iv)    If the Corporation shall grant to the holders of its Common Stock any rights to subscribe for or purchase any shares of capital stock of any class or any securities convertible into shares of capital stock of any class, it shall afford the holders of the Series B Preferred Stock the same rights with respect to such grant as they would have been entitled to receive as holders of the Common Stock had they converted their shares of Common Stock as of the record date for the granting of such rights.
(v)    No fractional shares of Common Stock shall be issued upon conversion of any Preferred Stock, but in lieu of fractional shares the Corporation shall pay an amount in cash equal to the current market value of such fractional interest, computed on the basis of the last reported sale price of the Common Stock on the New York Stock Exchange prior to the date of conversion.
(vi)    After any adjustment of the conversion rate has been made pursuant to subparagraph (iii) hereof, the Corporation shall, as soon as possible and in any event no late than 30 days after such adjustment, file with each transfer agent of such Preferred Stock and the Common Stock a certificate signed by the President


Exhibit 3.1

or a Vice President of the Corporation, setting forth in reasonable detail the facts requiring the adjustment of the conversion rate and specifying the adjusted conversion rate (or, if the adjusted results in a change in the kind of securities or other property issuable, specifying such securities or other property).
(vii)    As long as any of the Series B Preferred Stock remains outstanding, the Corporation shall take all steps necessary to reserve and keep available a number of its authorized but unissued shares of Common Stock sufficient for issuance upon conversion of all outstanding shares of such Preferred Stock.
(viii)    In case of the voluntary dissolution, liquidation, or winding up of the Corporation, all conversion rights of the holders of the Series B Preferred Stock shall terminate on a date fixed by the Board of Directors but not more than 30 days prior to the record date for determining the holders of the Common Stock entitled to receive any distribution upon such dissolution, liquidation, or winding up. The corporation shall cause notice of the proposed action, and of the date of termination of conversion rights, to be mailed to the holders of record of the Series B Preferred Stock not later than 30 days prior to the date of such termination, and shall promptly give similar notice to each transfer agent for such Preferred Stock and for the Common Stock. Such notice shall also state the conversion rate then in effect. A consolidation or merger of the Corporation with or into any other corporation or a sale of all or substantially all of the assets of the Corporation for stock or securities of another corporation shall not constitute a dissolution, liquidation or winding up of the Corporation for the purposes of this subparagraph.
(ix)    All certificates of Series B Preferred Stock surrendered for conversion as provided herein shall be cancelled and retired in the manner provided by law and no further Preferred Stock shall be issued in lieu thereof.
(x)    The exercise of the conversion privilege shall be subject to such regulations, not inconsistent with the foregoing provisions, as may from time to time be adopted by the Board of Directors of the Corporation.
(xi)    All shares of Common Stock issued upon the conversion of the Series B Preferred Stock shall be validly issued and outstanding and fully paid and non-assessable, and the Corporation shall pay all issue taxes payable in respect thereof. The Corporation shall not be required, however, to pay any tax imposed in connection with any transfer involved in the issuance and delivery of certificates of Common Stock in a name other than that of the holder of the Preferred Stock converted.
(e)    Sinking Fund. The share of Series B Preferred Stock shall not be entitled to the benefit of any sinking fund to be applied to the purchase or redemption of such Preferred Stock.
6.    The holders of each share of Common Stock shall be entitled to one vote at any meeting of the shareholders. After or concurrently with making payment of or provision for payment of full dividends for the current quarterly dividend period of all then outstanding Preference Stock, and after having paid all past quarterly dividends on all the outstanding cumulative Preference Stock, and after first fulfilling any sinking requirements on other obligations in respect of all then outstanding Preference Stock, dividends may be paid to the holders of the Common Stock as and when declared by the Board of Directors in its discretion out of any of the funds of the Corporation legally available for the payment of such dividends, to the exclusion of the holders of Preference Stock then outstanding. In the event of liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, after payment to the holders of the then outstanding Preference Stock of the full amount to which they are entitled, the holders of the Common Stock shall be entitled, to the exclusion of the holders of the Preference Stock then outstanding, to share ratably in all the remaining assets of the Corporation according to the number of shares held by each.

ARTICLE IV
Board of Directors

(a)     Number, election and terms . Except as otherwise fixed by or pursuant to the provisions of Article III hereof relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect additional Directors under specified circumstances, the number of the Directors of the Corporation shall be fixed from time to time by or pursuant to the By-Laws of the Corporation. The Directors, other than those who may be elected by the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, shall be classified, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as possible, as shall be provided in the manner specified in the By-Laws of the Corporation, one class to be originally elected for a term expiring at the annual meeting of stockholders to be held in 1985, another class to be originally elected for a term expiring


Exhibit 3.1

at the annual meeting of stockholders to be held in 1986, and another class to be originally elected for a term expiring at the annual meeting of stockholders to be held in 1987, with each class to hold office until its successor is elected and qualified. At each annual meeting of the stockholders of the Corporation, the successors of the class of Directors whose term expires at that meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election. Commencing in 2016, Directors, other than those who may be elected by the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, shall be elected to hold office for a term expiring at the next annual meeting of stockholders following their election. Accordingly, at the 2016 annual meeting of stockholders, Directors whose terms expire at that meeting shall be elected to hold office for a term expiring at the 2017 annual meeting of stockholders; at the 2017 annual meeting of stockholders, Directors whose terms expire at that meeting shall be elected to hold office for a term expiring at the 2018 annual meeting of stockholders; and at the 2018 annual meeting of stockholders and at each annual meeting of stockholders thereafter, all Directors shall be elected to hold office for a term expiring at the next annual meeting of stockholders following their election. All Directors, subject to such Director’s earlier death, resignation, retirement, disqualification or removal from office, shall hold office until the expiration of the term for which he or she was elected, and until his or her successor is duly elected and qualified.
(b)     Stockholder nomination of director candidates . Advance notice of stockholder nominations for the election of Directors shall be given in the manner provided in the By-Laws of the Corporation.
(c)     Newly created directorships and vacancies . Except as otherwise provided for or fixed by or pursuant to the provisions of Article III hereof relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect Directors under specified circumstances, newly created directorships resulting from any increase in the number of Directors and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or any other cause shall be filled by the affirmative vote of a majority of the remaining Directors then in office, even though less than a quorum of the Board of Directors. Any Director elected in accordance with the preceding sentence shall hold office until the next election of directors by the stockholders and until such Director’s successor shall have been duly elected and qualified. No decrease in the number of Directors constituting the Board of Directors shall shorten the term of any incumbent Director.
(d)     Removal . Subject to the rights of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect Directors under specified circumstances, any Director may be removed from office, with or without cause, only by the affirmative vote of the holders of a majority of the votes cast (in person or by proxy) by the holders of the outstanding shares of stock entitled to vote generally in the election of Directors, voting together as a single class. For purposes of clarity, “abstentions,” “withheld” votes and “broker non-votes” shall not be counted as a vote cast with respect to such action.
(e)     Amendment, repeal, etc . Notwithstanding anything contained in these Restated Articles of Incorporation to the contrary, the affirmative vote of the holders of a majority of the votes cast (in person or by proxy) by the holders of the outstanding shares of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to alter, amend or adopt any provision inconsistent with or repeal this Article IV. For purposes of clarity, “abstentions,” “withheld” votes and “broker non-votes” shall not be counted as a vote cast with respect to such action.”
ARTICLE V
Stockholder Action

All actions required or permitted to be taken by the shareholders at an annual or special meeting of shareholders of the Corporation may be effected by the consent in writing of the holders of capital stock of the Corporation entitled to vote; provided that no such action may be effected except in accordance with the provisions of this Article V and applicable law. Notwithstanding anything contained in these Restated Articles of Incorporation to the contrary, the affirmative vote of the holders of a majority of the votes cast (in person or by proxy) by the holders of the outstanding shares of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to alter, amend or adopt any provision inconsistent with or repeal this Article V. For purposes of clarity, “abstentions,” “withheld” votes and “broker non-votes” shall not be counted as a vote cast with respect to such action.

(a) Request for Record Date . The record date for determining the shareholders entitled to consent to corporate action in writing without a meeting shall be as fixed by the Board of Directors or as otherwise established under this Article V. Any holder of capital stock of the Corporation seeking to have such shareholders authorize or take corporate action by written consent without a meeting shall, by written notice addressed to the Secretary of the Corporation, delivered to the Corporation and signed


Exhibit 3.1

by holders of record at the time such notice is delivered owning shares representing in the aggregate at least twenty five percent (25%) of the outstanding shares of capital stock of the Corporation, request that a record date be fixed for such purpose. For purposes of this Article V, the word “own” shall have the same meaning as in Article IV, Section 5(g)(2)(C) of the By-Laws of the Corporation, as may be amended from time to time. The terms “owned,” “owner,” “owning” and other variations of the word “own” shall have correlative meanings. Such request must contain the information set forth in paragraph (b) of this Article V. Following receipt of such request, the Board of Directors shall, by the later of (i) 20 days after the Corporation’s receipt of such request and (ii) five days after delivery of any information requested by the Corporation to determine the validity of any such request or whether the action to which such request relates may be effected by written consent of shareholders in lieu of a meeting, determine the validity of such request and whether such request relates to an action that may be taken by written consent of shareholders in lieu of a meeting pursuant to this Article V and applicable law and, if appropriate, adopt a resolution fixing the record date for such purpose. The record date for such purpose shall be no more than 10 days after the date upon which the resolution fixing the record date is adopted by the Board of Directors and shall not precede the date upon which such resolution is adopted. If (x) the request required by this paragraph (a) has been determined to be valid and to relate to an action that may be effected by written consent pursuant to this Article V and applicable law or (y) no such determination shall have been made by the date required by this paragraph (a), and in either event no record date has been fixed by the Board of Directors, the record date shall be the first date on which a signed written consent relating to the action taken or proposed to be taken by written consent is delivered to the Corporation in the manner described in paragraph (f) of this Article V; provided that if prior action by the Board of Directors is required under the provisions of the Florida Business Corporation Act, the record date shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action.
(b) Request Requirements. Any request required by paragraph (a) of this Article V (i) must be delivered by the holders of record owning at least twenty five percent (25%) of the outstanding shares of capital stock of the Corporation, who shall not revoke such request and who shall continue to own not less twenty five percent (25%) of the outstanding shares of capital stock of the Corporation through the date of delivery of consents signed by a sufficient number of shareholders to authorize or take such action, (ii) must contain an agreement to solicit consents in accordance with paragraph (d) of this Article V, (iii) must describe the action proposed to be taken by written consent of shareholders and (iv) must contain (1) such information and representations, to the extent applicable, then required by Article IV, Section 1 and Article IV, Section 5 of the Corporation's By-Laws as though such shareholder was intending to propose an amendment to the Amended and Restated Articles of Incorporation or By-Laws or other business to be brought before a meeting of shareholders and (2) the text of the proposed action to be taken (including the text of any resolutions to be adopted by written consent) and (v) must include documentary evidence that the requesting shareholder(s) own in the aggregate not less than twenty five percent (25%) of the outstanding shares of capital stock of the Corporation as of the date of such written request to the Secretary; provided, however, that if the shareholder(s) making the request are not the beneficial owners of the shares representing at least twenty five percent (25%) of the outstanding shares of capital stock of the Corporation, then to be valid, the request must also include documentary evidence (or, if not simultaneously provided with the request, such documentary evidence must be delivered to the Secretary within ten business days after the date on which the request is delivered to the Secretary) that the beneficial owners on whose behalf the request is made beneficially own at least twenty five percent (25%) of the outstanding shares of capital stock of the Corporation as of the date on which such request is delivered to the Secretary. If the action proposes to elect directors by written consent, the written request for a record date must also contain the information required by Article IV, Section 6 of the Corporation's By-Laws. The Corporation may require the shareholder(s) submitting such request to furnish such other information as may be reasonably requested by the Corporation. Any requesting shareholder may revoke his, her or its request at any time by written revocation delivered to the Secretary of the Corporation at the Corporation's principal executive offices. Any disposition by a requesting shareholder of any shares of capital stock of the Corporation (or of beneficial ownership of such shares by the beneficial owner on whose behalf the request was made) after the date of the request, shall be deemed a revocation of the request with respect to such shares, and each requesting shareholder and the applicable beneficial owner shall certify to the Secretary of the Corporation on the day prior to the record date set for the action by written consent as to whether any such disposition has occurred. If the unrevoked requests represent in the aggregate less than twenty five percent (25%) of the outstanding shares of capital stock of the Corporation, the Board of Directors, in its discretion, may cancel the action by written consent and revoke the fixing of the record date established in connection therewith.


Exhibit 3.1

(c) Actions That May Be Taken by Written Consent . Shareholders are not entitled to act by written consent if (i) the request to act by written consent made pursuant to paragraph (a) of this Article V (x) does not comply with this Article V or the Corporation’s By-Laws, (y) was made in a manner that involved a violation of Regulation 14A under the Exchange Act or other applicable law, or (z) relates to an item of business that is not a proper subject for shareholder action under applicable law, (ii) any such request is received by the Corporation during the period commencing 90 days before the first anniversary of the date of the immediately preceding annual meeting of shareholders and ending on the earlier of (x) the date of the next annual meeting of shareholders and (y) 30 calendar days after the first anniversary of the date of the immediately preceding annual meeting of shareholders, (iii) an identical or substantially similar item (as determined in good faith by the Board of Directors, a “Similar Item”), other than the election or removal of directors, was presented at a meeting of shareholders held not more than 12 months before the request for a record date for such action is delivered to the corporation, (iv) a Similar Item consisting of the election or removal of directors was presented at a meeting of shareholders held not more than 90 days before the request for a record date was delivered to the corporation (and, for purposes of this clause, the election or removal of directors shall be deemed a “Similar Item” with respect to all items of business involving the election or removal of directors, changing the size of the Board of Directors and the filling of vacancies and/or newly created directorships resulting from any increase in the authorized number of directors), or (v) a Similar Item is included in the Corporation’s notice of meeting as an item of business to be brought before an annual or special shareholders meeting that has been called but not yet held or that is called within 90 days after the request is received by the Secretary of the Corporation. The Board of Directors shall determine in good faith whether a record date is required to be set under the provisions of this Article V.
(d) Manner of Consent Solicitation . Shareholders may take action by written consent only if consents are solicited by the shareholder or shareholders seeking to take action by written consent of shareholders in accordance with this Article V, Regulation 14A of the Exchange Act, without reliance upon the exemption contained in Rule 14a-2(b)(2) of the Exchange Act, and applicable law from all holders of capital stock of the Corporation entitled to vote on the matter.
(e) Date of Consent . Every written consent purporting to take or authorize the taking of corporate action (each such written consent is referred to in this paragraph and in paragraph (f) as a “Consent”) must bear the date of signature of each shareholder who signs the Consent, and no Consent shall be effective to take the corporate action referred to therein unless, within 30 days of the earliest dated Consent delivered in the manner required by paragraph (f) of this Article V and applicable law, and not later than 90 days after the record date, Consents signed by a sufficient number of shareholders to take such action are so delivered to this Corporation.
(f) Delivery of Consents . No Consents may be dated or delivered to the Corporation or its registered office in the State of Florida until 90 days after the delivery of a valid request to set a record date. Consents must be delivered to the Corporation by delivery to its registered office in the State of Florida or its principal place of business. Delivery must be made by hand or by certified or registered mail, return receipt requested. In the event of the delivery to the Corporation of Consents, the Secretary or such other officer of the Corporation as the Board of Directors may designate shall provide for the safe-keeping of such Consents and any related revocations and shall promptly conduct such ministerial review of the sufficiency of all Consents and any related revocations and of the validity of the action to be taken by written consent as the Secretary or such other officer, as the case may be, deems necessary or appropriate, including, without limitation, whether the shareholders of a number of shares having the requisite voting power to authorize or take the action specified in Consents have given consent; provided, however, that if the action to which the Consents relate is the removal of one or more members of the Board of Directors, the Secretary or such other officer of the Corporation as the Board of Directors may designate, as the case may be, shall promptly designate two persons, who shall not be members of the Board of Directors, to serve as inspectors (the “Inspectors”) with respect to such Consent and such Inspectors shall discharge the functions of the Secretary, or such other officer of the Corporation as the Board of Directors may designate, as the case may be, under this Article V. If after such investigation the Secretary, such other officer of the Corporation as the Board of Directors may designate or the Inspectors, as the case may be, shall determine that the action purported to have been taken is duly authorized by the Consents, that fact shall be certified on the records of the Corporation kept for the purpose of recording the proceedings of meetings of shareholders and the Consents shall be filed in such records. In conducting the investigation required by this paragraph (f), the Secretary, such other officer of the Corporation as the Board of Directors may


Exhibit 3.1

designate or the Inspectors, as the case may be, may, at the expense of the Corporation, retain special legal counsel and any other necessary or appropriate professional advisors as such person or persons may deem necessary or appropriate and, to the fullest extent permitted by law, shall be fully protected in relying in good faith upon the opinion of such counsel or advisors.
(g) Effectiveness of Consent . Notwithstanding anything in these Restated Articles of Incorporation to the contrary, no action may be taken by the shareholders by written consent except in accordance with this Article V and applicable law. If the Board of Directors shall determine that any request to fix a record date or to take shareholder action by written consent was not properly made in accordance with, or relates to an action that may not be effected by written consent pursuant to, this Article V or applicable law, or the shareholder or shareholders seeking to take such action do not otherwise comply with this Article V or applicable law, then the Board of Directors shall not be required to fix a record date in respect of such proposed action, and any such purported action by written consent shall be null and void. No action by written consent without a meeting shall be effective until such date as the Secretary, such other officer of the Corporation as the Board of Directors may designate or the Inspectors, as applicable, certify to the Corporation that the Consents delivered to the Corporation in accordance with paragraph (f) of this Article V represent at least the minimum number of votes that would be necessary to take the corporate action at a meeting at which all shares entitled to vote thereon were present and voted, in accordance with the Florida Business Corporation Act and these Restated Articles of Incorporation.
(h) Challenge to Validity of Consent . Nothing contained in this Article V shall in any way be construed to suggest or imply that the Board of Directors or any shareholder shall not be entitled to contest the validity of any consent or related revocations, whether before or after such certification by the Secretary, such other officer of the Corporation as the Board of Directors may designate or the Inspectors, as the case may be, or to take any other action (including, without limitation, the commencement, prosecution, or defense of any litigation with respect thereto, and the seeking of injunctive relief in such litigation).
(i) Board-Solicited Shareholder Action by Written Consent . Notwithstanding anything to the contrary set forth above, (x) none of the foregoing provisions of this Article V shall apply to any solicitation of shareholder action by written consent in lieu of a meeting by or at the direction of the Board of Directors and (y) the Board of Directors shall be entitled to solicit shareholder action by written consent in accordance with applicable law.    
ARTICLE VI
By-Law Amendments

The Board of Directors shall have power to adopt, alter, amend and repeal the By-Laws of the Corporation (except as so far as the By-Laws of the Corporation adopted by the stockholders shall otherwise provide). Any By-Laws made by the Directors under the powers conferred hereby may be altered, amended or repealed by the Directors or by the stockholders. Notwithstanding the foregoing and anything contained in these Restated Articles of Incorporation to the contrary, Sections 1 and 2 of Article V of the By-Laws shall not be altered, amended or repealed and no provision inconsistent therewith shall be adopted without the affirmative vote of the holders of a majority of the votes cast (in person or by proxy) by the holders of the outstanding shares of the Corporation entitled to vote generally in the election of directors, voting together as a single class. Notwithstanding anything contained in these Restated Articles of Incorporation to the contrary, the affirmative vote of the holders of a majority of the votes cast (in person or by proxy) by the holders of the outstanding shares of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to alter, amend or adopt any provision inconsistent with or repeal this Article VI. For purposes of clarity, “abstentions,” “withheld” votes and “broker non-votes” shall not be counted as a vote cast with respect to such action.

ARTICLE VII
[Reserved]


Exhibit 3.1


ARTICLE VIII
INDEMNIFICATION OF OFFICERS,
DIRECTORS, EMPLOYEES AND AGENTS

The Corporation shall have the power to indemnify officers, directors, employees and agents and their heirs, executors and administrators, to the full extent permitted by law. In addition, the Corporation shall have the power to make any other or further indemnification, except an indemnification prohibited by law, under any by-law, agreement, vote of shareholders or disinterested directors or otherwise.

ARTICLE IX
MODIFICATION OF STATUTORY PREEMPTIVE RIGHTS

No holder of stock of the Corporation of any class, as such, shall have any preemptive or preferential right of subscription to any shares of any class or series of stock of the Corporation whether now or hereafter authorized, or to any obligations convertible into stock of the Corporation, or any right of subscription to any thereof, other than such, if any, as the Board of Directors in its discretion may, from time to time, determine with respect thereto; and any shares of stock or convertible obligations which the Board of Directors may determine to offer for subscription to the holders of stock of the Corporation may, as said Board shall determine, be offered to the holders of any class or classes of stock exclusively, or to the holders of all classes of stock, and, if offered to more than one class of stock, in such proportion as between said classes of stock as the Board of Directors in its discretion may determine. As used herein, the expression “convertible obligations” shall include any notes, bonds, or other evidences of indebtedness to which are attached or with which are issued warrants or other rights to purchase stock of the Corporation of any class or classes. The Board of Directors is hereby expressly authorized, in its discretion, in connection with the issue of any obligation or stock of the Corporation (but without intending hereby to limit its general power so to do in other cases), to grant rights or options to purchase stock of the Corporation of any class upon such terms and during such period as the Board of Directors shall determine, but not for a consideration less than the equivalent of the full par value of the stock, and to cause the rights to be evidenced by such warrants or other instruments as it may deem advisable. Should the Board of Directors elect to grant rights or options to purchase stock or convertible obligations of the Corporation to the stockholders of any class of stock, whether now or hereafter authorized, no waiver or release of the foregoing provisions of this Article shall be or be deemed to be accomplished thereby. The acceptance of stock in the Corporation shall be a waiver of any preemptive or preferential right which, in the absence of the provisions of this Article, might otherwise be asserted by stockholders of the Corporation.
ARTICLE X
RE-ESTABLISHMENT OF LOST CERTIFICATES
In case of loss or destruction of any certificate of stock, another may be issued in its place upon receipt of proof of such loss of destruction and upon furnishing a satisfactory bond of indemnity to the Corporation and/or to the transfer agent and registrar of such stock in such sum as the Board of Directors may provide and approve, such approval by the Corporation to be given by its Board of Directors or by such persons or person as the said Board may designate for that purpose.
ARTICLE XI
CORPORATE EXISTENCE
This Corporation shall have perpetual existence unless sooner dissolved according to law.
ARTICLE XII
PRINCIPAL PLACE OF BUSINESS
The principal office of business of said Corporation shall be in Miami, Dade County, Florida, with the privilege of having branch offices at other places within or without the State of Florida, or within or without the United States of America.


Exhibit 3.1


STATEMENT OF RESOLUTION ESTABLISHING
DUTCH AUCTION RATE TRANSFERABLE SECURITIES TM
PREFERRED STOCK, SERIES A
OF
RYDER SYSTEM, INC.
Pursuant to the provisions of Section 607.047 of the Florida General Corporation Act, the undersigned corporation submits the following statement for the purpose of establishing and designating a special series of its Dutch Auction Rate Transferable Securities Preferred Stock, Series A, and fixing and determining the relative rights and preferences thereof:
1.    The name of the corporation is Ryder System, Inc. (the “Corporation”).
2.    The following resolutions, establishing and designating a special series of Dutch Auction Rate Transferable Securities Preferred Stock, Series A, and fixing and determining the relative rights and preferences thereof, were duly adopted by the Securities Committee of the Board of Directors of the Corporation on November 18, 1985, pursuant to authority duly granted by the Board of Directors of the Corporation on November 9, 1985:
RESOLVED, that there be and hereby is established a series of Preferred Stock of the Corporation, without par value, designated as “Dutch Auction Rate Transferable Securities TM Preferred Stock, Series A” (hereinafter referred to as the “Series A DARTS”), consisting of 500,000 shares of Series A DARTS TM, which the Corporation has authority to issue. All the shares of Series A DARTS shall be identical, and each share of Series A DARTS shall be equal in all respects to every other such share.
FURTHER RESOLVED, that the designations, preferences and relative, participating, optional or other special rights of the Series A DARTS and the qualifications, limitations and restrictions thereof are as follows:
500,000 shares (500 Units) of the Preferred Stock, without par value, of the Corporation shall constitute a series of Preferred Stock designated as “Dutch Auction Rate Transferable Securities Preferred Stock, Series A”, hereinafter referred to as the “Series A DARTS”. All shares of Series A DARTS shall be identical with each other in all respects. The shares of the Series A DARTS shall be issued in units (the “Units”), with each Unit consisting of 1,000 shares of Series A DARTS. The shares of Series A DARTS may be purchased or transferred only in whole Units and the shares of Series A DARTS included in the Units may not be separately purchased or transferred. The designations, preferences and relative, participating, optional or other special rights of the Series A DARTS and the qualifications, limitations and restrictions thereof are as follows:
1.     Definitions . Unless the context or use indicates another or different meaning or intent, the following terms shall have the following meanings, whether used in the singular or plural:
(a)    “60-day 'AA' Composite Commercial Paper Rate”, on any date, means (i) the interest equivalent of the 60-day rate on commercial paper placed on behalf of issuers whose corporate bonds are rated “AA” by Standard & Poor's Corporation (“S&P”), or the equivalent of such rating by S&P or another rating agency, as such 60-day rate is made available on a discount basis or otherwise by the Federal Reserve Bank of New York for the Business Day immediately preceding such date, or (ii) in the event that the Federal Reserve Bank of New York does not make available such a rate, then the arithmetic average of the interest equivalent of the 60-day rate on commercial paper placed on behalf of such issuers, as quoted on a discount basis or otherwise by the Commercial Paper Dealers to the Trust Company for the close of business of the Business Day immediately preceding such date. If any Commercial Paper Dealer does not quote a rate required to determine the 60-day “AA” Composite Commercial Paper Rate, the 60‑day “AA” Composite Commercial Paper Rate shall be determined on the basis of the quotation or quotations furnished by the remaining Commercial Paper Dealer or Commercial Paper Dealers and any Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers selected by the Corporation to provide such rate or rates not being supplied by any Commercial Paper Dealer or Commercial Paper Dealers, as the case may be, or, if the Corporation does not select any such Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers, by the remaining Commercial Paper Dealer or Commercial Paper Dealers. If the Board of Directors of the Corporation shall make the adjustment referred to in the third sentence of paragraph 2(b)(i), than (i) if the Dividend Period Days shall be fewer than 70 days, such rate shall be the interest equivalent of the 60-day rate on such commercial paper; (ii) if the Dividend Period Days shall be 70 or more days but fewer than 85 days, such rate shall be the arithmetic average of the interest equivalent of the 60-day and 90-day rates on such commercial paper; and (iii) if the Dividend Period Days shall be 85 or more days but 98 or fewer days, such rate shall be the interest equivalent of the 90-day rate on such commercial paper. For purposes of this definition, the “interest equivalent” of a rate stated on a discount basis (a “discount rate”) for commercial paper of a given day's maturity shall


Exhibit 3.1

be equal to the quotient of (A) the discount rate divided by (B) the difference between (x) 1.00 and (y) a fraction the numerator of which shall be the product of the discount rate times the number of days in which such commercial paper matures and the denominator of which shall be 360. If the rate obtained by the Trust Company is quoted on another basis, the Trust Company shall convert the quoted rate to its interest equivalent after consultation with the Corporation as to the method of such conversion.
(b)    “Applicable Rate” means the rate per annum at which dividends are payable on the shares of Series A DARTS for any Dividend Period.
(c)    “Auction” means each periodic operation of the Auction Procedures.
(d)    “Auction Procedures” means the procedures for conducting Auctions set forth in paragraph 6 below.
(e)    “Business Day” means a day on which the New York Stock Exchange is open for trading and which is not a Saturday, Sunday or other day on which banks in The City of New York are authorized by law to close.
(f)    “Code” means the Internal Revenue Code of 1954, as amended.
(g)    “Commercial Paper Dealers” means Salomon Brothers Inc and Goldman, Sachs & Co., or, in lieu of either thereof, their respective affiliates or successors.
(h)    “Common Stock” means all shares now or hereafter issued of the class of common stock of the Corporation presently authorized and any other shares into which such shares may hereafter be changed from time to time.
(i)    “Corporation” means Ryder System, Inc., a Florida corporation, or its successor.
(j)    “DARTS” means (except as provided in paragraph 6(a)(x) below) the Preferred Stock, without par value, of the Corporation designated as its “Dutch Auction Rate Transferable Securities Preferred Stock”, as it may be issued in one or more series.
(k)    “Date of Original Issue” means the date on which the Corporation originally issues shares of Series A DARTS.
(l)    “Dividend Payment Date” has the meaning set forth in paragraph 2(b)(i) below.
(m)    “Dividend Period” has the meaning set forth in paragraph 2(c)(i) below.
(n)    “Dividend Period Days” has the meaning set forth in paragraph 2(b)(i) below.
(o)    “Holder” means the holder of shares of the Corporation's Series A DARTS as the same appears on the Stock Books of the Corporation.
(p)    “Initial Dividend Payment Date” has the meaning set forth in paragraph 2(b)(i) below.
(q)    “Initial Dividend Rate” has the meaning set forth in paragraph 2(c)(i) below.
(r)    “Initial Dividend Period” has the meaning set forth in paragraph 2(c)(i) below.
(s)    “Minimum Holding Period” has the meaning set forth in paragraph 2(b)(i) below.
(t)    “Normal Day” has the meaning set forth in paragraph 2(b)(i) below.
(u)    “Notice of Redemption” has the meaning set forth in paragraph 4(c) below.
(v)    “Parity Stockholders” shall have the meaning specified in paragraph 3(d) below.
(w)    “Preferred Director” shall have the meaning specified in paragraph 5(c) below.


Exhibit 3.1

(x)    “Preferred Stock” means the Preferred Stock, without par value, of the Corporation.
(y)    “Series A DARTS” means the series of DARTS designated by the Corporation as its “Dutch Auction Rate Transferable Securities TM Preferred Stock, Series A”.
(z)    “Stock Books” means the stock transfer books of the Corporation maintained by the Trust Company.
(aa)    “Subsequent Dividend Period” has the meaning specified in paragraph 2(c)(i) below.
(bb)    “Substitute Commercial Paper Dealer” means Merrill Lynch, Pierce, Fenner & Smith Incorporated and Lehman Commercial Paper Incorporated, or, in lieu of either thereof, their respective affiliates or successors.
(cc)    “Trust Company” means Manufacturers Hanover Trust Company unless and until another bank or trust company shall have been so appointed by a resolution of the Board of Directors of the Corporation.
(dd)    “Voting Parity Preferred Stock” shall have the meaning specified in paragraph 5(c) below.
2.     Dividends . (a) The Holders shall be entitled to receive, when, as and if declared by the Board of Directors of the Corporation, or by a committee of the Board of Directors of the Corporation duly authorized by the Board of Directors of the Corporation to declare dividends on the Series A DARTS, out of funds legally available therefor, cumulative cash dividends at the Applicable Rate per annum, determined as set forth below, and no more, payable on the respective dates set forth below.
(b)    (i) Dividends on shares of Series A DARTS, at the Applicable Rate per annum, shall accrue from the Date of Original Issue and shall be payable commencing on January 14, 1985, and on each succeeding seventh Tuesday after the Date of Original Issue (in each case, the “Normal Day”); provided , however , that if any of such Tuesday, the Monday preceding such Tuesday or the Wednesday following such Tuesday is not a Business Day, then (X) the Dividend Payment Date will be on the first Business Day after such Tuesday that is immediately followed by a Business Day and is preceded by a Business Day that is the preceding Monday or a day after such Monday, or (Y) if the Securities Depository shall make available to its participants and members, in funds immediately available in The City of New York on Dividend Payment Dates, the amount due as dividends on such Dividend Payment Dates (and the Securities Depository shall have so advised the Trust Company), then the Dividend Payment Date will be on the first Business Day on or after such Tuesday that is preceded by a Business Day that is the preceding Monday or a day after such Monday (each date of payment of dividends being herein referred to as a “Dividend Payment Date” and the first Dividend Payment Date being herein referred to as the “Initial Dividend Payment Date”). Although any particular Dividend Payment Date may not occur on the originally scheduled Normal Day because of the above-mentioned provisos, the next succeeding Dividend Payment Date shall be, subject to such provisos, the seventh Tuesday following the originally designated Normal Day for the prior Dividend Period. Notwithstanding the foregoing, in the event of a change in law lengthening the minimum holding period (currently found in paragraph 246(c) of the Code) (the “Minimum Holding Period”) required for taxpayers to be entitled to the dividends-received deduction on preferred stock held by nonaffiliated corporations (currently found in paragraph 243(a) of the Code), the Board of Directors of the Corporation or a duly designated Committee thereof shall adjust the period of time between Dividend Payment Dates so as to adjust uniformly the number of days (such number of days without giving effect to the provisos in the first sentence of this paragraph 2(b)(i) being hereinafter referred to as “Dividend Period Days”) in Dividend Periods commencing after the date of such change in law to equal or exceed the then-current Minimum Holding Period; provided that the number of Dividend Period Days shall not exceed by more than nine days the length of such then-current Minimum Holding Period and shall be evenly divisible by seven, and the maximum number of Dividend Period Days in no event shall exceed 98 days. Upon any such change in the number of Dividend Period Days as a result of a change in law, the Corporation shall mail notice of such change by first-class mail, postage prepaid, to the Trust Company and to each Holder at such Holder's address as the same appears on the Stock Books of the Corporation.
(ii)    Each dividend shall be paid to the Holder of shares of Series A DARTS as its name appears on the Stock Books of the Corporation at the opening of business on the Business Day next preceding the Dividend Payment Date thereof. Dividends in arrears for any past Dividend Period may be declared and paid at any time, without reference to any regular Dividend Payment Date, to the Holder as its name appears on the Stock Books of the Corporation on such date, not exceeding 15 days preceding the payment date thereof, as may be fixed by the Board of Directors of the Corporation.
(c)    (i)    The dividend rate (the “Initial Dividend Rate”) on shares of Series A DARTS during the period from and after the Date of Original Issue to the Initial Dividend Payment Date (the “Initial Dividend Period”) shall be 5-7/8% per annum. Commencing on the Initial Dividend Payment Date, the dividend rate on shares of the Series A DARTS for each subsequent dividend period (hereinafter referred to as a “Subsequent Dividend Period”, and the Initial Dividend Period or any


Exhibit 3.1

Subsequent Dividend Period being hereinafter referred to as a “Dividend Period”), which Subsequent Dividend Period shall commence on the last day of the preceding Dividend Period and shall end on the next Dividend Payment Date, shall be equal to the rate per annum that results from implementation of the Auction Procedures.
(ii)    The amount of dividends per share of the Series A DARTS payable for any Dividend Period or part thereof shall be computed by multiplying the Applicable Rate for such Dividend Period by a fraction the numerator of which shall be the number of days in such Dividend Period or part thereof (calculated by counting the first day thereof but excluding the last day thereof) such share was outstanding and the denominator of which shall be 360 and multiplying the rate so obtained by $100. The amount of dividends per Unit of the Series A DARTS payable for any Dividend Period or part thereof shall be computed by multiplying the amount of dividends per share of the Series A DARTS determined as aforesaid by 1,000.
(d)    (i)     Except as hereinafter provided, no dividends shall be declared or paid or set apart for payment on the shares of Series A DARTS for any period unless full cumulative dividends have been or contemporaneously are declared and paid on the shares of Series A DARTS through the most recent Dividend Payment Date. Holders of shares of Series A DARTS shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on the shares of Series A DARTS. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment on the shares of Series A DARTS that may be in arrears.
(ii)    So long as any shares of Series A DARTS are outstanding, the Corporation shall not declare, pay or set aside for payment any dividend (other than a dividend in Common Stock) or other distribution in respect of, or call for redemption or redeem, and neither the Corporation nor any subsidiary shall purchase or otherwise acquire for consideration, any shares of its Common Stock or any other class or series of stock of the Corporation ranking junior to or on a parity with the shares of Series A DARTS as to the payment of dividends or upon dissolution, liquidation or winding-up of the Corporation, unless full cumulative dividends on all shares of Series A DARTS for all past Dividend Periods through the most recent Dividend Payment Date shall have been declared and paid (or declared and a sum sufficient for the payment of the dividends set apart for payment).
(iii)    In case the dividends on shares of Series A DARTS are not paid in full, the Series A DARTS and any other class or series of stock ranking on a parity with Series A DARTS as to the payment of dividends shall share ratably in the payment of dividends, including accumulations, if any, in accordance with the sums which would be payable on such shares if all dividends were declared and paid in full, and, in any distribution of assets other than by way of dividends, in accordance with the sums which would be payable in such distribution if all sums payable were paid in full.
(iv)    Any dividend payment made on shares of Series A DARTS shall first be credited against the earliest accrued but unpaid dividend due with respect to shares of Series A DARTS.
(v)    The Corporation may not purchase or otherwise acquire any shares of Series A DARTS during any period when dividend payments on the shares of Series A DARTS are in arrears.
3.     Liquidation Rights . (a) Upon the dissolution, liquidation or winding up of the affairs of the Corporation, whether voluntary or involuntary, the Holders of the shares of Series A DARTS then outstanding shall be entitled to receive out of the assets of the Corporation available for distribution to stockholders, after satisfying claims of creditors but before any payment or distribution shall be made on the Common Stock or on any other class of stock ranking junior to the shares of Series A DARTS upon liquidation, the amount of $100 per share ($100,000 per Unit). In addition, upon any such dissolution, liquidation or winding up, the Holders of the shares of Series A DARTS then outstanding shall be entitled to receive all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the date of final distribution before any payment or distribution shall be made on the Common Stock or on any other class of stock ranking junior to the shares of Series A DARTS upon liquidation.
(b)    Neither the sale, lease or exchange (for cash, shares of stock, securities or other consideration) of all or substantially all the property and assets of the Corporation, nor the merger or consolidation of the Corporation into or with any other corporation, or the merger or consolidation of any other corporation into or with the Corporation, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purposes of this paragraph 3.
(c)    After the payment to the Holders of the full amounts provided for in this paragraph 3, Holders in their capacity as Holders of shares of Series A DARTS shall have no right or claim to any of the remaining assets of the Corporation
(d)    If the assets of the Corporation available for distribution to the Holders of the Series A DARTS upon dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full


Exhibit 3.1

all amounts to which the Holders are entitled pursuant to clause (a) of this paragraph 3, and to which holders of any other stock of the Corporation ranking on a parity with the Series A DARTS as to assets on dissolution, liquidation or winding-up (collectively, the “Parity Stockholders”) are entitled pursuant to the Restated Articles of Incorporation, as it may be amended from time to time, then such assets shall be distributed among the Holders of the Series A DARTS and the Parity Stockholders ratably in proportion to the full amounts otherwise due such Holders and Parity Stockholders.
4.     Redemption . Shares of Series A DARTS shall be redeemable by the Corporation as provided below:
(a)    (i)     At its option, the Board of Directors of the Corporation or a duly designated Committee thereof may, out of funds legally available therefor, upon at least 30 days' but not more than 45 days' Notice of Redemption pursuant to clause (c) of this paragraph 4, redeem the shares of Series A DARTS as a whole or from time to time in part on any Dividend Payment Date at a redemption price equal to
        (A)    $101.50 ($101,500 per Unit) per share if redeemed on or before the     first anniversary of the Date of Original Issue;
        (B)    $101.00 ($101,000 per Unit) per share if redeemed on or before the     second anniversary of the Date of the Original Issue;
        (C)    $100.50 ($100,500 per Unit) per share if redeemed on or before the     third anniversary of the Date of Original Issue; or
        (D)    $100.00 ($100,000 per Unit) per share if redeemed thereafter; plus,     in each case, an amount equal to accrued and unpaid dividends on such shares     (whether or not earned or declared) to the redemption date.
(ii)    The shares of Series A DARTS may also be redeemed, at the option of the Board of Directors of the Corporation or a duly designated Committee thereof, as a whole but not in part, on any Dividend Payment Date, upon at least 30 days' but not more than 45 days' Notice of Redemption pursuant to clause (c) of this paragraph 4, at a redemption price of $100.00 per share, plus an amount equal to accrued and unpaid dividends (whether or not earned or declared) on such shares to the redemption date, if the Applicable Rate fixed for the Dividend Period ending on such Dividend Payment Date shall equal or exceed the 60-day “AA” Composite Commercial Paper Rate on the date of determination of such Applicable Rate.
(b)    Notwithstanding any other provision of this paragraph 4, shares of Series A DARTS may not be redeemed, other than as a whole, unless all accrued and unpaid dividends on all outstanding shares of Series A DARTS shall have been paid or contemporaneously set apart for payment. In the event that less than all the outstanding shares of Series A DARTS are to be redeemed, the shares to be redeemed shall be selected by lot or such other method as the Corporation shall deem fair and equitable.
(c)    Whenever shares of Series A DARTS are to be redeemed, the Corporation shall mail a notice (“Notice of Redemption”) by first-class mail, postage prepaid, to each Holder of record of shares of Series A DARTS to be redeemed and to the Trust Company. A Notice of Redemption shall be addressed to the Holder at that address of the Holder appearing on the Stock Books of the Corporation maintained by the Trust Company. The Notice of Redemption shall include a statement of (i) the redemption date, (ii) the redemption price, (iii) the number of shares of Series A DARTS to be redeemed, (iv) the place or places where shares of Series A DARTS are to be surrendered for payment of the redemption price, (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date, and (vi) the provision under which redemption is made. No defect in the Notice of Redemption or in the mailing or publication thereof shall affect the validity of the redemption proceedings, except as required by law
If Notice of Redemption shall have been given as aforesaid and the Corporation shall have deposited a sum sufficient to redeem the shares of Series A DARTS as to which Notice of Redemption has been given with the Trust Company, with irrevocable instructions and authority to pay the redemption price to the Holders thereof, or if no such deposit is made, then upon such date fixed for redemption (unless the Corporation shall default in making payment of the redemption price), all rights of the Holders thereof as stockholders of the Corporation by reason of the ownership of such shares (except their right to receive the redemption price thereof, but without interest), shall terminate, and such shares shall no longer be deemed outstanding. The Corporation shall be entitled to receive, from time to time, from the Trust Company the interest, if any, on such monies deposited with it and the Holders of any shares so redeemed shall have no claim to any such interest. In case the Holder of any shares so called for redemption shall not claim the redemption price for his shares within one year after the date of redemption, the Trust Company shall, upon demand, pay over to the Corporation such amount remaining on deposit and the Trust Company shall thereupon be relieved of all responsibility to the Holder of such shares and such Holder of the shares of DARTS so called for redemption shall look only to the Corporation for the payment thereof.


Exhibit 3.1

(d)    Except in an Auction and except as set forth above with respect to redemptions, nothing contained in this Statement shall limit any legal right of the Corporation to purchase or otherwise acquire any shares of Series A DARTS in privately negotiated transactions or in the over-the-counter market or otherwise; provided that the Corporation is current in the payment of dividends on the Series A DARTS.
(e)    Except as otherwise provided by law, shares of the Series A DARTS that have been redeemed, purchased or otherwise acquired by the Corporation shall be held in the treasury or retired, as determined by the Board of Directors of the Corporation, provided that such shares shall not be reissuable as DARTS of any existing series.
(f)    Notwithstanding any other provisions of this paragraph 4, share of Series A DARTS shall be redeemable only in whole Units.
5.     Voting Rights . (a) Holders of the Series A DARTS shall have no voting rights, either general or special, except as expressly required by applicable law, the Restated Articles of Incorporation and as specified in this paragraph 5.
(b)    For purposes of any right of the Holders of Series A DARTS to vote on any matter, whether such right is created by this Statement of Resolution, the Restated Articles of Incorporation, by statute or otherwise, no Holder of any share of Series A DARTS shall be entitled to vote and no share of Series A DARTS shall be deemed to be “outstanding” for the purpose of voting or determining the number of shares required to constitute a quorum, if prior to or concurrently with a determination of shares entitled to vote or share deemed outstanding for quorum purposes, as the case may be, the requisite funds for the redemption of such shares shall have been deposited in trust with the Trust Company for that purpose and the requisite Notice of Redemption thereof shall have been given as provided for in paragraph 4 above.
(c)    If at the time of any annual meeting of stockholders for the election of directors a default in preference dividends shall exist on the DARTS of any series or any series of Preferred Stock of the Corporation ranking on a parity with the DARTS as to dividends and upon liquidation and which is granted in the Restated Articles of Incorporation the right to vote together with the DARTS of all series as a single class on the election of directors (the DARTS and the other Preferred Stock of all such series, the “Voting Parity Preferred Stock”), the number of directors constituting the Board of Directors of the Corporation shall be increased by two, and the holders of the Voting Parity Preferred Stock of all series shall have the right at such meeting, voting together as a single class without regard to series, to the exclusion of the holders of the Common Stock and any other class of capital stock that is not Voting Parity Preferred Stock, to elect two directors of the Corporation to fill such newly created directorships. Such right shall continue until there are no dividends in arrears upon the Voting Parity Preferred Stock of any series, at which time such right shall terminate, subject to revesting in the event of each and every subsequent default of the character above mentioned, and the number of directors constituting the Board of Directors of the Corporation shall be reduced by two. Upon any such termination of the right of the holders of shares of Voting Parity Preferred Stock as a class to vote for directors as herein provided, the term of office of each director then in office elected by such holders voting as a class (herein called a “Preferred Director”) shall terminate immediately. Any Preferred Director may be removed by, and shall not be removed except by, the vote of the holders of record of the outstanding share of Voting Parity Preferred Stock, voting together as a single class without regard to series, at a meeting of the Corporation's stockholders, or of the holders of shares of Voting Parity Preferred Stock, called for such purpose. So long as a default in any preference dividends on the Voting Parity Preferred Stock of any series shall exist (A) any vacancy in the office of Preferred Director may be filled (except as provided in the following clause (B)) by a person appointed by an instrument in writing signed by the remaining Preferred Director and filed with the Corporation and (B) in the case of the removal of any Preferred Director, the vacancy may be filled by a person elected by the vote of the holders of the outstanding shares of Voting Parity Preferred Stock, voting together as a single class without regard to series, at the same meeting at which such removal shall be voted. Each director appointed as aforesaid by the remaining Preferred Director shall be deemed, for all purposes hereof, to be a Preferred Director. Whenever a default in preference dividends shall no longer exist, the term of office of the Preferred Directors shall terminate immediately and the number of directors constituting the Board of Directors of the Corporation shall be reduced by two. For the purposes hereof, a “default in preference dividends” on the Voting Parity Preferred Stock of any series shall be deemed to have occurred whenever the amount of unpaid accrued dividends upon any series of Voting Parity Preferred Stock shall be equivalent to six quarterly dividends (which, with respect to any series of the DARTS or similar Voting Parity Preferred Stock, shall be deemed to be dividends in respect of a number of Dividend Periods containing not less than 540 days) or more, and, having so occurred, such default shall be deemed to exist thereafter until, but only until, all accrued dividends on all shares of Voting Parity Preferred Stock of each and every series then outstanding shall have been paid to the end of the last preceding Dividend Period.
(d)    The consent of the holders of two-thirds of the outstanding Series A DARTS, given in person or by proxy either in writing or at a meeting or meetings at which the holders of such series of DARTS shall vote separately as a class,


Exhibit 3.1

shall be necessary for the authorization, creation or issuance of any shares of any series of Preferred Stock ranking prior to the Series A DARTS either as to the payment of dividends or the distribution of assets upon liquidation, dissolution or winding up, or the reclassification of any authorized stock of the Corporation into any such prior shares, or the creation, authorization or issuance of any obligation or security convertible into or evidencing the right to purchase any such prior shares.
(e)    At all meetings of stockholders at which holders of Preferred Stock shall be entitled to vote for the election or removal of directors as a single class, the holder of each share of Preferred Stock shall be entitled to one vote for every one dollar ($1.00) of the stated liquidation preference of such share, and the holders of a majority of the aggregate outstanding voting power of the Preferred Stock of all series shall be necessary to constitute a quorum, whether present in person or by proxy, for the election by the Preferred Stock of its designated directors. In order to validate an election or removal of directors by the holders of the Preferred Stock voting as a class, such directors shall be elected or removed by the vote of at least a plurality of the votes cast by the holders of the Preferred Stock present or represented at such meeting. At any such meeting, the election or removal of directors by the holders of the Preferred Stock voting as a class shall be valid notwithstanding that a quorum of other stockholders voting as one or more classes may not be present or represented at such meeting, and if any stockholders voting as a class shall elect directors, the directors so elected shall be deemed to be the directors of the Corporation unless and until the other stockholders entitled to vote as one or more classes shall elect their directors.
(f)    At all meetings of stockholders at which holders of Series A DARTS shall be entitled to vote (other than with respect to a vote for directors pursuant to paragraph (e) above), either as a series or together with holders of Preferred Stock of other series as a class, the holder of each share of Series A DARTS and of such other series of Preferred Stock, if applicable, shall be entitled to one vote for every one dollar ($1.00) of the stated liquidation preference of such share.
6.     Auction Procedures . (a) Certain Definitions . Capitalized terms not defined in this paragraph 6 shall have the respective meanings specified in paragraphs 1 through 5 above. As used in this paragraph 6, the following terms shall have the following meanings, unless the context otherwise requires:
(i)    “Affiliate” shall mean any Person known to the Trust Company to be controlled by, in control of, or under common control with the Corporation; provided, that for purposes of this clause (i), “control” shall not be deemed to exist solely by reason of the direct or indirect ownership of less than 10% of the Common Stock or other voting power of the Corporation.
(ii)    “Agent Member” shall mean the member of the Securities Depository that will act on behalf of a Bidder and is identified as such in such Bidder's Purchaser's Letter.
(iii)    “Auction” shall mean the periodic operation of the procedures set forth in this paragraph 6.
(iv)    “Auction Date” shall mean the Business day next preceding a Dividend Payment Date.
(v)    “Available DARTS” shall have the meaning specified in paragraph 6(d)(i) below.
(vi)    “Bid” shall have the meaning specified in paragraph 6(b)(i) below.
(vii)    “Bidder” shall have the meaning specified in paragraph 6(b)(i) below.
(viii)    “Broker-Dealer” shall mean any broker-dealer, or other entity permitted by law to perform the functions required of a Broker-Dealer in this paragraph 6, that has been selected by the Corporation and has entered into a Broker-Dealer Agreement with the Trust Company that remains effective.
(ix)    “Broker-Dealer Agreement” shall mean an agreement between the Trust Company and a Broker-Dealer pursuant to which such Broker-Dealer agrees to follow the procedures specified in this paragraph 6.
(x)    “DARTS” shall mean the Series A DARTS of the Corporation.
(xi)    “Existing Holder”, when used with respect to shares of DARTS, shall mean a Person who has signed a Purchaser's Letter and is listed as the beneficial owner of such shares of DARTS in the records of the Trust Company.


Exhibit 3.1

(xii)    “Hold Order” shall have the meaning specified in paragraph 6(b)(i) below.
(xiii)    “Maximum Applicable Rate,” on any Auction Date, shall mean 110% of the 60‑day “AA” Composite Commercial Paper Rate on the Auction Date; provided, however, that if with respect to any Auction the Applicable Rate set at the prior Auction equaled or exceeded 110% of the 60-day “AA” Composite Commercial Paper Rate at such prior Auction, then the Maximum Applicable Rate at such Auction shall be the percentage of the 60-day “AA” Composite Commercial Paper Rate on such Auction Date, determined as set forth below based on the prevailing rating of shares of DARTS in effect at the close of business on such Auction Date:
Prevailing Rating                              Percentage
AA/aa or Above                             110%
     A/a                                     120%
     BBB/baa                                 130%
     Below BBB/baa                             150%
For purposes of this definition, the “prevailing rating” of shares of DARTS shall be (i) AA/aa or Above, if shares of DARTS have a rating of AA- or better by Standard & Poor's Corporation or its successor (“S&P”) or aa3 or better by Moody's Investors Service, Inc., or its successor (“Moody's”), or the equivalent of either or both of such ratings by such agencies or a substitute rating agency or substitute rating agencies selected as provided below, (ii) if not AA/aa or Above, then A/a if the shares of DARTS have a rating of A- or better and lower than AA- by S&P or a3 or better and lower than aa3 by Moody's or the equivalent of either or both of such ratings by such agencies or a substitute rating agency or substitute rating agencies selected as provided below, (iii) if not AA/aa or Above or A/a, then BBB/baa, if the shares of DARTS have a rating of BBB- or better and lower than A- by S&P or baa or better and lower than a3 by Moody's or the equivalent of either or both of such ratings by such agencies or a substitute rating agency or substitute rating agencies selected as provided below, and (iv) if not AA/aa or Above, A/a or BBB/baa, then Below BBB/baa. The Company shall take all reasonable action necessary to enable S&P and Moody's to provide a rating for DARTS. If either S&P or Moody's shall not make such a rating available, Salomon Brothers Inc or its successor shall select a nationally recognized securities rating agency or two nationally recognized securities rating agencies to act as a substitute rating agency or substitute rating agencies, as the case may be.
(xiv)    “Minimum Applicable Rate”, on any Auction Date, shall mean 58% of the 60-day “AA” Composite Commercial Paper Rate in effect on the date of such Auction.
(xv)    “Order” shall have the meaning specified in paragraph 6(b)(i) below.
(xvi)    “Outstanding” shall mean, as of any date, shares of DARTS theretofore issued by the Corporation except, without duplication, (A) any shares of DARTS theretofore canceled or delivered to the Trust Company for cancelation, or redeemed by the Corporation or as to which a notice of redemption shall have been given by the Corporation, (B) any shares of DARTS as to which the Corporation or any Affiliate thereof shall be an Existing Holder and (C) any shares of DARTS represented by any certificate in lieu of which a new certificate has been executed and delivered by the Corporation.
(xvii)    “Person” shall mean and include an individual, a partnership, a corporation, a trust, an unincorporated association, a joint venture or other entity or a government or any agency or political subdivision thereof.
(xviii)    “Potential Holder” shall mean any Person, including any Existing Holder, (A) who shall have executed a Purchaser's Letter and (B) who may be interested in acquiring shares of DARTS (or, in the case of an Existing Holder, additional shares of DARTS).
(xix)    “Purchaser's Letter” shall mean a letter addressed to the Corporation, the Trust Company and a Broker-Dealer in which a Person agrees, among other things, to offer to purchase, purchase, offer to sell and/or sell shares of DARTS as set forth in this paragraph 6.
(xx)    “Securities Depository” shall mean The Depository Trust Company and its successors and assigns or any other securities depository selected by the Corporation which agrees to follow the procedures required to be followed by such securities depository in connection with shares of DARTS.
(xxi)    “Sell Order” shall have the meaning specified in paragraph 6(b)(i) below.


Exhibit 3.1

(xxii)    “Submission Deadline” shall mean 12:30 P.M., New York City time, on any Auction Date or such other time on any Auction Date by which Broker-Dealers are required to submit Orders to the Trust Company as specified by the Trust Company from time to time.
(xxiii)    “Submitted Bid” shall have the meaning specified in paragraph 6(d)(i) below.
(xxiv)    “Submitted Hold Order” shall have the meaning specified in paragraph 6(d)(i) below.
(xxv)    “Submitted Order” shall have the meaning specified in paragraph 6(d)(i) below.
(xxvi)    “Submitted Sell Order” shall have the meaning specified in paragraph 6(d)(i) below.
(xxvii)    “Sufficient Clearing Bids” shall have the meaning specified in paragraph 6(d)(i) below.
(xxviii)     “Winning Bid Rate” shall have the meaning specified in paragraph 6(d)(i) below.
(b)     Orders by Existing Holders and Potential Holders . (i) On or prior to each Auction Date:
(A)    each Existing Holder may submit to a Broker-Dealer information     as to:
(1)    the number of Outstanding shares, if any, of DARTS held by such Existing Holder which such Existing Holder desires to continue to hold without regard to the Applicable Rate for the next succeeding Dividend Period;
(2)    the number of Outstanding shares, if any, of DARTS which such Existing Holder desires to continue to hold, provided that the Applicable Rate for the next succeeding Dividend Period shall not be less than the rate per annum specified by such Existing Holder; and/or
(3)    the number of Outstanding shares, if any, of DARTS held by such Existing Holder which such Existing Holder offers to sell without regard to the Applicable Rate for the next succeeding Dividend Period; and
(B)    each Broker-Dealer, using a list of Potential Holders that shall be maintained in good faith for the purpose of conducting a competitive Auction shall contact Potential Holders, including Persons that are not Existing Holders, on such list to determine the number of Outstanding shares, if any, of DARTS which each such Potential Holder offers to purchase, provided, that the Applicable Rate for the next succeeding Dividend Period shall not be less than the rate per annum specified by such Potential Holder.
For the purposes hereof, the communication to a Broker-Dealer of information referred to in clauses (A) and (B) of this paragraph 6(b)(i) is hereinafter referred to as an “Order” and each Existing Holder and each Potential Holder placing an Order is hereinafter referred to as a “Bidder”; an Order containing the information referred to in clause (A)(1) of this paragraph 6(b)(i) is hereinafter referred to as a “Hold Order”; an Order containing the information referred to in clause (A)(2) or (B) of this paragraph 6(b)(i) is hereinafter referred to as a “Bid”; and an Order containing the information referred to in clause (A)(3) of this paragraph 6(b)(i) is hereinafter referred to as a “Sell Order.”
(ii)    (A) A Bid by an Existing Holder shall constitute an irrevocable offer to sell:
(1)    the number of Outstanding shares of DARTS specified in such Bid if the Applicable Rate determined on such Auction Date shall be less than the rate specified therein; or
(2)    such number or a lesser number of Outstanding shares of DARTS determined as set forth in paragraph 6(e)(i)(D) if the Applicable Rate determined on such Auction Date shall be equal to such specified rate; or
(3)    a lesser number of Outstanding shares of DARTS to be determined as set forth in paragraph 6(e)(ii)(C) if such specified rate shall be higher than the Maximum Applicable Rate and Sufficient Clearing Bids do not exist.


Exhibit 3.1

(B)    A Sell Order by an Existing Holder shall constitute an irrevocable offer to sell:
(1)    the number of Outstanding shares of DARTS specified in such Sell Order; or
(2)    such number or a lesser number of Outstanding shares of DARTS as set forth in paragraph 6(e)(ii)(C) if Sufficient Clearing Bids do not exist.
(C)    A Bid by a Potential Holder shall constitute an irrevocable offer to purchase:
(1)    the number of Outstanding shares of DARTS specified in such Bid if the Applicable Rate determined on such Auction Date shall be higher than the rate specified therein; or
(2)    such number or a lesser number of Outstanding shares of DARTS as set forth in paragraph 6(e)(i)(E) if the Applicable Rate determined on such Auction Date shall be equal to such specified rate.
(c)     Submission of Orders by Broker-Dealers to Trust Company . (i) Each Broker-Dealer shall submit in writing to the Trust Company prior to the Submission Deadline on each Auction Date all Orders obtained by such Broker-Dealer and specifying with respect to each Order;
(A)    the name of the Bidder placing such Order;
(B)    the aggregate number of Outstanding shares of DARTS that are the subject of such Order;
(C)    to the extent that such Bidder is an Existing Holder:
(1)    the number of Outstanding shares, if any, of DARTS subject to any Hold Order placed by such Existing Holder;
(2)    the number of Outstanding shares, if any, of DARTS subject to any Bid placed by such Existing Holder and the rate specified in such Bid; and
(3)    the number of Outstanding shares, if any, of DARTS subject to any Sell Order placed by such Existing Holder;
(D)    to the extent such Bidder is a Potential Holder, the rate specified in such Potential Holder's Bid.
(ii)    If any rate specified in any Bid contains more than three figures to the right of the decimal point, the Trust Company shall round such rate up to the next highest one-thousandth (.001) of 1%.
(iii)     If an Order or Orders covering all of the Outstanding shares of DARTS held by an Existing Holder is not submitted to the Trust Company prior to the Submission Deadline, the Trust Company shall deem a Hold Order to have been submitted on behalf of such Existing Holder covering the number of Outstanding shares of DARTS held by such Existing Holder and not subject to Orders submitted to the Trust Company.
(iv)    If one or more Orders covering in the aggregate more than the number of Outstanding shares of DARTS held by an Existing Holder are submitted to the Trust Company, such Orders shall be considered valid as follows and in the following order of priority:
(A)    any Hold Order submitted on behalf of such Existing Holder shall be considered valid up to and including the number of Outstanding shares of DARTS held by such Existing Holder; provided that if more than one Hold Order is submitted on behalf of such Existing Holder and the number of shares of DARTS subject to such Hold Orders exceeds the number of Outstanding shares of DARTS held by such Existing Holder, the number of shares of DARTS subject to such Hold Orders shall be reduced pro rata so that such Hold Orders shall cover the number of Outstanding shares of DARTS held by such Existing Holder;


Exhibit 3.1

(B) (1) any Bid shall be considered valid up to and including the excess of the number of Outstanding shares of DARTS held by such Existing Holder over the number of shares of DARTS subject to Hold Orders referred to in paragraph 6(c)(iv)(A);
(2)    subject to clause (1) above, if more than one Bid with the same rate is submitted on behalf of such Existing Holder and the number of Outstanding shares of DARTS subject to such Bids is greater than such excess, the number of Outstanding shares of DARTS subject to such Bids shall be reduced pro rata so that such Bids shall cover the number of Outstanding shares of DARTS equal to such excess, and
(3)    subject to clause (1) above, if more than one Bid with different rates is submitted on behalf of such Existing Holder, such Bids shall be considered valid in the ascending order of their respective rates and in any such event the number, if any, of such Outstanding shares subject to Bids not valid under this clause (B) shall be treated as the subject of a Bid by a Potential Holder; and
(C)    any Sell Order shall be considered valid up to and including the excess of the number of Outstanding shares of DARTS held by such Existing Holder over the number of Outstanding shares of DARTS subject to Hold Orders referred to in paragraph 6(c)(iv)(A) and Bids referred to in paragraph 6(c)(iv)(B).
(v)    If more than one Bid is submitted on behalf of any Potential Holder, each Bid submitted shall be a separate Bid with the rate and shares of DARTS therein specified.
(vi)    If any rate specified in any Bid is lower than the Minimum Applicable Rate for the Dividend Period with respect to which such Bid relates, such Bid shall be deemed to be a Bid specifying a rate equal to such Minimum Applicable Rate.
(vii)    Orders by Existing Holders and Potential Holders must specify numbers of shares of DARTS in whole Units. Any Order that specifies a number of shares of DARTS other than in whole Units will be invalid and will not be considered a Submitted Order for purposes of an Auction.
(d)     Determination of Sufficient Clearing Bids, Winning Bid Rate and Applicable Rate . (i) Not earlier than the Submission Deadline on each Auction Date, the Trust Company shall assemble all Orders submitted to it by the Broker-Dealers (each such Order as submitted or deemed submitted by a Broker-Dealer being hereinafter referred to individually as a “Submitted Hold Order,” a “Submitted Bid” or a “Submitted Sell Order”, as the case may be, or as a “Submitted Order”) and shall determine:
(A)    the excess of the total number of Outstanding shares of DARTS over the number of Outstanding shares of DARTS that are the subject of Submitted Hold Orders (such excess being hereinafter referred to as the “Available DARTS”);
(B)    from the Submitted Orders whether;
(1)    the number of Outstanding shares of DARTS that are the subject of Submitted Bids by Potential Holders specifying one or more rates equal to or lower than the Maximum Applicable Rate, exceeds or is equal to the sum of:
(2)    (a) the number of Outstanding shares of DARTS that are the subject of Submitted Bids by Existing Holders specifying one or more rates higher than the Maximum Applicable Rate, and
(b) the number of Outstanding shares of DARTS that are subject to Submitted Sell Orders
(if such excess or such equality exists (other than because the number of Outstanding shares of DARTS in clauses (a) and (b) above are each zero because all the Outstanding shares of DARTS are the subject of Submitted Holder Orders), such Submitted Bids in clause (1) above being hereinafter referred to collectively as “Sufficient Clearing Bids”); and


Exhibit 3.1

(C)    if Sufficient Clearing Bids exist, the lowest rate specified in the Submitted Bids (the “Winning Bid Rate”), which if:
(1)    each Submitted Bid from Existing Holders specifying the Winning Bid Rate and all other Submitted Bids from Existing Holders specifying lower rates were rejected, thus entitling such Existing Holders to continue to hold the shares of DARTS that are the subject of such Submitted Bids, and
(2)    each Submitted Bid from Potential Holders specifying the Winning Bid Rate and all other Submitted Bids from Potential Holders specifying lower rates were accepted, thus entitling the Potential Holders to purchase the shares of DARTS that are the subject of such Submitted Bids;
would result in the number of shares subject to all Submitted Bids specifying the Winning Bid Rate or a lower rate being at least equal to the Available DARTS.
(ii)    Promptly after the Trust Company has made the determinations pursuant to paragraph 6(d)(i), the Trust Company shall advise the Corporation of the Maximum Applicable Rate and the Minimum Applicable Rate and, based on such determinations, the Applicable Rate for the next succeeding Dividend Period as follows:
(A)    if Sufficient Clearing Bids exist, that the Applicable Rate for the next succeeding Dividend Period shall be equal to the Winning Bid Rate     so determined;
(B)    if Sufficient Clearing Bids do not exist (other than because all of the Outstanding Shares of DARTS are the subject of Submitted Hold Orders), that the Applicable Rate for the next succeeding Dividend Period shall be equal to the Maximum Applicable Rate; or
(C)    if all of the Outstanding shares of DARTS are the subject of Submitted Hold Orders, that the Applicable Rate for the next succeeding Dividend Period shall be equal to the Minimum Applicable Rate.
(e)     Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and Allocation of Shares . Based on the determinations made pursuant to paragraph 6(d)(i), the Submitted Bids and Submitted Sell Orders shall be accepted or rejected and the Trust Company shall take such other action as set forth below:
(i)     If Sufficient Clearing Bids have been made, subject to the provisions of paragraph 6(e)(ii) and 6(e)(iv), Submitted Bids and Submitted Sell Orders shall be accepted or rejected in the following order of priority and all other Submitted Bids shall be rejected:
(A)     the Submitted Sell Orders of Existing Holders shall be accepted and the Submitted Bid of each of the Existing Holders specifying any rate that is higher than the Winning Bid Rate shall be accepted, thus requiring each such Existing Holder to sell the Outstanding shares of DARTS that are the subject of such Submitted Bid;
(B)     the Submitted Bid of each of the Existing Holders specifying any rate that is lower than the Winning Bid Rate shall be rejected, thus entitling each such Existing Holder to continue to hold the Outstanding shares of DARTS that are the subject of such Submitted Bid;
(C)     the Submitted Bid of each of the Potential Holders specifying any rate that is lower than the Winning Bid Rate shall be accepted;
(D)     the Submitted Bid of each of the Existing Holders specifying a rate that is equal to the Winning Bid Rate shall be rejected, thus entitling each such Existing Holder to continue to hold the Outstanding shares of DARTS that are the subject of such Submitted Bid, unless the number of Outstanding shares of DARTS subject to all such Submitted Bids shall be greater than the number of Outstanding shares of DARTS (“remaining shares”) equal to the excess of the Available DARTS over the number of Outstanding shares of DARTS subject to Submitted Bids described in paragraphs 6(e)(i)(B) and 6(e)(i)(C), in which event the Submitted Bids of each such Existing Holder shall be accepted, and each such Existing Holder shall be required to sell Outstanding shares of DARTS, but only in an amount equal to the difference between (1) the number of Outstanding shares of DARTS then held by such Existing Holder subject to such Submitted Bid and (2) the number of shares of DARTS obtained by multiplying (x) the number of remaining shares by (y) a


Exhibit 3.1

fraction the numerator of which shall be the number of Outstanding shares of DARTS held by such Existing Holder subject to such Submitted Bid and the denominator of which shall be the sum of the number of Outstanding shares of DARTS subject to such Submitted Bids made by all such Existing Holders that specified a rate equal to the Winning Bid Rate; and
(E)     the Submitted Bid of each of the Potential Holders specifying a rate that is equal to the Winning Bid Rate shall be accepted but only in an amount equal to the number of Outstanding shares of DARTS obtained by multiplying (x) the difference between the Available DARTS and the number of Outstanding shares of DARTS subject to Submitted Bids described in paragraphs 6(e)(i)(B), 6(e)(i)(C) and 6(e)(i)(D) by (y) a fraction the numerator of which shall be the number of Outstanding shares of DARTS subject to such Submitted Bid and the denominator of which shall be the sum of the number of Outstanding shares of DARTS subject to such Submitted Bids made by all such Potential Holders that specified rates equal to the Winning Bid Rate.
(ii)     If Sufficient Clearing Bids have not been made (other than because all of the Outstanding shares of DARTS are subject to Submitted Hold Orders), subject to the provisions of paragraphs 6(e)(iii) and 6(e)(iv), Submitted Orders shall be accepted or rejected as follows in the following order of priority and all other Submitted Bids shall be rejected:
(A)     the Submitted Bid of each Existing Holder specifying any rate that is equal to or lower than the Maximum Applicable Rate shall be rejected, thus entitling such Existing Holder to continue to hold the Outstanding shares of DARTS that are the subject of such Submitted Bid;
(B)     the Submitted Bid of each Potential Holder specifying any rate that is equal to or lower than the Maximum Applicable Rate shall be accepted, thus requiring such Potential Holder to purchase the Outstanding shares of DARTS that are the subject of such Submitted Bid; and
(C)     the Submitted Bids of each Existing Holder specifying any rate that is higher than the Maximum Applicable Rate shall be accepted and the Submitted Sell Orders of each Existing Holder shall be accepted, in both cases only in an amount equal to the difference between (1) the number of Outstanding shares of DARTS then held by such Existing Holder subject to such Submitted Bid or Submitted Sell Order and (2) the number of shares of DARTS obtained by multiplying (x) the difference between the Available DARTS and the aggregate number of Outstanding shares of DARTS subject to Submitted Bids described in paragraphs 6(e)(ii)(A) and 6(e)(ii)(B) by (y) a fraction the numerator of which shall be the number of Outstanding shares of DARTS held by such Existing Holder subject to such Submitted Bid or Submitted Sell Order and the denominator of which shall be the number of Outstanding shares of DARTS subject to all such Submitted Bids and Submitted Sell Orders.
(iii)     If, as a result of the procedures described in paragraph 6(e)(i) or 6(e)(ii), any Existing Holder would be entitled or required to sell, or any Potential Holder would be entitled or required to purchase, a fraction of a Unit of DARTS on any Auction Date, the Trust Company shall, in such manner as, in its sole discretion, it shall determine, round up or down the number of Units of DARTS to be purchased or sold by any Existing Holder or Potential Holder on such Auction Date so that the number of Outstanding Units purchased or sold by each Existing Holder or Potential Holder on such Auction Date shall be whole Units of DARTS.
(iv)     If, as a result of the procedures described in paragraph 6(e)(i), any Potential Holder would be entitled or required to purchase less than a whole Unit of DARTS on any Auction Date, the Trust Company shall, in such manner as, in its sole discretion, it shall determine, allocate Units for purchase among Potential Holders so that only whole Units of DARTS are purchased on such Auction Date by any Potential Holder, even if such allocation results in one or more of such Potential Holders not purchasing shares of DARTS on such Auction Date.
(v)     Based on the results of each Auction, the Trust Company shall determine the aggregate number of Outstanding shares of DARTS to be purchased and the aggregate number of Outstanding shares of DARTS to be sold by Potential Holders and Existing Holders on whose behalf each Broker-Dealer submitted Bids or Sell Orders, and, with respect to each Broker-Dealer, to the extent that such aggregate number of Outstanding shares to be purchased and such aggregate number of Outstanding shares to be sold differ, determine to which other Broker-Dealer or Broker-Dealers acting for one or more purchasers such Broker-Dealer shall deliver, or from which other Broker-Dealer or Broker-Dealers acting for one or more sellers such Broker-Dealer shall receive, as the case may be, Outstanding shares of Darts.


Exhibit 3.1

(f)     Miscellaneous . The Board of Directors or any duly designated committee thereof may interpret the provisions of this paragraph 6 to resolve any inconsistency or ambiguity, remedy any formal defect or make any other change or modification which does not adversely affect the rights of Existing Holders of DARTS. An Existing Holder (A) may sell, transfer or otherwise dispose of shares of DARTS only pursuant to a Bid or Sell Order in accordance with the procedures described in this paragraph 6 or to or through a Broker-Dealer or to a Person that has delivered a signed copy of a Purchaser's Letter to the Trust Company, provided that in the case of all transfers other than pursuant to Auctions such Existing Holder, its Broker-Dealer or its Agent Member advises the Trust Company of such transfer and (B) shall have the ownership of the shares of DARTS held by it maintained in book entry form by the Securities Depository in the account of its Agent Member, which in turn will maintain records of such Existing Holder's beneficial ownership. Neither the Corporation nor any Affiliate shall submit an Order in an Auction. All of the Outstanding DARTS shall be represented by a certificate registered in the name of the nominee of the Securities Depository.
(g)     Headings of Subdivisions . The headings of the various subdivisions of this paragraph 6 are for convenience of reference only and shall not affect the interpretation of any of the provisions hereof
IN WITNESS WHEREOF, the Corporation has caused this Statement to be executed in its name by the undersigned, thereunto duly authorized, this 26th day of November, 1985.

[SEAL]                     RYDER SYSTEM, INC.
By: /s/ M. Anthony Burns            
                         President
/s/ James M. Herron                
                         Secretary
    
STATE OF FLORIDA,    ) ss:
                    )
    COUNTY OF DADE,        ) ss:
On this day personally appeared before me M. Anthony Burns, President, and James M. Herron, Secretary, of RYDER SYSTEM, INC., a Florida corporation, and acknowledged that they executed the above and foregoing Statement of Resolution Establishing Dutch Auction Rate Transferable Securities Preferred Stock, Series A as officers for and on behalf of said corporation after having been duly authorized so to do.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal at the county and state aforesaid, this 21st day of November, 1985.
    
/s/ Susana M. Hernandez
                            NOTARY PUBLIC
                            State of Florida at Large
My Commission Expires :    


Exhibit 3.1


STATEMENT OF RESOLUTION ESTABLISHING
DUTCH AUCTION RATE TRANSFERABLE SECURITIES TM
PREFERRED STOCK, SERIES B
OF
RYDER SYSTEM, INC.
Pursuant to the provisions of Section 607.047 of the Florida General Corporation Act, the undersigned corporation submits the following statement for the purpose of establishing and designating a special series of its Dutch Auction Rate Transferable Securities Preferred Stock, Series B, and fixing and determining the relative rights and preferences thereof:
1. The name of the corporation is Ryder System, Inc. (the “Corporation”).
2. The following resolutions, establishing and designating a special series of Dutch Auction Rate Transferable Securities Preferred Stock, Series B, and fixing and determining the relative rights and preferences thereof, were duly adopted by the Securities Committee of the Board of Directors of the Corporation on November 18, 1985, pursuant to authority duly granted by the Board of Directors of the Corporation on November 8, 1985:
RESOLVED, that there be and hereby is established a series of Preferred Stock of the Corporation, without par value, designated as “Dutch Auction Rate Transferable Securities TM Preferred Stock, Series B” (hereinafter referred to as the “Series B DARTS”), consisting of 500,000 shares (500 Units) of Series B DARTS TM, which the Corporation has authority to issue. All the shares of Series B DARTS shall be identical, and each share of Series B DARTS shall be equal in all respects to every other such share.
FURTHER RESOLVED, that the designations, preferences and relative, participating, optional or other special rights of the Series B DARTS and the qualifications, limitations and restrictions thereof are as follows:
500,000 shares (500 Units) of the Preferred Stock, without par value, of the Corporation shall constitute a series of Preferred Stock designated as “Dutch Auction Rate Transferable Securities Preferred Stock, Series B”, hereinafter referred to as the “Series B DARTS”. All shares of Series B DARTS shall be identical with each other in all respects. The share of the Series B DARTS shall be issued in units (the “Units”), with each Unit consisting of 1,000 shares of Series B DARTS. The shares of Series B DARTS may be purchased or transferred only in whole Units and the shares of Series B DARTS included in the Units may not be separately purchased or transferred. The designations, preferences and relative, participating, optional or other special rights of the Series B DARTS and the qualifications, limitations and restrictions thereof are as follows:
1     Definitions . Unless the context or use indicates another or different meaning or intent, the following terms shall have the following meanings, whether used in the singular or plural:
(a) “60-day 'AA' Composite Commercial Paper Rate”, on any date, means (i) the interest equivalent of the 60-day rate on commercial paper placed on behalf of issuers whose corporate bonds are rated “AA” by Standard & Poor's Corporation (“S&P”), or the equivalent of such rating by S&P or another rating agency, as such 60-day rate is made available on a discount basis or otherwise by the Federal Reserve Bank of New York for the Business Day immediately preceding such date, or (ii) in the event that the Federal Reserve Bank of New York does not make available such a rate, then the arithmetic average of the interest equivalent of the 60-day rate on commercial paper placed on behalf of such issuers, as quoted on a discount basis or otherwise by the Commercial Paper Dealers to the Trust Company for the close of business of the Business Day immediately preceding such date. If any Commercial Paper Dealer does not quote a rate required to determine the 60-day “AA” Composite Commercial Paper Rate, the 60-day “AA” Composite Commercial Paper Rate shall be determined on the basis of the quotation or quotations furnished by the remaining Commercial Paper Dealer or Commercial Paper Dealers and any Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers selected by the Corporation to provide such rate or rates not being supplied by any Commercial Paper Dealer or Commercial Paper Dealers, as the case may be, or, if the Corporation does not select any such Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers, by the remaining Commercial Paper Dealer or Commercial Paper Dealers. If the Board of Directors of the Corporation shall make the adjustment referred to in the third sentence of paragraph 2(b)(i), than (i) if the Dividend Period Days shall be fewer than 70 days, such rate shall be the interest equivalent of the 60-day rate on such commercial paper; (ii) if the Dividend Period Days shall be 70 or more days but fewer than 65 days, such rate shall be the arithmetic average of the interest equivalent of the 60-day and 90-day rates on such commercial paper; and (iii) if the Dividend Period Days shall be 85 or more days but 98 or fewer days, such rate shall be the interest equivalent of the 90-day rate on such commercial paper. For purposes of this definition, the “interest equivalent” of a rate stated on a discount basis (a


Exhibit 3.1

“discount rate”) for commercial paper of a given day's maturity shall be equal to the quotient of (A) the discount rate divided by (B) the difference between (x) 1.00 and (y) a fraction the numerator of which shall be the product of the discount rate times the number of days in which such commercial paper matures and the denominator of which shall be 360. If the rate obtained by the Trust Company is quoted on another basis, the Trust Company shall convert the quoted rate to its interest equivalent after consultation with the Corporation as to the method of such conversion.
(b) “Applicable Rate” means the rate per annum at which dividends are payable on the shares of Series B DARTS for any Dividend Period.
(c) “Auction” means each periodic operation of the Auction Procedures.
(d) “Auction Procedures” means the procedures for conducting Auctions set forth in paragraph 6 below.
(e) “Business Day” means a day on which the New York Stock Exchange is open for trading and which is not a Saturday, Sunday or other day on which banks in The City of New York are authorized by law to close.
(f) “Code” means the Internal Revenue Code of 1954, as amended.
(g) “Commercial Paper Dealers” means Salomon Brothers Inc. and Goldman, Sachs & Co., or, in lieu of either thereof, their respective affiliates or successors.
(h) “Common Stock” means all shares now or hereafter issued of the class of common stock of the Corporation presently authorized and any other shares into which such shares may hereafter be changed from time to time.
(i) “Corporation” means Ryder System, Inc., a Florida corporation, or its successor.
(j) “DARTS” means (except as provided in paragraph 6(a)(x) below) the Preferred Stock, without par value, of the Corporation designated as its “Dutch Auction Rate Transferable Securities Preferred Stock”, as it may be issued in one or more series.
(k) “Date of Original Issue” means the date on which the Corporation originally issues shares of Series B DARTS.
(l) “Dividend Payment Date” has the meaning set forth in paragraph 2(b)(i) below.
(m) “Dividend Period” has the meaning set forth in paragraph 2(c)(i) below.
(n) “Dividend Period Days” has the meaning set forth in paragraph 2(b)(i) below.
(o) “Holder” means the holder of shares of the Corporation's Series B DARTS as the same appears on the Stock Books of the Corporation.
(p) “Initial Dividend Payment Date” has the meaning set forth in paragraph 2(b)(i) below.
(q) “Initial Dividend Rate” has the meaning set forth in paragraph 2(c)(i) below.
(r) “Initial Dividend Period” has the meaning set forth in paragraph 2(c)(i) below.
(s) “Minimum Holding Period” has the meaning set forth in paragraph 2(b)(i) below.
(t) “Normal Day” has the meaning set forth in paragraph 2(b)(i) below.
(u) “Notice of Redemption” has the meaning set forth in paragraph 4(c) below.
(v) “Parity Stockholders” shall have the meaning specified in paragraph 3(d) below.
(w) “Preferred Director” shall have the meaning specified in paragraph 5(c) below.


Exhibit 3.1

(x) “Preferred Stock” means the Preferred Stock, without par value, of the Corporation.
(y) “Series B DARTS” means the series of DARTS designated by the Corporation as its “Dutch Auction Rate Transferable Securities TM Preferred Stock, Series B”.
(z) “Stock Books” means the stock transfer books of the Corporation maintained by the Trust Company.
(aa) “Subsequent Dividend Period” has the meaning specified in paragraph 2(c)(i) below.
(bb) “Substitute Commercial Paper Dealer” means Merrill Lynch, Pierce, Fenner & Smith Incorporated and Lehman Commercial Paper Incorporated, or, in lieu of either thereof, their respective affiliates or successors.
(cc) “Trust Company” means Manufacturers Hanover Trust Company unless and until another bank or trust company shall have been so appointed by a resolution of the Board of Directors of the Corporation.
(dd) “Voting Parity Preferred Stock” shall have the meaning specified in paragraph 5(c) below.
2.     Dividends . (a) The Holders shall be entitled to receive, when, as and if declared by the Board of Directors of the Corporation, or by a committee of the Board of Directors of the Corporation duly authorized by the Board of Directors of the Corporation to declare dividends on the Series B DARTS, out of funds legally available therefor, cumulative cash dividends at the Applicable Rate per annum, determined as set forth below, and no more, payable on the respective dates set forth below.
(b)    (i) Dividends on shares of Series B DARTS, at the Applicable Rate per annum, shall accrue from the Date of Original Issue and shall be payable commencing on January 22, 1985, and on each succeeding seventh Tuesday after the Date of Original Issue (in each case, the “Normal Day”); provided , however , that if any of such Tuesday, the Monday preceding such Tuesday or the Wednesday following such Tuesday is not a Business Day, then (X) the Dividend Payment Date will be on the first Business Day after such Tuesday that is immediately followed by a Business Day and is preceded by a Business Day that is the preceding Monday or a day after such Monday, or (Y) if the Securities Depository shall make available to its participants and members, in funds immediately available in The City of New York on Dividend Payment Dates, the amount due as dividends on such Dividend Payment Dates (and the Securities Depository shall have so advised the Trust Company), then the Dividend Payment Date will be on the first Business Day on or after such Tuesday that is preceded by a Business Day that is the preceding Monday or a day after such Monday (each date of payment of dividends being herein referred to as a “Dividend Payment Date” and the first Dividend Payment Date being herein referred to as the “Initial Dividend Payment Date”). Although any particular Dividend Payment Date may not occur on the originally scheduled Normal Day because of the above-mentioned provisos, the next succeeding Dividend Payment Date shall be, subject to such provisos, the seventh Tuesday following the originally designated Normal Day for the prior Dividend Period. Notwithstanding the foregoing, in the event of a change in law lengthening the minimum holding period (currently found in paragraph 246(c) of the Code) (the “Minimum Holding Period”) required for taxpayers to be entitled to the dividends-received deduction on preferred stock held by nonaffiliated corporations (currently found in paragraph 243(a) of the Code), the Board of Directors of the Corporation or a duly designated Committee thereof shall adjust the period of time between Dividend Payment Dates so as to adjust uniformly the number of days (such number of days without giving effect to the provisos in the first sentence of this paragraph 2(b)(i) being hereinafter referred to as “Dividend Period Days”) in Dividend Periods commencing after the date of such change in law to equal or exceed the then-current Minimum Holding Period; provided that the number of Dividend Period Days shall not exceed by more than nine days the length of such then-current Minimum Holding Period and shall be evenly divisible by seven, and the maximum number of Dividend Period Days in no event shall exceed 98 days.
Upon any such change in the number of Dividend Period Days as a result of a change in law, the Corporation shall mail notice of such change by first-class mail, postage prepaid, to the Trust Company and to each Holder at such Holder's address as the same appears on the Stock Books of the Corporation.
(ii)     Each dividend shall be paid to the Holder of shares of Series B DARTS as its name appears on the Stock Books of the Corporation at the opening of business on the Business Day next preceding the Dividend Payment Date thereof. Dividends in arrears for any past Dividend Period may be declared and paid at any time, without reference to any regular Dividend Payment Date, to the Holder as its name appears on the Stock Books of the Corporation on such date, not exceeding 15 days preceding the payment date thereof, as may be fixed by the Board of Directors of the Corporation.


Exhibit 3.1

(c)    (i) The dividend rate (the “Initial Dividend Rate”) on shares of Series B DARTS during the period from and after the Date of Original Issue to the Initial Dividend Payment Date (the “Initial Dividend Period”) shall be 5-7/8% per annum. Commencing on the Initial Dividend Payment Date, the dividend rate on shares of the Series B DARTS for each subsequent dividend period (hereinafter referred to as a “Subsequent Dividend Period”, and the Initial Dividend Period or any Subsequent Dividend Period being hereinafter referred to as a “Dividend Period”), which Subsequent Dividend Period shall commence on the last day of the preceding Dividend Period and shall end on the next Dividend Payment Date, shall be equal to the rate per annum that results from implementation of the Auction Procedures.
(ii)     The amount of dividends per share of the Series B DARTS payable for any Dividend Period or part thereof shall be computed by multiplying the Applicable Rate for such Dividend Period by a fraction the numerator of which shall be the number of days in such Dividend Period or part thereof (calculated by counting the first day thereof but excluding the last day thereof) such share was outstanding and the denominator of which shall be 360 and multiplying the rate so obtained by $100. The amount of dividends per Unit of the Series B DARTS payable for any Dividend Period or part thereof shall be computed by multiplying the amount of dividends per share of the Series B DARTS determined as aforesaid by 1,000.
(d)    (i) Except as hereinafter provided, no dividends shall be declared or paid or set apart for payment on the shares of Series B DARTS for any period unless full cumulative dividends have been or contemporaneously are declared and paid on the shares of Series B DARTS through the most recent Dividend Payment Date. Holders of shares of Series B DARTS shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on the shares of Series B DARTS. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment on the shares of Series B DARTS that may be in arrears.
(ii)     So long as any shares of Series B DARTS are outstanding, the Corporation shall not declare, pay or set aside for payment any dividend (other than a dividend in Common Stock) or other distribution in respect of, or call for redemption or redeem, and neither the Corporation nor any subsidiary shall purchase or otherwise acquire for consideration, any shares of its Common Stock or any other class or series of stock of the Corporation ranking junior to or on a parity with the shares of Series B DARTS as to the payment of dividends or upon dissolution, liquidation or winding-up of the Corporation, unless full cumulative dividends on all shares of Series B DARTS for all past Dividend Periods through the most recent Dividend Payment Date shall have been declared and paid (or declared and a sum sufficient for the payment of the dividends set apart for payment).
(iii)     In case the dividends on shares of Series B DARTS are not paid in full, the Series B DARTS and any other class or series of stock ranking on a parity with Series B DARTS as to the payment of dividends shall share ratably in the payment of dividends, including accumulations, if any, in accordance with the sums which would be payable on such shares if all dividends were declared and paid in full, and, in any distribution of assets other than by way of dividends, in accordance with the sums which would be payable in such distribution if all sums payable were paid in full.
(iv)     Any dividend payment made on shares of Series B DARTS shall first be credited against the earliest accrued but unpaid dividend due with respect to shares of Series B DARTS.
(v)     The Corporation may not purchase or otherwise acquire any shares of Series B DARTS during any period when dividend payments on the shares of Series B DARTS are in arrears.
3.     Liquidation Rights . (a) Upon the dissolution, liquidation or winding up of the affairs of the Corporation, whether voluntary or involuntary, the Holders of the shares of Series B DARTS then outstanding shall be entitled to receive out of the assets of the Corporation available for distribution to stockholders, after satisfying claims of creditors but before any payment or distribution shall be made on the Common Stock or on any other class of stock ranking junior to the shares of Series B DARTS upon liquidation, the amount of $100 per share ($100,000 per Unit). In addition, upon any such dissolution, liquidation or winding up, the Holders of the shares of Series B DARTS then outstanding shall be entitled to receive all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the date of final distribution before any payment or distribution shall be made on the Common Stock or on any other class of stock ranking junior to the shares of Series B DARTS upon liquidation.
(b)     Neither the sale, lease or exchange (for cash, shares of stock, securities or other consideration) of all or substantially all the property and assets of the Corporation, nor the merger or consolidation of the Corporation into or with any other corporation, or the merger or consolidation of any other corporation into or with the Corporation, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purposes of this paragraph 3.


Exhibit 3.1

(c)     After the payment to the Holders of the full amounts provided for in this paragraph 3, Holders in their capacity as Holders of shares of Series B DARTS shall have no right or claim to any of the remaining assets of the Corporation.
(d)     If the assets of the Corporation available for distribution to the Holders of the Series B DARTS upon dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which the Holders are entitled pursuant to clause (a) of this paragraph 3, and to which holders of any other stock of the Corporation ranking on a parity with the Series B DARTS as to assets on dissolution, liquidation or winding-up (collectively, the “Parity Stockholders”) are entitled pursuant to the Restated Articles of Incorporation, as it may be amended from time to time, then such assets shall be distributed among the Holders of the Series B DARTS and the Parity Stockholders ratably in proportion to the full amounts otherwise due such Holders and Parity Stockholders.
4.     Redemption . Shares of Series B DARTS shall be redeemable by the Corporation as provided below:
(a)    (i) At its option, the Board of Directors of the Corporation or a duly designated Committee thereof may, out of funds legally available therefor, upon at least 30 days' but not more than 45 days' Notice of Redemption pursuant to clause (c) of this paragraph 4, redeem the shares of Series B DARTS as a whole or from time to time in part on any Dividend Payment Date at a redemption price equal to
(A)    $101.50 ($101,500 per Unit) per share if redeemed on or before the first anniversary of the Date of Original Issue;
(B)    $101.00 ($101,000 per Unit) per share if redeemed on or before the second anniversary of the Date of the Original Issue;
(C)    $100.50 ($100,500 per Unit) per share if redeemed on or before the third anniversary of the Date of Original Issue; or
(D)    $100.00 ($100,000 per Unit) per share if redeemed thereafter; plus, in each case, an amount equal to accrued and unpaid dividends on such shares (whether or not earned or declared) to the redemption date.
(ii)     The shares of Series B DARTS may also be redeemed, at the option of the Board of Directors of the Corporation or a duly designated Committee thereof, as a whole but not in part, on any Dividend Payment Date, upon at least 30 days' but not more than 45 days' Notice of Redemption pursuant to clause (c) of this paragraph 4, at a redemption price of $100.00 per share, plus an amount equal to accrued and unpaid dividends (whether or not earned or declared) on such shares to the redemption date, if the Applicable Rate fixed for the Dividend Period ending on such Dividend Payment Date shall equal or exceed the 60-day “AA” Composite Commercial Paper Rate on the date of determination of such Applicable Rate.
(b)     Notwithstanding any other provision of this paragraph 4, shares of Series B DARTS may not be redeemed, other than as a whole, unless all accrued and unpaid dividends on all outstanding shares of Series B DARTS shall have been paid or contemporaneously set apart for payment. In the event that less than all the outstanding shares or Series B DARTS are to be redeemed, the shares to be redeemed shall be selected by lot or such other method as the Corporation shall deem fair and equitable.
(c)     Whenever shares of Series B DARTS are to be redeemed, the Corporation shall mail a notice (“Notice of Redemption”) by first-class mail, postage prepaid, to each Holder of record of shares of Series B DARTS to be redeemed and to the Trust Company. A Notice of Redemption shall be addressed to the Holder at that address of the Holder appearing on the Stock Books of the Corporation maintained by the Trust Company. The Notice of Redemption shall include a statement of (i) the redemption date, (ii) the redemption price, (iii) the number of shares of Series B DARTS to be redeemed, (iv) the place or places where shares of Series B DARTS are to be surrendered for payment of the redemption price, (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date, and (vi) the provision under which redemption is made. No defect in the Notice of Redemption or in the mailing or publication thereof shall affect the validity of the redemption proceedings, except as required by law
If Notice of Redemption shall have been given as aforesaid and the Corporation shall have deposited a sum sufficient to redeem the shares of Series B DARTS as to which Notice of Redemption has been given with the Trust Company, with irrevocable instructions and authority to pay the redemption price to the Holders thereof, or if no such deposit is made, then


Exhibit 3.1

upon such date fixed for redemption (unless the Corporation shall default in making payment of the redemption price), all rights of the Holders thereof as stockholders of the Corporation by reason of the ownership of such shares (except their right to receive the redemption price thereof, but without interest), shall terminate, and such shares shall no longer be deemed outstanding. The Corporation shall be entitled to receive, from time to time, from the Trust Company the interest, if any, on such monies deposited with it and the Holders of any shares so redeemed shall have no claim to any such interest. In case the Holder of any shares so called for redemption shall not claim the redemption price for his shares within one year after the date of redemption, the Trust Company shall, upon demand, pay over to the Corporation such amount remaining on deposit and the Trust Company shall thereupon be relieved of all responsibility to the Holder of such shares and such Holder of the shares of DARTS so called for redemption shall look only to the Corporation for the payment thereof.
(d)     Except in an Auction and except as set forth above with respect to redemptions, nothing contained in this Statement shall limit any legal right of the Corporation to purchase or otherwise acquire any shares of Series B DARTS in privately negotiated transactions or in the over-the-counter market or otherwise; provided that the Corporation is current in the payment of dividends on the Series B DARTS.
(e)     Except as otherwise provided by law, shares of the Series B DARTS that have been redeemed, purchased or otherwise acquired by the Corporation shall be held in the treasury or retired, as determined by the Board of Directors of the Corporation, provided that such shares shall not be reissuable as DARTS of any existing series.
(f)     Notwithstanding any other provisions of this paragraph 4, share of Series B DARTS shall be redeemable only in whole Units.
5.     Voting Rights . (a) Holders of the Series B DARTS shall have no voting rights, either general or special, except as expressly required by applicable law, the Restated Articles of Incorporation and as specified in this paragraph 5.
(b)    For purposes of any right of the Holders of Series B DARTS to vote on any matter, whether such right is created by this Statement of Resolution, the Restated Articles of Incorporation, by statute or otherwise, no Holder of any share of Series B DARTS shall be entitled to vote and no share of Series B DARTS shall be deemed to be “outstanding” for the purpose of voting or determining the number of shares required to constitute a quorum, if prior to or concurrently with a determination of shares entitled to vote or share deemed outstanding for quorum purposes, as the case may be, the requisite funds for the redemption of such shares shall have been deposited in trust with the Trust Company for that purpose and the requisite Notice of Redemption thereof shall have been given as provided for in paragraph 4 above.
(c)    If at the time of any annual meeting of stockholders for the election of directors a default in preference dividends shall exist on the DARTS of any series or any series of Preferred Stock of the Corporation ranking on a parity with the DARTS as to dividends and upon liquidation and which is granted in the Restated Articles of Incorporation the right to vote together with the DARTS of all Series as a single class on the election of directors (the DARTS and the other Preferred Stock of all such series, the “Voting Parity Preferred Stock”), the number of directors constituting the Board of Directors of the Corporation shall be increased by two, and the holders of the Voting Parity Preferred Stock of all series shall have the right at such meeting, voting together as a single class without regard to series, to the exclusion of the holders of the Common Stock and any other class of capital stock that is not Voting Parity Preferred Stock, to elect two directors of the Corporation to fill such newly created directorships. Such right shall continue until there are no dividends in arrears upon the Voting Parity Preferred Stock of any series, at which time such right shall terminate, subject to revesting in the event of each and every subsequent default of the character above mentioned, and the number of directors constituting the Board of Directors of the Corporation shall be reduced by two. Upon any such termination of the right of the holders of shares of Voting Parity Preferred Stock as a class to vote for directors as herein provided, the term of office of each director then in office elected by such holders voting as a class (herein called a “Preferred Director”) shall terminate immediately. Any Preferred Director may be removed by, and shall not be removed except by, the vote of the holders of record of the outstanding share of Voting Parity Preferred Stock, voting together as a single class without regard to series, at a meeting of the Corporation's stockholders, or of the holders of shares of Voting Parity Preferred Stock, called for such purpose. So long as a default in any preference dividends on the Voting Parity Preferred Stock of any series shall exist (A) any vacancy in the office of Preferred Director may be filled (except as provided in the following clause (B)) by a person appointed by an instrument in writing signed by the remaining Preferred Director and filed with the Corporation and (B) in the case of the removal of any Preferred Director, the vacancy may be filled by a person elected by the vote of the holders of the outstanding shares of Voting Parity Preferred Stock, voting together as a single class without regard to series, at the same meeting at which such removal shall be voted. Each director appointed as aforesaid by the remaining Preferred Director shall be deemed, for all purposes hereof, to be a Preferred Director. Whenever a default in preference dividends shall no longer exist, the term of office of the Preferred Directors shall terminate immediately and the number of directors constituting the Board of Directors of the Corporation shall be reduced by two. For the purposes hereof, a “default in preference dividends” on the Voting Parity Preferred Stock of any series shall be deemed to have occurred


Exhibit 3.1

whenever the amount of unpaid accrued dividends upon any series of Voting Parity Preferred Stock shall be equivalent to six quarterly dividends (which, with respect to any series of the DARTS or similar Voting Parity Preferred Stock, shall be deemed to be dividends in respect of a number of Dividend Periods containing not less than 540 days) or more, and, having so occurred, such default shall be deemed to exist thereafter until, but only until, all accrued dividends on all shares of Voting Parity Preferred Stock of each and every series then outstanding shall have been paid to the end of the last preceding Dividend Period.
(d)    The consent of the holders of two-thirds of the outstanding Series B DARTS, given in person or by proxy either in writing or at a meeting or meetings at which the holders of such series of DARTS shall vote separately as a class, shall be necessary for the authorization, creation or issuance of any shares of any series of Preferred Stock ranking prior to the Series B DARTS either as to the payment of dividends or the distribution of assets upon liquidation, dissolution or winding up, or the reclassification of any authorized stock of the Corporation into any such prior shares, or the creation, authorization or issuance of any obligation or security convertible into or evidencing the right to purchase any such prior shares.
(e)    At all meetings of stockholders at which holders of Preferred Stock shall be entitled to vote for the election or removal of directors as a single class, the holder of each share of Preferred Stock shall be entitled to one vote for every one dollar ($1.00) of the stated liquidation preference of such share, and the holders of a majority of the aggregate outstanding voting power of the Preferred Stock of all series shall be necessary to constitute a quorum, whether present in person or by proxy, for the election by the Preferred Stock of its designated directors. In order to validate an election or removal of directors by the holders of the Preferred Stock voting as a class, such directors shall be elected or removed by the vote of at least a plurality of the votes cast by the holders of the Preferred Stock present or represented at such meeting. At any such meeting, the election or removal of directors by the holders of the Preferred Stock voting as a class shall be valid notwithstanding that a quorum of other stockholders voting as one or more classes may not be present or represented at such meeting, and if any stockholders voting as a class shall elect directors, the directors so elected shall be deemed to be the directors of the Corporation unless and until the other stockholders entitled to vote as one or more classes shall elect their directors.
(f)    At all meetings of stockholders at which holders of Series B DARTS shall be entitled to vote (other than with respect to a vote for directors pursuant to paragraph (e) above), either as a series or together with holders of preferred Stock of other series as a class, the holder of each share of Series B DARTS and of such other series of Preferred Stock, if applicable, shall be entitled to one vote for every one dollar ($1.00) of the stated liquidation preference of such share.
6.     Auction Procedures . (a) Certain Definitions . Capitalized terms not defined in this paragraph 6 shall have the respective meanings specified in paragraphs 1 through 5 above. As used in this paragraph 6, the following terms shall have the following meanings, unless the context otherwise requires:
(i)     “Affiliate” shall mean any Person known to the Trust Company to be controlled by, in control of, or under common control with the Corporation; provided, that for purposes of this clause (i), “control” shall not be deemed to exist solely by reason of the direct or indirect ownership of less than 10% of the Common Stock or other voting power of the Corporation.
(ii)     “Agent Member” shall mean the member of the Securities Depository that will act on behalf of a Bidder and is identified as such in such Bidder's Purchaser's Letter.
(iii)     “Auction” shall mean the periodic operation of the procedures set forth in this paragraph 6.
(iv)     “Auction Date” shall mean the Business day next preceding a Dividend Payment Date.
(v)     “Available DARTS” shall have the meaning specified in paragraph 6(d)(i) below.
(vi)     “Bid” shall have the meaning specified in paragraph 6(b)(i) below.
(vii)     “Bidder” shall have the meaning specified in paragraph 6(b)(i) below.
(viii)     “Broker-Dealer” shall mean any broker-dealer, or other entity permitted by law to perform the functions required of a Broker-Dealer in this paragraph 6, that has been selected by the Corporation and has entered into a Broker-Dealer Agreement with the Trust Company that remains effective.
(ix)     “Broker-Dealer Agreement” shall mean an agreement between the Trust Company and a Broker-Dealer pursuant to which such Broker-Dealer agrees to follow the procedures specified in this paragraph 6.


Exhibit 3.1

(x)     “DARTS” shall mean the Series B DARTS of the Corporation.
(xi)     “Existing Holder”, when used with respect to shares of DARTS, shall mean a Person who has signed a Purchaser's Letter and is listed as the beneficial owner of such shares of DARTS in the records of the Trust Company.
(xii)     “Hold Order” shall have the meaning specified in paragraph 6(b)(i) below.
(xiii)     “Maximum Applicable Rate,” on any Auction Date, shall mean 110% of the 60-day “AA” Composite Commercial Paper Rate on the Auction Date; provided, however, that if with respect to any Auction the Applicable Rate set at the prior Auction equaled or exceeded 110% of the 60-day “AA” Composite Commercial Paper Rate at such prior Auction, then the Maximum Applicable Rate at such Auction shall be the percentage of the 60-day “AA” Composite Commercial Paper Rate on such Auction Date, determined as set forth below based on the prevailing rating of shares of DARTS in effect at the close of business on such Auction Date:
Prevailing Rating                              Percentage
AA/aa or Above                             110%
     A/a                                     120%
     BBB/baa                                 130%
     Below BBB/baa                             150%
For purposes of this definition, the “prevailing rating” of shares of DARTS shall be (i) AA/aa or Above, if shares of DARTS have a rating of AA- or better by Standard & Poor's Corporation or its successor (“S&P”) or aa3 or better by Moody's Investors Service, Inc., or its successor (“Moody's”), or the equivalent of either or both of such ratings by such agencies or a substitute rating agency or substitute rating agencies selected as provided below, (ii) if not AA/aa or Above, then A/a if the shares of DARTS have a rating of A- or better and lower than AA- by S&P or a3 or better and lower than aa3 by Moody's or the equivalent of either or both of such ratings by such agencies or a substitute rating agency or substitute rating agencies selected as provided below, (iii) if not AA/aa or Above or A/a, then BBB/baa, if the shares of DARTS have a rating of BBB- or better and lower than A- by S&P or baa or better and lower than a3 by Moody's or the equivalent of either or both of such ratings by such agencies or a substitute rating agency or substitute rating agencies selected as provided below, and (iv) if not AA/aa or Above, A/a or BBB/baa, then Below BBB/baa. The Company shall take all reasonable action necessary to enable S&P and Moody's to provide a rating for DARTS. If either S&P or Moody's shall not make such a rating available, Salomon Brothers Inc. or its successor shall select a nationally recognized securities rating agency or two nationally recognized securities rating agencies to act as a substitute rating agency or substitute rating agencies, as the case may be.
(xiv)     “Minimum Applicable Rate”, on any Auction Date, shall mean 58% of the 60-day “AA” Composite Commercial Paper Rate in effect on the date of such Auction.
(xv)     “Order” shall have the meaning specified in paragraph 6(b)(i) below.
(xvi)     “Outstanding” shall mean, as of any date, shares of DARTS theretofore issued by the Corporation except, without duplication, (A) any shares of DARTS theretofore canceled or delivered to the Trust Company for cancelation, or redeemed by the Corporation or as to which a notice of redemption shall have been given by the Corporation, (B) any shares of DARTS as to which the Corporation or any Affiliate thereof shall be an Existing Holder and (C) any shares of DARTS represented by any certificate in lieu of which a new certificate has been executed and delivered by the Corporation.
(xvii)     “Person” shall mean and include an individual, a partnership, a corporation, a trust, an unincorporated association, a joint venture or other entity or a government or any agency or political subdivision thereof.
(xviii)     “Potential Holder” shall mean any Person, including any Existing Holder, (A) who shall have executed a Purchaser's Letter and (B) who may be interested in acquiring shares of DARTS (or, in the case of an Existing Holder, additional shares of DARTS).
(xix)     “Purchaser's Letter” shall mean a letter addressed to the Corporation, the Trust Company and a Broker-Dealer in which a Person agrees, among other things, to offer to purchase, purchase, offer to sell and/or sell shares of DARTS as set forth in this paragraph 6.


Exhibit 3.1

(xx)     “Securities Depository” shall mean The Depository Trust Company and its successors and assigns or any other securities depository selected by the Corporation which agrees to follow the procedures required to be followed by such securities depository in connection with shares of DARTS.
(xxi)     “Sell Order” shall have the meaning specified in paragraph 6(b)(i) below.
(xxii)     “Submission Deadline” shall mean 12:30 P.M., New York City time, on any Auction Date or such other time on any Auction Date by which Broker-Dealers are required to submit Orders to the Trust Company as specified by the Trust Company from time to time.
(xxiii)     “Submitted Bid” shall have the meaning specified in paragraph 6(d)(i) below.
(xxiv)     “Submitted Hold Order” shall have the meaning specified in paragraph 6(d)(i) below.
(xxv)     “Submitted Order” shall have the meaning specified in paragraph 6(d)(i) below.
(xxvi)     “Submitted Sell Order” shall have the meaning specified in paragraph 6(d)(i) below.
(xxvii)     “Sufficient Clearing Bids” shall have the meaning specified in paragraph 6(d)(i) below.
(xxviii)     “Winning Bid Rate” shall have the meaning specified in paragraph 6(d)(i) below.
(b)     Orders by Existing Holders and Potential Holders . (i) On or prior to each Auction Date:
(A)     each Existing Holder may submit to a Broker-Dealer information as to:
(1)     the number of Outstanding shares, if any, of DARTS held by such Existing Holder which such Existing Holder desires to continue to hold without regard to the Applicable Rate for the next succeeding Dividend Period;
(2)     the number of Outstanding shares, if any, of DARTS which such Existing Holder desires to continue to hold, provided that the Applicable Rate for the next succeeding Dividend Period shall not be less than the rate per annum specified by such Existing Holder; and/or
(3)     the number of Outstanding shares, if any, of DARTS held by such Existing Holder which such Existing Holder offers to sell without regard to the Applicable Rate for the next succeeding Dividend Period; and
(B)     each Broker-Dealer, using a list of Potential Holders that shall be maintained in good faith for the purpose of conducting a competitive Auction shall contact Potential Holders, including Persons that are not Existing Holders, on such list to determine the number of Outstanding shares, if any, of DARTS which each such Potential Holder offers to purchase, provided, that the Applicable Rate for the next succeeding Dividend Period shall not be less than the rate per annum specified by such Potential Holder.
For the purposes hereof, the communication to a Broker-Dealer of information referred to in clauses (A) and (B) of this paragraph 6(b)(i) is hereinafter referred to as an “Order” and each Existing Holder and each Potential Holder placing an Order is hereinafter referred to as a “Bidder”; an Order containing the information referred to in clause (A)(1) of this paragraph 6(b)(i) is hereinafter referred to as a “Hold Order”; an Order containing the information referred to in clause (A)(2) or (B) of this paragraph 6(b)(i) is hereinafter referred to as a “Bid”; and an Order containing the information referred to in clause (A)(3) of this paragraph 6(b)(i) is hereinafter referred to as a “Sell Order.”

    (ii)        (A) A Bid by an Existing Holder shall constitute an irrevocable offer to             sell:
(1)     the number of Outstanding shares of DARTS specified in such Bid if the Applicable Rate determined on such Auction Date shall be less than the rate specified therein; or


Exhibit 3.1

(2)     such number or a lesser number of Outstanding shares of DARTS determined as set forth in paragraph 6(e)(i)(D) if the Applicable Rate determined on such Auction Date shall be equal to such specified rate; or
(3)     a lesser number of Outstanding shares of DARTS to be determined as set forth in paragraph 6(e)(ii)(C) if such specified rate shall be higher than the Maximum Applicable Rate and Sufficient Clearing Bids do not exist.
(B)     A Sell Order by an Existing Holder shall constitute an irrevocable offer to sell:
(1)     the number of Outstanding shares of DARTS specified in such Sell Order; or
(2)     such number or a lesser number of Outstanding shares of DARTS as set forth in paragraph 6(e)(ii)(C) if Sufficient Clearing Bids do not exist.
(C)     A Bid by a Potential Holder shall constitute an irrevocable offer to purchase:
(1)     the number of Outstanding shares of DARTS specified in such Bid if the Applicable Rate determined on such Auction Date shall be higher than the rate specified therein; or
(2)     such number or a lesser number of Outstanding shares of DARTS as set forth in paragraph 6(e)(i)(E) if the Applicable Rate determined on such Auction Date shall be equal to such specified rate.
(c)     Submission of Orders by Broker-Dealers to Trust Company . (i) Each Broker-Dealer shall submit in writing to the Trust Company prior to the Submission Deadline on each Auction Date all Orders obtained by such Broker-Dealer and specifying with respect to each Order;
(A)     the name of the Bidder placing such Order;
(B)     the aggregate number of Outstanding shares of DARTS that are the subject of such Order;
(C)     to the extent that such Bidder is an Existing Holder:
(1)     the number of Outstanding shares, if any, of DARTS subject to any Hold Order placed by such Existing Holder;
(2)     the number of Outstanding shares, if any, of DARTS subject to any Bid placed by such Existing Holder and the rate specified in such Bid; and
(3)     the number of Outstanding shares, if any, of DARTS subject to any Sell Order placed by such Existing Holder;
(D)     to the extent such Bidder is a Potential Holder, the rate specified in such Potential Holder's Bid.
(ii)     If any rate specified in any Bid contains more than three figures to the right of the decimal point, the Trust Company shall round such rate up to the next highest one-thousandth (.001) of 1%.
(iii)     If an Order or Orders covering all of the Outstanding shares of DARTS held by an Existing Holder is not submitted to the Trust Company prior to the Submission Deadline, the Trust Company shall deem a Hold Order to have been submitted on behalf of such Existing Holder covering the number of Outstanding shares of DARTS held by such Existing Holder and not subject to Orders submitted to the Trust Company.
(iv)     If one or more Orders covering in the aggregate more than the number of Outstanding shares of DARTS held by an Existing Holder are submitted to the Trust Company, such Orders shall be considered valid as follows and in the following order of priority:


Exhibit 3.1

(A)     any Hold Order submitted on behalf of such Existing Holder shall be considered valid up to and including the number of Outstanding shares of DARTS held by such Existing Holder; provided that if more than one Hold Order is submitted on behalf of such Existing Holder and the number of shares of DARTS subject to such Hold Orders exceeds the number of Outstanding shares of DARTS held by such Existing Holder, the number of shares of DARTS subject to such Hold Orders shall be reduced pro rata so that such Hold Orders shall cover the number of Outstanding shares of DARTS held by such Existing Holder;
(B)     (1) any Bid shall be considered valid up to and including the excess of the number of Outstanding shares of DARTS held by such Existing Holder over the number of shares of DARTS subject to Hold Orders referred to in paragraph 6(c)(iv)(A);
(2)     subject to clause (1) above, if more than one Bid with the same rate is submitted on behalf of such Existing Holder and the number of Outstanding shares of DARTS subject to such Bids is greater than such excess, the number of Outstanding shares of DARTS subject to such Bids shall be reduced pro rata so that such Bids shall cover the number of Outstanding shares of DARTS equal to such excess, and
(3)     subject to clause (1) above, if more than one Bid with different rates is submitted on behalf of such Existing Holder, such Bids shall be considered valid in the ascending order of their respective rates and in any such event the number, if any, of such Outstanding shares subject to Bids not valid under this clause (B) shall be treated as the subject of a Bid by a Potential Holder; and
(C)     any Sell Order shall be considered valid up to and including the excess of the number of Outstanding shares of DARTS held by such Existing Holder over the number of Outstanding shares of DARTS subject to Hold Orders referred to in paragraph 6(c)(iv)(A) and Bids referred to in paragraph 6(c)(iv)(B).
(v)     If more than one Bid is submitted on behalf of any Potential Holder, each Bid submitted shall be a separate Bid with the rate and shares of DARTS therein specified.
(vi)     If any rate specified in any Bid is lower than the Minimum Applicable Rate for the Dividend Period with respect to which such Bid relates, such Bid shall be deemed to be a Bid specifying a rate equal to such Minimum Applicable Rate.
(vii)     Orders by Existing Holders and Potential Holders must specify numbers of shares of DARTS in whole Units. Any Order that specifies a number of shares of DARTS other than in whole Units will be invalid and will not be considered a Submitted Order for purposes of an Auction.
(d)     Determination of Sufficient Clearing Bids, Winning Bid Rate and Applicable Rate . (i) Not earlier than the Submission Deadline on each Auction Date, the Trust Company shall assemble all Orders submitted to it by the Broker-Dealers (each such Order as submitted or deemed submitted by a Broker-Dealer being hereinafter referred to individually as a “Submitted Hold Order,” a “Submitted Bid” or a “Submitted Sell Order”, as the case may be, or as a “Submitted Order”) and shall determine:
(A)     the excess of the total number of Outstanding shares of DARTS over the number of Outstanding shares of DARTS that are the subject of Submitted Hold Orders (such excess being hereinafter referred to as the “Available DARTS”);
(B)     from the Submitted Orders whether;
(1)     the number of Outstanding shares of DARTS that are the subject of Submitted Bids by Potential Holders specifying one or more rates equal to or lower than the Maximum Applicable Rate, exceeds or is equal to the sum of:
(2)     [a] the number of Outstanding shares of DARTS that are the subject of Submitted Bids by Existing Holders specifying one or more rates higher than the Maximum Applicable Rate, and


Exhibit 3.1

[b] the number of Outstanding shares of DARTS that are subject to Submitted Sell Orders
(if such excess or such equality exists (other than because the number of Outstanding shares of DARTS in clauses [a] and [b] above are each zero because all the Outstanding shares of DARTS are the subject of Submitted Holder Orders), such Submitted Bids in clause (1) above being hereinafter referred to collectively as “Sufficient Clearing Bids”); and
(C)     if Sufficient Clearing Bids exist, the lowest rate specified in the Submitted Bids (the “Winning Bid Rate”), which if:
(1)     each Submitted Bid from Existing Holders specifying the Winning Bid Rate and all other Submitted Bids from Existing Holders specifying lower rates were rejected, thus entitling such Existing Holders to continue to hold the shares of DARTS that are the subject of such Submitted Bids, and
(2)     each Submitted Bid from Potential Holders specifying the Winning Bid Rate and all other Submitted Bids from Potential Holders specifying lower rates were accepted, thus entitling the Potential Holders to purchase the shares of DARTS that are the subject of such Submitted Bids;
would result in the number of shares subject to all Submitted Bids specifying the Winning Bid Rate or a lower rate being at least equal to the Available DARTS.
(ii)    Promptly after the Trust Company has made the determinations pursuant to paragraph 6(d)(i), the Trust Company shall advise the Corporation of the Maximum Applicable Rate and the Minimum Applicable Rate and, based on such determinations, the Applicable Rate for the next succeeding Dividend Period as follows:
(A)     if Sufficient Clearing Bids exist, that the Applicable Rate for the next succeeding Dividend Period shall be equal to the Winning Bid Rate so determined;
(B)     if Sufficient Clearing Bids do not exist (other than because all of the Outstanding Shares of DARTS are the subject of Submitted Hold Orders), that the Applicable Rate for the next succeeding Dividend Period shall be equal to the Maximum Applicable Rate; or
(C)     if all of the Outstanding shares of DARTS are the subject of Submitted Hold Orders, that the Applicable Rate for the next succeeding Dividend Period shall be equal to the Minimum Applicable Rate.
(e)     Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and Allocation of Shares . Based on the determinations made pursuant to paragraph 6(d)(i), the Submitted Bids and Submitted Sell Orders shall be accepted or rejected and the Trust Company shall take such other action as set forth below:
(i)     If Sufficient Clearing Bids have been made, subject to the provisions of paragraph 6(e)(ii) and 6(e)(iv), Submitted Bids and Submitted Sell Orders shall be accepted or rejected in the following order of priority and all other Submitted Bids shall be rejected:
(A)     the Submitted Sell Orders of Existing Holders shall be accepted and the Submitted Bid of each of the Existing Holders specifying any rate that is higher than the Winning Bid Rate shall be accepted, thus requiring each such Existing Holder to sell the Outstanding shares of DARTS that are the subject of such Submitted Bid;
(B)     the Submitted Bid of each of the Existing Holders specifying any rate that is lower than the Winning Bid Rate shall be rejected, thus entitling each such Existing Holder to continue to hold the Outstanding shares of DARTS that are the subject of such Submitted Bid;
(C)     the Submitted Bid of each of the Potential Holders specifying any rate that is lower than the Winning Bid Rate shall be accepted;
(D)     the Submitted Bid of each of the Existing Holders specifying a rate that is equal to the Winning Bid Rate shall be rejected, thus entitling each such Existing Holder to continue to hold the


Exhibit 3.1

Outstanding shares of DARTS that are the subject of such Submitted Bid, unless the number of Outstanding shares of DARTS subject to all such Submitted Bids shall be greater than the number of Outstanding shares of DARTS (“remaining shares”) equal to the excess of the Available DARTS over the number of Outstanding shares of DARTS subject to Submitted Bids described in paragraphs 6(e)(i)(B) and 6(e)(i)(C), in which event the Submitted Bids of each such Existing Holder shall be accepted, and each such Existing Holder shall be required to sell Outstanding shares of DARTS, but only in an amount equal to the difference between (1) the number of Outstanding shares of DARTS then held by such Existing Holder subject to such Submitted Bid and (2) the number of shares of DARTS obtained by multiplying (x) the number of remaining shares by (y) a fraction the numerator of which shall be the number of Outstanding shares of DARTS held by such Existing Holder subject to such Submitted Bid and the denominator of which shall be the sum of the number of Outstanding shares of DARTS subject to such Submitted Bids made by all such Existing Holders that specified a rate equal to the Winning Bid Rate; and
(E)     the Submitted Bid of each of the Potential Holders specifying a rate that is equal to the Winning Bid Rate shall be accepted but only in an amount equal to the number of Outstanding shares of DARTS obtained by multiplying (x) the difference between the Available DARTS and the number of Outstanding shares of DARTS subject to Submitted Bids described in paragraphs 6(e)(i)(B), 6(e)(i)(C) and 6(e)(i)(D) by (y) a fraction the numerator of which shall be the number of Outstanding shares of DARTS subject to such Submitted Bid and the denominator of which shall be the sum of the number of Outstanding shares of DARTS subject to such Submitted Bids made by all such Potential Holders that specified rates equal to the Winning Bid Rate.
(ii)     If Sufficient Clearing Bids have not been made (other than because all of the Outstanding shares of DARTS are subject to Submitted Hold Orders), subject to the provisions of paragraphs 6(e)(iii) and 6(e)(iv), Submitted Orders shall be accepted or rejected as follows in the following order of priority and all other Submitted Bids shall be rejected:
(A)     the Submitted Bid of each Existing Holder specifying any rate that is equal to or lower than the Maximum Applicable Rate shall be rejected, thus entitling such Existing Holder to continue to hold the Outstanding shares of DARTS that are the subject of such Submitted Bid;
(B)     the Submitted Bid of each Potential Holder specifying any rate that is equal to or lower than the Maximum Applicable Rate shall be accepted, thus requiring such Potential Holder to purchase the Outstanding shares of DARTS that are the subject of such Submitted Bid; and
(C)     the Submitted Bids of each Existing Holder specifying any rate that is higher than the Maximum Applicable Rate shall be accepted and the Submitted Sell Orders of each Existing Holder shall be accepted, in both cases only in an amount equal to the difference between (1) the number of Outstanding shares of DARTS then held by such Existing Holder subject to such Submitted Bid or Submitted Sell Order and (2) the number of shares of DARTS obtained by multiplying (x) the difference between the Available DARTS and the aggregate number of Outstanding shares of DARTS subject to Submitted Bids described in paragraphs 6(e)(ii)(A) and 6(e)(ii)(B) by (y) a fraction the numerator of which shall be the number of Outstanding shares of DARTS held by such Existing Holder subject to such Submitted Bid or Submitted Sell Order and the denominator of which shall be the number of Outstanding shares of DARTS subject to all such Submitted Bids and Submitted Sell Orders.
(iii)     If, as a result of the procedures described in paragraph 6(e)(i) or 6(e)(ii), any Existing Holder would be entitled or required to sell, or any Potential Holder would be entitled or required to purchase, a fraction of a Unit of DARTS on any Auction Date, the Trust Company shall, in such manner as, in its sole discretion, it shall determine, round up or down the number of Units of DARTS to be purchased or sold by any Existing Holder or Potential Holder on such Auction Date so that the number of Outstanding Units purchased or sold by each Existing Holder or Potential Holder on such Auction Date shall be whole Units of DARTS.
(iv)     If, as a result of the procedures described in paragraph 6(e)(i), any Potential Holder would be entitled or required to purchase less than a whole Unit of DARTS on any Auction Date, the Trust Company shall, in such manner as, in its sole discretion, it shall determine, allocate Units for purchase among Potential Holders so that only whole Units of DARTS are purchased on such Auction Date by any Potential Holder, even if such allocation results in one or more of such Potential Holders not purchasing shares of DARTS on such Auction Date.


Exhibit 3.1

(v)     Based on the results of each Auction, the Trust Company shall determine the aggregate number of Outstanding shares of DARTS to be purchased and the aggregate number of Outstanding shares of DARTS to be sold by Potential Holders and Existing Holders on whose behalf each Broker-Dealer submitted Bids or Sell Orders, and, with respect to each Broker-Dealer, to the extent that such aggregate number of Outstanding shares to be purchased and such aggregate number of Outstanding shares to be sold differ, determine to which other Broker-Dealer or Broker-Dealers acting for one or more purchasers such Broker-Dealer shall deliver, or from which other Broker-Dealer or Broker-Dealers acting for one or more sellers such Broker-Dealer shall receive, as the case may be, Outstanding shares of Darts.
(f)     Miscellaneous . The Board of Directors or any duly designated committee thereof may interpret the provisions of this paragraph 6 to resolve any inconsistency or ambiguity, remedy any formal defect or make any other change or modification which does not adversely affect the rights of Existing Holders of DARTS. An Existing Holder (A) may sell, transfer or otherwise dispose of shares of DARTS only pursuant to a Bid or Sell Order in accordance with the procedures described in this paragraph 6 or to or through a Broker-Dealer or to a Person that has delivered a signed copy of a Purchaser's Letter to the Trust Company, provided that in the case of all transfers other than pursuant to Auctions such Existing Holder, its Broker-Dealer or its Agent Member advises the Trust Company of such transfer and (B) shall have the ownership of the shares of DARTS held by it maintained in book entry form by the Securities Depository in the account of its Agent Member, which in turn will maintain records of such Existing Holder's beneficial ownership. Neither the Corporation nor any Affiliate shall submit an Order in an Auction. All of the Outstanding DARTS shall be represented by a certificate registered in the name of the nominee of the Securities Depository.
(g)     Headings of Subdivisions . The headings of the various subdivisions of this paragraph 6 are for convenience of reference only and shall not affect the interpretation of any of the provisions hereof.
IN WITNESS WHEREOF, the Corporation has caused this Statement to be executed in its name by the undersigned, thereunto duly authorized, this 26th day of November, 1985.
[SEAL]                    RYDER SYSTEM, INC.,
By: /s/ M. Anthony Burns
                                President
/s/ James M. Herron
                                Secretary
    
STATE OF FLORIDA,    )
                    ) ss:
    COUNTY OF DADE,        )
On this day personally appeared before me M. Anthony Burns, President, and James M. Herron, Secretary, of RYDER SYSTEM, INC., a Florida corporation, and acknowledged that they executed the above and foregoing Statement of Resolution Establishing Dutch Auction Rate Transferable Securities Preferred Stock, Series B as officers for and on behalf of said corporation after having been duly authorized so to do.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal at the county and state aforesaid, this 21st day of November, 1985.
    
/s/ Susana M. Hernandez
                            NOTARY PUBLIC
                            State of Florida at Large
My Commission Expires:    



Exhibit 3.1


STATEMENT OF RESOLUTION ESTABLISHING
FIXED RATE AUCTION PREFERRED STOCKSM, SERIES B
OF
RYDER SYSTEM, INC.
Pursuant to the provisions of Section 607.047 of the Florida General Corporation Act, the undersigned corporation submits the following statement for the purpose of establishing and designating a special series of its Fixed Rate Auction Preferred StockSM, Series B, and fixing and determining the relative rights and preferences thereof:
1. The name of the corporation is Ryder System, Inc. (the “Corporation”).
2. The following resolutions were duly adopted by the Securities Committee of the Board of Directors of the Corporation on May 14, 1990, pursuant to authority duly granted by the Board of Directors of the Corporation on February 16, 1990:
RESOLVED, that there be and hereby is established a series of Preferred Stock of the Corporation, without par value, designated as “Fixed Rate Auction Preferred StockSM, Series B” (hereinafter referred to as the “Series B FRAPS”), consisting of 500,000 shares of Series B FRAPSSM.
FURTHER RESOLVED, that the designations, preferences and relative, optional or other special rights of the Series B FRAPS and the qualifications, limitations and restrictions thereof are as follows:
500,000 shares of the Preferred Stock, without par value, of the Corporation shall constitute a series of Preferred Stock designated as “Fixed Rate Auction Preferred Stock, Series B”, hereinafter referred to as the “Series B FRAPS”. All shares of Series B FRAPS shall be identical with each other in all respects. The shares of the Series B FRAPS shall be issued in units (the “Units”) with each Unit consisting of 1,000 shares of Series B FRAPS. The shares of Series B FRAPS may be purchased, transferred, converted and redeemed only in whole Units and the shares of Series B FRAPS included in the Units may not be separately purchased, transferred, converted or redeemed.
1.     Definitions . Unless the context or use indicates another or different meaning or intent, the following terms shall have the following meanings, whether used in the singular or plural:
(a)    “60-day 'AA' Composite Commercial Paper Rate”, on any date, means (i) the interest equivalent of the 60‑day rate on commercial paper placed on behalf of issuers whose corporate bonds are rated “AA” by Standard & Poor's Corporation (“S&P”), or the equivalent of such rating by S&P or another rating agency, as such 60‑day rate is made available on a discount basis or otherwise by the Federal Reserve Bank of New York for the Business Day immediately preceding such date, or (ii) in the event that the Federal Reserve Bank of New York does not make available such a rate, then the arithmetic average of the interest equivalent of the 60‑day rate on commercial paper placed on behalf of such issuers, as quoted on a discount basis or otherwise by the Commercial Paper Dealers to the Trust Company for the close of business of the Business Day immediately preceding such date. If any Commercial Paper Dealer does not quote a rate required to determine the 60‑day “AA” Composite Commercial Paper Rate, the 60‑day “AA” Composite Commercial Paper Rate shall be determined on the basis of the quotation or quotations furnished by the remaining Commercial Paper Dealer or Commercial Paper Dealers and any Substitute Commercial Paper Dealers or Substitute Commercial Paper Dealers selected by the Corporation to provide such rate or rates not being supplied by any Commercial Paper Dealer or Commercial Paper Dealers, as the case may be, or, if the Corporation does not select any such Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers, by the remaining Commercial Paper Dealer or Commercial Paper Dealers. If the Board of Directors of the Corporation shall adjust the period of time between Dividend Payment Dates as provided in the fourth sentence of paragraph 2(b)(i), then (i) if the Dividend Period Days shall be fewer than 70 days, such rate shall be the interest equivalent of the 60‑day rate on such commercial paper; (ii) if the Dividend Period Days shall be 70 or more days but fewer than 85 days, such rate shall be the arithmetic average of the interest equivalent of the 60‑day and 90‑day rates on such commercial paper; and (iii) if the Dividend Period Days shall be 85 or more days but 98 or fewer days, such rate shall be the interest equivalent of the 90‑day rate on such commercial paper. For purposes of this definition, the “interest equivalent” of a rate stated on a discount basis (a “discount rate”) for commercial paper of a given day's maturity shall be equal to the quotient of (A) the discount rate dividend by (B) the difference between (x) 1.00 and (y) a fraction the numerator of which shall be the product of the discount rate times the number of days in which such commercial paper matures and the denominator of which shall be 360. If the rate obtained by the Trust Company is quoted on another basis, the Trust Company shall convert the quoted rate to its interest equivalent after consultation with the Corporation as to the method of such conversion.


Exhibit 3.1

(b)    “Applicable Rate” means the rate per annum at which dividends are payable on the shares of Series B FRAPS for any Auction Dividend Period.
(c)    “Agent Member” has the meaning set forth in paragraph 7(a)(ii) below.
(d)    “Auction” means each periodic operation of the Auction Procedures.
(e)    “Auction Dividend Period” means any Dividend Period occurring after the Fixed Rate Period.
(f)    “Auction Procedures” means the procedures for conducting Auctions set forth in paragraph 7 below.
(g)    “Broker-Dealer” has the meaning set forth in paragraph 7(a)(viii) below.
(h)    “Business Day” means a day on which the New York Stock Exchange is open for trading and which is not a Saturday, Sunday or other day on which banks in The City of New York are authorized by law to close.
(i)    “Code” means the Internal Revenue Code of 1986, as amended.
(j)    “Commercial Paper Dealers” means Salomon Brothers Inc and Merrill Lynch, Pierce, Fenner & Smith Incorporated, or, in lieu of either, their respective affiliates or successors.
(k)    “Common Stock” means all shares now or hereafter issued of the class of common stock of the Corporation presently authorized and any other shares into which such shares may hereafter be changed from time to time.
(l)    “Corporation” means Ryder System, Inc., a Florida corporation, or its successor.
(m)    “Date or Original Issue” means the date on which the Corporation originally issues shares of Series B FRAPS.
(n)    “Dividend Payment Date” has the meaning set forth in paragraph 2(a) below.
(o)    “Dividend Period” means the period commencing on (and including) a Dividend Payment Date (or, in the case of the Initial Dividend Period, the Date of Original Issue) for the Series B FRAPS and ending on (and including) the next Dividend Payment Date.
(p)    “Dividend Period Days” has the meaning set forth in paragraph 2(b)(i) below.
(q)    “Existing Holder” has the meaning set forth in paragraph 7(a)(xi) below.
(r)    “Fixed Rate Period” has the meaning set forth in paragraph 2(b)(i) below.
(s)    “Fixed Dividend Rate” has the meaning set forth in paragraph 2(c)(i) below.
(t)    “FRAPS” means the Preferred Stock, without par value, of the Corporation designated as its “Fixed Rate Auction Preferred Stock”, Series B.
(u)    “Holder” means the holder of record of shares of the Corporation's Series B FRAPS as the same appears on the Stock Books of the Corporation, which shall be the Securities Depository unless the Corporation shall distribute certificates to Agent Members or Existing Holders.
(v)    “Initial Auction Dividend Payment Date” has the meaning set forth in Paragraph 2(b)(i) below.
(w)    “Initial Dividend Payment Date” has the meaning set forth in paragraph 2(b)(i) below.
(x)    “Minimum Holding Period” has the meaning set forth in paragraph 2(b)(i) below.
(y)    “Normal Day” has the meaning set forth in paragraph 2(b)(i) below.
(z)    “Notice of Redemption” has the meaning set forth in paragraph 4(c) below.


Exhibit 3.1

(aa)    “Parity Stockholders” has the meaning specified in paragraph 3(d) below.
(bb)     “Preferred Director” has the meaning specified in paragraph 6(c) below.
(cc)    “Preferred Stock” means the Preferred Stock, without par value, of the Corporation.
(dd)    “Ratings Conversion Date” has the meaning set forth in paragraph 5(d) below.
(ee)    “Ratings Downgrade” has the meaning set forth in paragraph 5(a) below.
(ff)    “Restricted Transfer Date” means May 3, 1993.
(gg)    “Securities Depository” has the meaning set forth in paragraph 7(a)(xx) below.
(hh)    “Series B FRAPS” means the series of FRAPS designated by the Corporation as its “Fixed Rate Auction Preferred Stock, Series B”.
(ii)    “Stock Books” means the stock transfer books of the Corporation maintained by the Trust Company which identifies the Holders.
(jj)    “Substitute Commercial Paper Dealer” means Morgan Stanley & Co. and Goldman, Sachs & Co. or, in lieu of either, their respective affiliates or successors.
(kk)    “Trust Company” means Manufacturers Hanover Trust Company unless and until another bank or trust company shall have been so appointed by a resolution of the Board of Directors of the Corporation.
(ll)    “Voting Parity Preferred Stock” has the meaning specified in paragraph 6(c) below.
2.     Dividends . (a) The Holders shall be entitled to receive, when, as and if declared by the Board of Directors of the Corporation, or by a committee of the Board of Directors of the Corporation duly authorized by the Board of Directors of the Corporation to declare dividends on the Series B FRAPS, out of funds legally available therefor, cumulative cash dividends at the Applicable Rate per annum, determined as set forth below, and no more, payable on the respective dates (each a “Dividend Payment Date”) set forth below.
(b)    (i) From the Date of Original Issue to and including May 18, 1993 (the “Fixed Rate Period”), dividends on the Series B FRAPS shall accumulate and be payable on the 15th day of February, May, August and November in each year, in arrears, commencing on August 15, 1990 (the “Initial Dividend Payment Date”) and ending May 18, 1993, unless any such date is not a Business Day, in which event such dividend on the Series B FRAPS shall be payable on the next succeeding Business Day without any adjustment in the amount of dividends payable.
After the Fixed Rate Period, dividends on shares of Series B FRAPS, at the Applicable Rate per annum, shall accumulate and be payable on July 6, 1993, (the “Initial Auction Dividend Payment Date”) and thereafter on each succeeding seventh Tuesday after the Initial Auction Dividend Payment Date (in each case, the “Normal Day”); provided , however , that for each Dividend Payment Date after the Initial Auction Dividend Payment Date, if for any such Tuesday, the Monday preceding such Tuesday or the Wednesday following such Tuesday is not a Business Day, then (X) the Dividend Payment Date will be on the first Business Day after such Tuesday that is immediately followed by a Business Day and is preceded by a Business Day that is the preceding Monday or a day after such Monday, or (Y) if the Securities Depository shall make available to its participants and members the amount due as dividends, in funds immediately available in The City of New York, on such Dividend Payment Date (and the Securities Depository shall have so advised the Trust Company), then the Dividend Payment Date will be on the first Business Day on or after such Tuesday that is preceded by a Business Day that is the preceding Monday or a day after such Monday. Although any particular Dividend Payment Date may not occur on the originally scheduled Normal Day because of the above-mentioned provisos, the next succeeding Payment Date shall be, subject to such provisos, the seventh Tuesday following the originally designated Normal Day for the prior Dividend Period. Notwithstanding the foregoing, in the event of a change in law lengthening the minimum holding period (currently found in paragraph 246(c) of the Code) (the “Minimum Holding Period”) required for taxpayers to be entitled to the dividends-received deduction on preferred stock held by nonaffiliated corporations (currently found in paragraph 243(a) of the Code), the Board of Directors of the Corporation or a duly designated Committee thereof shall adjust the period of time between Dividend Payment Dates so as to adjust uniformly the number of days (such number of days without giving effect to the provisos in the first sentence of this paragraph being hereinafter referred to as “Dividend Period Days”) in Dividend Periods commencing after the date of such


Exhibit 3.1

change in law to equal or exceed the then-current Minimum Holding Period; provided that the number of Dividend Period Days shall not exceed by more than nine days the length of such then-current Minimum Holding Period and shall be evenly divisible by seven, and the maximum number of Dividend Period Days in no event shall exceed 98 days. Upon any such change in the number of Dividend Period Days as a result of a change in law, the Corporation shall mail notice of such change by first-class mail, postage prepaid, to the Trust Company and to each Holder at such Holder's address as the same appears on the Stock Books of the Corporation.
(ii)    Each dividend shall be paid to the Holder of shares of Series B FRAPS as its name appears on the Stock Books of the Corporation as of the opening of business on the Business Day next preceding the Dividend Payment Date thereof, unless such shares of Series B FRAPS are later deemed not to be outstanding as of such Business Day. Dividends in arrears for any past Dividend Period may be declared and paid at any time, without reference to any regular Dividend Payment Date, to the Holder as its name appears on the Stock Books of the Corporation on such date, not exceeding 15 days preceding the payment date thereof, as may be fixed by the Board of Directors of the Corporation.
(c)    (i)    The dividend rate on each share of Series B FRAPS for each Dividend Period during the Fixed Rate Period shall be 10.5% per annum (the “Fixed Dividend Rate”), on the liquidation value of each such share, and for each Auction Dividend Period thereafter shall be the Applicable Rate for such Auction Dividend Period on such liquidation value, and no more.
(ii)    During the Fixed Rate Period, the amount of dividends per share of the Series B FRAPS payable for each full three-month Dividend Period shall be computed by dividing the Fixed Dividend Rate by four and multiplying the result by $100. The amount of dividends per share of the Series B FRAPS payable for the period from the Date of Original Issue to the Initial Dividend Payment Date or for any Dividend Period that occurs during the Fixed Rate Period and is shorter or longer than a full three-month period shall be computed by multiplying the Fixed Dividend Rate by a fraction, the numerator of which shall be the number of days in such Dividend Period (calculated by counting the first day thereof but excluding the last day thereof) during which such share was outstanding and the denominator of which shall be 360, and multiplying the rate so obtained by $100.
The amount of dividends per share of Series B FRAPS payable for each Auction Dividend Period or part thereof shall be computed by multiplying the Applicable Rate for such Dividend Period by a fraction, the numerator of which shall be the number of days in such Dividend Period or part thereof (calculated by counting the first day thereof but excluding the last day thereof) during which such share was outstanding and the denominator of which shall be 360 and multiplying the rate so obtained by $100.
The amount of dividends per Unit of the Series B FRAPS payable for any Dividend Period or part thereof shall be computed by multiplying the amount of dividends per share of the Series B FRAPS determined as aforesaid by 1,000.
(d)    (i) Except as hereinafter provided, no dividends shall be declared or paid or set apart from payment on the shares of Series B FRAPS for any period unless full cumulative dividends have been or contemporaneously are declared and paid on the shares of Series B FRAPS through the most recent Dividend Payment Date. Holders of shares of Series B FRAPS shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on the shares of Series B FRAPS. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment on the shares of Series B FRAPS that may be in arrears.
(ii)    So long as any shares of Series B FRAPS are outstanding, the Corporation shall not declare, pay or set aside for payment any dividend (other than a dividend in Common Stock) or other distribution in respect of, or call for redemption or redeem, and neither the Corporation nor any subsidiary shall purchase or otherwise acquire for consideration, any shares of its Common Stock or any other class or series of stock of the Corporation ranking junior to or on a parity with the shares of Series B FRAPS as to the payment of dividends or upon dissolution, liquidation or winding-up of the Corporation, unless full cumulative dividends on all shares of Series B FRAPS for all past Dividend Periods through the most recent Dividend Payment Date shall have been declared and paid (or declared and a sum sufficient for the payment of the dividends set apart for payment).
(iii)    In case the dividends on shares of Series B FRAPS are not paid in full, the Series B FRAPS and any other class or series of stock ranking on a parity with Series B FRAPS as to the payment of dividends shall share ratably in the payment of dividends, including accumulations, if any, in accordance with the sums which would be payable on such shares if all dividends were declared and paid in full, and, in any distribution of assets other than by way of dividends, in accordance with the sums which would be payable in such distribution if all sums payable were paid in full.


Exhibit 3.1

(iv)    Any dividend payment made on shares of Series B FRAPS shall first be credited against the earliest accumulated but unpaid dividend due with respect to shares of Series B FRAPS.
(v)    The Corporation may not purchase or otherwise acquire any shares of Series B FRAPS during any period when dividend payments on the shares of Series B FRAPS are in arrears.
3.     Liquidation Rights . (a) Upon the dissolution, liquidation or winding up of the affairs of the Corporation, whether voluntary or involuntary, the Holders of the shares of Series B FRAPS then outstanding shall be entitled to receive out of the assets of the Corporation available for distribution to stockholders, after satisfying claims of creditors but before any payment or distribution shall be made on the Common Stock or on any other class of stock ranking junior to the shares of Series B FRAPS upon liquidation, the amount of $100 per share ($100,000 per unit). In addition, upon any such dissolution, liquidation or winding up, the Holders of the shares of Series B FRAPS then outstanding shall be entitled to receive all dividends (whether or not earned or declared) on such shares accumulated and unpaid thereon to the date of final distribution before any payment or distribution shall be made on the Common Stock or on any other class of stock ranking junior to the shares of Series B FRAPS upon liquidation.
(b)    Neither the sale, lease or exchange (for cash, shares of stock, securities or other consideration) of all or substantially all the property and assets of the Corporation, nor the merger or consolidation of the Corporation into or with any other corporation, or the merger or consolidation or any other corporation into or with the Corporation, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purposes of this paragraph 3.
(c)    After the payment to the Holders of the full amounts provided for in this paragraph 3, Holders in their capacity as Holders of shares of Series B FRAPS shall have no right or claim to any of the remaining assets of the Corporation.
(d)    If the assets of the Corporation available for distribution to the Holders of the Series B FRAPS upon dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which the Holders are entitled pursuant to clause (a) of this paragraph 3, and to which holders of any other stock of the Corporation ranking on a parity with the Series B FRAPS as to assets on dissolution, liquidation or winding-up (collectively, the “Parity Stockholders”) are entitled pursuant to the Restated Articles of Incorporation, as they may be amended from time to time, then such assets shall be distributed among the Holders of the Series B FRAPS and the Parity Stockholders ratably in proportion to the full amounts otherwise due such Holders and Parity Stockholders.
4.     Redemption . Shares of Series B FRAPS shall be redeemable by the Corporation as provided below:
(a)    (i) During the Fixed Rate Period, the shares of Series B FRAPS will not be redeemable by the Corporation; provided , however , at its option, the Board of Directors of the Corporation or a duly designated Committee thereof may, out of funds legally available therefor, upon at least 30 days' but not more than 49 days' Notice of Redemption pursuant to clause (c) of this paragraph 4, redeem the shares of Series B FRAPS as a whole or in part following a Ratings Downgrade or on the Business Day prior to the first Auction at a redemption price equal to $100.00 per share plus an amount equal to accumulated and unpaid dividends on such shares (whether or not earned or declared) to the redemption date.
(ii)    After the Fixed Rate Period, the shares of Series B FRAPS may be redeemed from time to time at the option of the Board of Directors of the Corporation or a duly designated Committee thereof, out of funds legally available therefor (x) on any Dividend Payment Date, as a whole or in part, upon at least 30 days' but not more than 49 days' Notice of Redemption pursuant to clause (c) of this paragraph 4, and, in addition, (y) at any time following a Ratings Downgrade or when the Applicable Rate is the Maximum Applicable Rate, as a whole but not in part, upon at least 10 days' but not more than 49 days' Notice of Redemption pursuant to clause (c) of this paragraph 4, in each case at a redemption price of $100.00 per share, plus an amount equal to accumulated and unpaid dividends (whether or not earned or declared) on such shares to the redemption date.
(iii)    In the event any shares of Series B FRAPS are to be redeemed pursuant to clause (a)(ii)(y) of this paragraph 4 on a date other than a Dividend Payment Date, any Auction scheduled to be held on a date subsequent to the date of the mailing of the notice of such redemption and prior to or on such date fixed for redemption shall be automatically canceled. The Applicable Rate for such series will continue to be the Maximum Applicable Rate, if applicable, until all such shares have been redeemed.
(b)    Notwithstanding any other provision of this paragraph 4, shares of Series B FRAPS may not be redeemed, other than as a whole, unless all accumulated and unpaid dividends on all outstanding shares of Series B FRAPS


Exhibit 3.1

shall have been paid or contemporaneously set apart for payment. In the event that less than all the outstanding shares of Series B FRAPS are to be redeemed, the number of shares to be redeemed shall be determined by the Corporation, and, if there should be more than one Holder of the outstanding shares of Series B FRAPS, the selection of shares to be redeemed from each Holder shall be by lot or such other method as the Corporation shall deem fair and equitable.
(c)    Whenever shares of Series B FRAPS are to be redeemed, the Corporation shall mail a notice (“Notice of Redemption”) by first-class mail, postage prepaid, to each Holder of shares of Series B FRAPS to be redeemed and to the Trust Company. During the Fixed Rate Period, any Notice of Redemption permitted to be given as a result of a Ratings Downgrade shall be given not less than 10 Business Days prior to the associated Ratings Conversion Date. To the extent that a conversion right arises following a Ratings Conversion Date (whether during the Fixed Rate Period or thereafter), shares of Series B FRAPS may not be redeemed during the 20 Business-Day conversion period commencing on a Ratings Conversion Date. Any Notice of Redemption given less than 30 days prior to the date fixed for redemption in such notice must be a Funded Redemption Notice (as defined below). A Notice of Redemption shall be addressed to the Holder at the address of the Holder appearing on the Stock Books of the Corporation maintained by the Trust Company. The Notice of Redemption shall include a statement of (i) the redemption date and, if such date is other than a Dividend Payment Date, whether there are any Auctions prior to or on such redemption date that will be automatically canceled as provided in clause (a)(iii) of this paragraph 4, (ii) the number of shares of Series B FRAPS to be redeemed and the redemption price, (iii) the place or places where shares of Series B FRAPS are to be surrendered for payment of the redemption price, (iv) the conversion price in effect as of the date of such notice, if such shares are then convertible, (v) the date on which conversion rights, if any, with respect to such shares are expected to expire and the first date on which the occurrence of a subsequent Designated Event or Ratings Conversion Date shall not give rise to any additional conversion rights with respect to such shares, (vi) that dividends on the shares to be redeemed will cease to accumulate on such redemption date and (vii) the CUSIP number of the Series B FRAPS to be redeemed. Any Notice of Redemption or a Funded Redemption Notice which is mailed as provided herein shall be conclusively presumed to have been duly given, whether or not received by any Holder, and no defect in the mailing or publication of such notice shall affect the validity thereof. Notice of Redemption shall be effective upon mailing; provided , however , that a Funded Redemption Notice (as defined below) shall be effective upon the later or mailing and the making of the required deposit.
If Notice of Redemption shall have been given as aforesaid and the Corporation shall have deposited with the Trust Company a sum sufficient to redeem the shares of Series B FRAPS as to which Notice of Redemption has been given, with irrevocable instructions and authority to pay the redemption price to the Holders thereof (a “Funded Redemption Notice”) then, on the date of such deposit, or if no such deposit is made, then upon such date fixed for redemption (unless the Corporation shall default in making payment of the redemption price), such shares shall no longer be deemed outstanding and all rights of the Holders thereof as stockholders of the Corporation by reason of the ownership of such shares (except their right to receive the redemption price thereof, but without interest), shall terminate. Notwithstanding the foregoing, conversion rights of Holders shall terminate only as provided in paragraph 5(a). The Corporation shall be entitled to receive, from time to time, from the Trust Company the interest, if any, on such monies deposited with it and invested in a manner which the Corporation shall instruct, and the Holders of any shares so redeemed shall have no claim to any such interest. In case the Holder of any shares so called for redemption shall not claim the redemption price for his shares within one year after the date of redemption, the Trust Company shall, upon demand, pay over to the Corporation such amount remaining on deposit, and the Trust Company shall thereupon be relieved of all responsibility to the Holder of such shares, and such Holder shall look only to the Corporation for the payment thereof, without interest.
(d)    Except in an Auction an except as set forth above with respect to redemptions, nothing contained in this Statement shall limit any legal right of the Corporation to purchase or otherwise acquire any shares of Series B FRAPS in privately negotiated transactions or in the over-the-counter market or otherwise; provided that the Corporation is current in the payment of dividends on the Series B FRAPS.
(e)    Except as otherwise provided by law, shares of the Series B FRAPS that have been redeemed, purchased or otherwise acquired by the Corporation shall be held in the treasury or retired, as determined by the Board of Directors of the Corporation, provided that such shares shall not be reissuable as FRAPS or any existing series.
(f)    Notwithstanding any other provision of this paragraph 4, shares of Series B FRAPS shall be redeemable only in whole Units.
5.     Conversion . (a) In the event that there shall occur a Designated Event (as defined in paragraph 5(c) below), each Unit of the Series B FRAPS (not previously redeemed or called for redemption as described below) will become immediately convertible into shares of Common Stock of the Company during the 120‑day period following such Designated Event. In addition, in the event that the rating of the Series B FRAPS is downgraded at any time to a “prevailing rating” of less than BBB-/baa3 (a “Ratings Downgrade”), Units of the Series B FRAPS will become convertible (subject to their prior


Exhibit 3.1

redemption or, under certain circumstances, their having been called for redemption) into shares of Common Stock during the 20-Business-Day period commencing on the 45th Business Day following such Ratings Downgrade (such 45th Business Day being a “Ratings Conversion Date”, as defined in paragraph 5(d) below, with respect to such Series B FRAPS). In either event, each Unit of the Series B FRAPS will be convertible into the number of shares of Common Stock computed by dividing (x) $100,000 plus an amount equal to accumulated and unpaid dividends on such Unit (whether or not earned or declared) to the date of such conversion by (y) the applicable conversion price per share of Common Stock determined pursuant to paragraph 5(b)(i) or (ii) depending on whether the conversion period commences with a Designated Event or a Ratings Conversion Date.
Unless such shares of Series B FRAPS shall have theretofore become convertible by reason of the occurrence of a Designated Event or a Ratings Conversion Date, no conversion right shall arise with respect to any share of the Series B FRAPS after the earlier of (i) the close of business on the date such share of the Series B FRAPS is to be redeemed and (ii) the close of business on the date which is 20 days after the Corporation has given not less than 30 days' prior notice of its intention to redeem such shares of the Series B FRAPS, in each case unless the Corporation shall default in payment due upon redemption thereof. Further, if the Corporation has given a Funded Redemption Notice, then, for such shares of Series B FRAPS for which the Funded Redemption Notice has been given, no conversion right shall arise with respect to any Designated Event or Ratings Conversion Date which occurs on or after the date on which funds are deposited in connection with such Funded Redemption Notice (regardless of whether the date of any Ratings Downgrade is before or after the giving of a Funded Redemption Notice). During the Fixed Rate Period, any notice of redemption permitted to be given as a result of a Ratings Downgrade shall be given not less than 10 Business Days prior to the associated Ratings Conversion Date.
To the extent that a conversion right arises following a Rating Conversion Date (whether during the Fixed Rate Period or thereafter), the 20 Business-Day conversion period commencing on such Rating Conversion Date may not be terminated. During the Fixed Rate Period with respect to shares of Series B FRAPS, once a conversion period that commences upon a Designated Event has begun, such conversion period may not be shortened or terminated except by a notice of redemption given not more than 49 days nor less than 30 days in advance of the Business Day prior to the first Auction for such Series B FRAPS and all such conversion rights will terminate at the close of business on the date which is 20 days after the Corporation has given such notice of redemption, unless the Corporation shall default in payment due upon redemption thereof, in which case such conversion right shall be reinstated for its original term, as otherwise adjusted as described in the next succeeding paragraph. After the Fixed Rate Period, a conversion period following a Designated Event (whether such Designated Event occurred during the Fixed Rate Period or thereafter) will terminate, with respect to shares of Series B FRAPS, upon the earlier of (i) the close of business on the date such shares of Series B FRAPS are to be redeemed and (ii) the close of business on the date which is 20 days after the Corporation has given not less than 30 days' prior notice of its intention to redeem such shares of Series B FRAPS, in each case unless the Corporation shall default in payment due upon redemption thereof, in which case such conversion right shall be reinstated for its original term, as otherwise adjusted as described in the next succeeding paragraph.
A conversion right arising as a result of a Designated Event may be exercised at any time during the period beginning on the date of the occurrence of such Designated Event and ending at the close of business on the 120th day from and including the occurrence of such Designated Event. A conversion right arising as a result of a Ratings Conversion Date may be exercised at any time during the period beginning at the opening of business on such Ratings Conversion Date and ending at the close of business on the 20th Business Day from and including such Ratings Conversion Date. If any Designated Event or Ratings Conversion Date occurs during an existing conversion period, such conversion period will be extended until the later of (i) 120 days after the occurrence of the last such Designated Event or (ii) 20 Business Days after the occurrence of the last such Ratings Conversion Date, but the conversion price in effect throughout such conversion period will not change. If the last day for the exercise of the conversion right shall not be a Business Day, then the last day for the exercise of such conversion right shall be the next succeeding Business Day.
(b)    (i) The conversion price per share of Common Stock in effect during any conversion period that commences with a Designated Event will be the lesser of (x) 125% of the average of the Closing Prices of the Common Stock during the ten Business Day period ending 120 days prior to the occurrence of the Designated Event, and (y) 110% of the average of the Closing Prices of the Common Stock during the ten-Business Day period ending on (and including) the Business Day immediately prior to the occurrence of such Designated Event; provided , however , that, in the case of a Designated Event described in paragraph 5(c)(i) or (iii) below, clause (x) above shall be modified to refer to 125% of the average of the Closing Prices of the Common Stock during the ten-Business Day period ending the earlier of (a) 120 days prior to the occurrence of such Designated Event and (b) 30 days prior to the first published announcement of the earliest tender or exchange offer for the Corporation's outstanding Voting Stock (as defined below), if any, that was pending at any time during the 60‑day period prior to the occurrence of such Designated Event. The Closing Price, with respect to the Common Stock, means the price of the Common Stock determined as follows: (I) if the Common Stock shall be quoted on a securities exchange or through the NASDAQ system, such price shall be the last sale price on the principal exchange on which the Common Stock is quoted on


Exhibit 3.1

the relevant date (or, if there is no sale on such date on any such exchange or through such system, the closing bid price) of such Common Stock as reported in The Wall Street Journal , Eastern edition, or, if such price shall not be reported on the relevant date, as reported in such other newspaper of general circulation in the Borough of Manhattan, the City of New York, or Miami, Florida, as is selected by the Corporation or (II) if the Common Stock shall not be so quoted, such price shall be the closing bid price on the relevant date for such Common Stock, as formulated by a professional market maker selected by the Corporation making a market in the Common Stock. In calculating the average of the Closing Prices, the ten Closing Prices will be averaged by summing the Closing Prices, dividing by ten and rounding to the nearest one cent ($0.01), with one-half of one cent ($0.005) being rounded up.
(ii)    The conversion price per share of Common Stock in effect during any conversion period that commences with a Ratings Conversion Date will be the average of the Closing Prices of the Common Stock during the ten-Business-Day period ending on (and including) the sixteenth Business Day prior to such Ratings Conversion Date. In calculating the average of the Closing Prices, the ten Closing Prices will be averaged by summing the Closing Prices, dividing by ten and rounding to the nearest one cent ($0.01), with one-half of one cent ($0.005) being rounded up.
The Corporation shall be obligated to adjust, in an equitable manner, the securities issuable upon exercise of the conversion right, or the conversion price, or any Closing Prices that are the basis of the calculation of the conversion price to account for the effect of any of the following occurring during the period commencing with the date of the first Closing Price comprising such calculation and ending on the date of the Designated Event or the Rating Conversion Date, as the case may be, with respect to which such conversion price is to be calculated: (a) the Corporation shall have paid a dividend in shares of its Common Stock, subdivided its outstanding shares of Common Stock, combined its shares of Common Stock into a smaller number of shares of the Corporation, or reclassified its shares of Common Stock by issuing any other shares of the Corporation or (b) the Corporation shall have issued rights or warrants to all holders of its Common Stock entitling them (for a period expiring within 45 days of the record date for the determination of stockholders entitled to receive such rights or warrants) to subscribe for or purchase shares of Common Stock at a price per share less than the Closing Price of the Common Stock immediately prior to such record date.
(c)    A Designated Event shall be deemed to have occurred at such time as:
(i)    a “person” or “group” (within the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than a holding company created as permitted by clause (iii) of this paragraph, becomes the “beneficial owner” (as defined in Rule 13d‑3 under the Exchange Act), directly or indirectly, of more than 20% of the total voting power of all classes of stock then outstanding of the Corporation normally entitled to vote in elections of directors (collectively, “Voting Stock”), provided that such 20% shall be 30% with respect to the aggregate ownership of all Employee Benefit Plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended) maintained by the Corporation and its subsidiaries, and all trust and funding vehicles maintained thereunder (collectively, the “Company Plans”); or
(ii)    during any period of two consecutive years, individuals who at the beginning of such period constitute the Corporation's Board of Directors (together with any new director whose election by the Corporation's Board of Directors or whose nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds of the directors in office at the time of such vote who either were directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the directors then in office; or
(iii)    the approval by the Board of Directors of the Corporation of a plan or agreement for the consolidation or merger of the Corporation with or into another corporation or the conveyance, transfer or lease of all or substantially all the assets of the Corporation to any person, in either case pursuant to a transaction or series of transactions in which at least a majority of the Voting Stock of the Corporation will be converted into or exchanged for cash, securities or other property, provided that transactions involving solely the creation of a public holding company or the reincorporation of the Corporation in another state shall be excluded from the operation of this paragraph 5(c)(iii); or
(iv)    on any date (a “Calculation Date”) (a) the Corporation shall take a record of the holders of its Voting Stock for the purpose of entitling such holders to receive any dividend or other distributions of cash, property or securities (other than regular dividends in the ordinary course and distributions of capital stock, or rights to acquire capital stock, of the Corporation) or (b) the Corporation, any subsidiary or any Company Plan purchases or otherwise acquires, directly or indirectly, beneficial ownership of Voting Stock of the Corporation and, in either case (c) the sum of the fair market value of all other such distributions by the Corporation and purchases by the Corporation, together with its subsidiaries and all Company Plans, which have occurred during the preceding twelve-month period (exclusive of any period prior to the Date of Original


Exhibit 3.1

Issue) is at least 20%, or which have occurred during the preceding five years (exclusive of any period prior to the Date of Original Issue) is at least 50%, of the fair market value of the outstanding Voting Stock of the Corporation (such fair market value to be determined for a Calculation Date by the methods described above for the determination of the Closing Price of the Common Stock). In the case of a Designated Event described in clauses (a) and (c) of this paragraph 5(c)(iv), each Holder of Series B FRAPS that exercises the conversion right relating to such Designated Event after the Calculation Date and on or prior to the later of (x) the fifth Business Day preceding the date of payment of such dividend or distribution and (y) the second Business Day following publication by the Corporation of the notice of such Designated Event, as described in paragraph 5(d) below, shall be entitled to receive a dividend or distribution equal in value to the dividend or distribution that such Holder would have been entitled to receive if it had been the Holder of such number of shares of Common Stock into which such shares of Series B FRAPS were actually converted on the date such record of the holders of Voting Stock was taken; provided, however, that the value of such dividend or distribution so payable to such Holder shall be reduced by the amount of dividends, if any, paid by the Corporation in respect of such shares of Series B FRAPS during the period following the date such record of the holders of Voting Stock was taken and prior to the date of such conversion. The percentages in this paragraph 5(c)(iv) shall be calculated for each Calculation Date by determining the percentage of the fair market value of the Corporation's outstanding Voting Stock as of such Calculation Date (determined as described above) which is represented by the fair market value of the distributions and purchases which have occurred on such date and adding to that percentage all of the percentages which have been similarly calculated on the Calculation Date of all such distributions and purchases during the preceding twelve-month or five-year period, as applicable.
As used in the descriptions of Designated Events in this paragraph 5(c), Corporation shall mean the Corporation or any corporation owning, directly or indirectly, 50% or more of the Voting Stock of the Corporation.
(d)    A Ratings Conversion Date shall be, with respect to the Series B FRAPS, the 45th Business Day following the date on which a Ratings Downgrade shall have occurred, except that no Ratings Conversion Date shall occur with respect to any such shares of Series B FRAPS which at any time prior to such 45th Business Day shall have been redeemed or, under certain circumstances, called for redemption, as described in paragraph 5(a) above. For a Ratings Downgrade, the “prevailing rating” of Series B FRAPS shall be deemed to be less than BBB‑/baa3 if the shares of such Series B FRAPS have a rating of BB+ or lower by Standard & Poor's Corporation or its successor (“S&P) or a rating of ba1 or lower by Moody's Investors Service, Inc., or its successor (“Moody's”), or the equivalent of either of such ratings by such agencies (or their respective substitutes selected as provided below). The Corporation shall take all reasonable action necessary to enable S&P and Moody's to provide a rating. If either S&P or Moody's shall not make such a rating available, or neither S&P nor Moody's shall make such a rating available, Salomon Brothers Inc, or its successor, shall select a nationally recognized securities rating agency or two nationally recognized securities rating agencies, as the case may be, to act as a substitute or substitutes.
(e)    On or before the fourth Business Day after the occurrence of each and any Designated Event, the Corporation shall forthwith mail to each Holder and the Trust Company a notice describing such Designated Event. Such notice shall state the date of such Designated Event, the date by which such Holder's conversion right is expected to expire and the conversion price. On or before the fourth Business Day after any Ratings Downgrade with respect to the shares of Series B FRAPS, the Corporation shall mail to each record holder of such shares of Series B FRAPS a notice describing the conversion right commencing on the Rating Conversion Date that will occur as a result. Such notice shall state the Ratings Conversion Date and the date by which the conversion right arising as a result of such Ratings Conversion Date is expected to expire. In each case, such notice shall also contain a summary of the procedures a beneficial owner of such shares of Series B FRAPS is required to follow in order to exercise such conversion right, including a copy of the form of required conversion request, and a summary of the circumstances under which a subsequent redemption or Funded Redemption Notice may extinguish such conversion right.
In addition, on or before the tenth day preceding the date on which the Corporation intends to take a record of the holders of its Voting Stock which the company believes will constitute a Designated Event described in clauses (a) and (c) of paragraph 5(c)(iv) above, the Corporation is obligated to mail to each Holder a notice describing such potential Designated Event and, to the extent then determinable, the date of such potential Designated Event and the date by which such conversion right would be expected to expire. The Corporation shall also cause a copy of each such notice to be published in The Wall Street Journal , Eastern edition, or, if such newspaper is not then being published, any English language newspaper of general circulation in the Borough of Manhattan, The City of New York. Such notices shall be effective upon mailing. Any notice of a Designated Event, potential Designated Event or Ratings Conversion Date which is mailed as provided herein shall be conclusively presumed to have been duly given, whether or not received by any Holder, and no defect in the mailing or publication of such notice shall affect the validity thereof.


Exhibit 3.1

(f)    In order to convert shares of Series B FRAPS into shares of Common Stock, the Holder must surrender at the office of the transfer agent for shares of such Series B FRAPS the certificate or certificates therefor, in whole Units only, duly endorsed or assigned to the Company in blank, and deliver at such office a written notice that such Holder elects to convert such shares.
In addition, so long as the Securities Depository is the only Holder of shares of Series B FRAPS, shares of Series B FRAPS, in whole Units only, will be converted only if (i) such shares of Series B FRAPS have been delivered “free” by book entry transfer from an account of the Agent Member of the Existing Holder or other beneficial owner of such shares into the special account of the Trust Company at the Securities Depository and (ii) the Trust Company has received a valid written request to convert such shares from either such Agent Member that identifies such beneficial owner or, after the Restricted Transfer Date, a Broker-Dealer that identifies such Existing Holder and such Agent Member and, in each case, that identifies the number of Units to be converted by each such beneficial owner or Existing Holder.
(g)    As promptly as practicable after the surrender, as herein provided, of any Series B FRAPS for conversion and the receipt of the conversion request, as herein provided, relating thereto, the Corporation shall deliver or cause to be delivered at said office or agency, to or upon the written order of the Holder of the Series B FRAPS so surrendered, a certificate or certificates representing the number of fully-paid and non-assessable shares of Common Stock into which such Series B FRAPS (or portion thereof) may be converted in accordance with the provisions of this paragraph 5, registered in the name of such Holder. In case any certificates representing more than one Unit of shares of Series B FRAPS shall be surrendered for partial conversion, the Corporation shall execute and the Trust Company shall countersign and deliver as transfer agent and registrar to or upon the written order of the Holder of the Series B FRAPS so surrendered, without charge to such Holder, a new certificate representing the number of Units of Series B FRAPS equal to the unconverted portion of the surrendered Series B FRAPS. Shares of Series B FRAPS converted into shares of Common Stock on any day shall be deemed to have become no longer outstanding as of the time immediately prior to the opening of business on such day and such Holder of Series B FRAPS shall be deemed to no longer be a Holder thereof at such time and the shares of Common Stock issued upon such conversion shall be deemed to have become outstanding at the time immediately after the opening of business on such day and such Holder shall be deemed to have become a holder of record of such Common Stock at such time.
(h)    No fractional shares or scrip representing fractional shares shall be issued upon the conversion of any Series B FRAPS. If any fractional interest in a share of Common Stock would, except for the provisions of this paragraph (5)(h), be deliverable for the account of any beneficial owner upon the conversion of Series B FRAPS, the Corporation shall, in lieu of issuing a fractional share therefor, adjust for such fractional interest by issuing for the account of the beneficial owner of such surrendered Series B FRAPS the nearest whole share of Common Stock, rounded up or down as the case may be (a fractional interest of exactly one-half of one share being rounded up), based upon the conversion price computed as provided in paragraph 5(b) hereof. The Corporation shall be entitled to rely upon any conversion request in determining whether to treat any person as a beneficial owner of Series B FRAPS.
(i)    The Corporation shall at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Stock or its issued Common Stock held in its treasury, or both, for the purpose of effecting conversions of Series B FRAPS, the full number of shares of Common Stock then deliverable upon the conversion of all outstanding shares of Series B FRAPS not theretofore converted; and if at any time the sum of the number of authorized but unissued shares of Common Stock and shares of issued Common Stock held in its treasury shall not be sufficient to effect the conversion of all said outstanding Series B FRAPS, the Corporation will take such corporate action as may in the opinion of its counsel be necessary to increase its authorized but unissued Common Stock or its issued Common Stock held in its treasury, or both, to such number of shares as shall be sufficient for that purpose.
(j)    The Corporation covenants that if any shares of Common Stock reserved for conversions of shares of Series B FRAPS require listing upon any national securities exchange before such shares may be delivered upon conversion, the Corporation will in good faith, and as expeditiously as possible, endeavor to cause such shares to be duly listed.
6.     Voting Rights . (a) Holders of the Series B FRAPS shall have no voting rights, either general or special, except as expressly required by applicable law, the Restated Articles of Incorporation and as specified in this paragraph 6.
(b)    For purposes of any right of the Holders of Series B FRAPS to vote on any matter, whether such right is created by this Statement of Resolution, the Restated Articles of Incorporation, by statute or otherwise, no Holder of any share of Series B FRAPS shall be entitled to vote and no share of Series B FRAPS shall be deemed to be “outstanding” for the purpose of voting or determining the number of shares required to constitute a quorum, if prior to or concurrently with a determination of shares entitled to vote or shares deemed outstanding for quorum purposes, as the case may be, the requisite


Exhibit 3.1

funds for the redemption of such shares shall have been deposited in trust with the Trust Company for that purposes and the requisite Notice of Redemption thereof shall have been given as provided for in paragraph 4 above.
(c)    If at the time of any annual meeting of stockholders for the election of directors a default in preference dividends shall exist on the FRAPS of any series or any series of Preferred Stock of the Corporation ranking on a parity with the FRAPS as to dividends and upon liquidation and which is granted in the Restated Articles of Incorporation the right to vote together with the FRAPS of all series as a single class on the election of directors (the FRAPS and the other Preferred Stock of all such series, the “Voting Parity Preferred Stock”), the number of directors constituting the Board of Directors of the corporation shall be increased by two, and the holders of the Voting Parity Preferred Stock of all series shall have the right at such meeting, voting together as a single class without regard to series, to the exclusion of the holders of the Common Stock and any other class of capital stock that is not Voting Parity Preferred Stock, to elect two directors of the Corporation to fill such newly created directorships. Such right shall continue until there are no dividends in arrears upon the Voting Parity Preferred Stock of any series, at which time such right shall terminate, subject to revesting in the event of each and every subsequent default of the character above mentioned. Upon any such termination of the right of the holders of shares of Voting Parity Preferred Stock as a class to vote for directors as herein provided, the term of office of each director then in office elected by such holders voting as a class (herein called a “Preferred Director”) shall terminate immediately. Any Preferred Director may be removed by, and shall not be removed except by, the vote of the holders of record of the outstanding shares of Voting Parity Preferred Stock, voting together as a single class without regard to series, at a meeting of the Corporation's stockholders, or of the holders of shares of Voting Parity Preferred Stock, called for such purpose. So long as a default in any preference dividends on the Voting Parity Preferred Stock of any series shall exist (A) any vacancy in the office of a Preferred Director may be filled (except as provided in the following clause (B)) by a person appointed by an instrument in writing signed by the remaining Preferred Director and filed with the Corporation and (B) in the case of the removal of any Preferred Director, the vacancy may be filled by a person elected by the vote of the holders of the outstanding shares of Voting Parity Preferred Stock, voting together as a single class without regard to series, at the same meeting at which such removal shall be voted. Each director appointed as aforesaid by the remaining Preferred Director shall be deemed, for all purposes hereof, to be a Preferred Director. For the purposes hereof, a “default in preference dividends” on the Voting Parity Preferred Stock of any series shall be deemed to have occurred whenever the amount of unpaid accrued dividends upon any series of Voting Parity Preferred Stock shall be equivalent to six quarterly dividends (which, with respect to any series of the FRAPS or similar Voting Parity Preferred Stock, shall be deemed to be dividends in respect of a number of Dividend Periods containing not less than 540 days) or more, and, having so occurred, such default shall be deemed to exist thereafter until, but only until, all accrued dividends on all shares of Voting Parity Preferred Stock of each and every series then outstanding shall have been paid to the end of the last preceding Dividend Period.
(d)    The consent of the holders of two-thirds of the outstanding Series B FRAPS, given in person or by proxy either in writing or at a meeting or meetings at which the holders of such series of FRAPS shall vote separately as a class, shall be necessary for the authorization, creation or issuance of any shares of any series of Preferred Stock ranking prior to the Series B FRAPS either as to the payment of dividends or the distribution of assets upon liquidation, dissolution or winding up, or the reclassification of any authorized stock of the Corporation into any such prior shares, or the creation, authorization or issuance of any obligation or security convertible into or evidencing the right to purchase any such prior shares.
(e)    At all meetings of stockholders at which holders of Preferred Stock shall be entitled to vote for the election or removal of directors as a single class, the holder of each share of Preferred Stock shall be entitled to one vote for every one dollar ($1.00) of the stated liquidation preference of such share, and the holders of a majority of the aggregate outstanding voting power of the Preferred Stock of all series shall be necessary to constitute a quorum, whether present in person or by proxy, for the election by the Preferred Stock of its designated directors. In order to validate an election or removal of directors by the holders of the Preferred Stock voting as a class, such directors shall be elected or removed by the vote of at least a plurality of the votes cast by the holders of the Preferred Stock present or represented at such meeting. At any such meeting, the election or removal of directors by the holders of the Preferred Stock voting as a class shall be valid notwithstanding that a quorum of other stockholders voting as one or more classes may not be present or represented at such meeting, and if any stockholders voting as a class shall elect directors, the directors so elected shall be deemed to be the directors of the Corporation unless and until the other stockholders entitled to vote as one or more classes shall elect their directors.
(f)    At all meetings of stockholders at which holders of Series B FRAPS shall be entitled to vote (other than with respect to a vote for directors pursuant to paragraph (e) above) either as a series or together with holders of Preferred Stock of other series as a class, the holder of each share of Series B FRAPS and of such other series of Preferred Stock, if applicable, shall be entitled to one vote for every one dollar ($1.00) of the stated liquidation preference of such share.


Exhibit 3.1

7.     Auction Procedures . (a) Certain Definitions . Capitalized terms not defined in this paragraph 7 shall have the respective meanings specified in paragraphs 1 through 6 above. As used in this paragraph 7, the following terms shall have the following meanings, unless the context otherwise requires:
(i)    “Affiliate” shall mean any Person actually known to an authorized officer of the Trust Company to be controlled by, in control of, or under common control with the Corporation; provided, that for purposes of this clause (i), “control” shall not be deemed to exist solely by reason of the direct or indirect ownership of less than 10% of the Common Stock or other voting power of the Corporation.
(ii)    “Agent Member” shall mean (i) a member of the Securities Depository who will act on behalf of a beneficial owner of FRAPS prior to the Restricted Transfer Date and (ii) after the Restricted Transfer Date, such a member who will act on behalf of an Existing Holder or Potential Holder and who is identified in such person's Purchaser's Letter.
(iii)    “Auction” shall mean the periodic operation of the procedures set forth in this paragraph 7.
(iv)    “Auction Date” shall mean the first Business Day preceding the first day of an Action Dividend Period.
(v)    “Available FRAPS” shall have the meaning specified in paragraph 7(d)(i) below.
(vi)    “Bid” shall have the meaning specified in paragraph 7(b)(i) below.
(vii)    “Bidder” shall have the meaning specified in paragraph 7(b)(i) below.
(viii)    “Broker-Dealer” shall mean any broker-dealer, or other entity permitted by law to perform the functions required of a Broker-Dealer in this paragraph 7, that has been selected by the Corporation and has entered into a Broker-Dealer Agreement with the Trust Company that remains effective.
(ix)    “Broker-Dealer Agreement” shall mean an agreement between the Trust Company and a Broker-Dealer pursuant to which such Broker-Dealer agrees to follow the procedures specified in this paragraph 7.
(x)    “FRAPS” shall mean the Series B FRAPS of the Corporation.
(xi)    “Existing Holder”, when used with respect to shares of FRAPS, shall mean a Person who has signed a Purchaser's Letter and is listed as the beneficial owner of such shares of FRAPS in the records of the Trust Company.
(xii)    “Hold Order” shall have the meaning specified in paragraph 7(b)(i) below.
(xiii)    “Maximum Applicable Rate,” at any Auction shall be the percentage of the 60‑day “AA” Composite Commercial Paper Rate on such Auction Date, determined as set forth below based on the prevailing rating of shares of FRAPS in effect at the close of business on such Auction Date:

Prevailing Rating                                  Percentage

AA/“aa” or above                                  120%
A/“a”                                          130%
BBB/“baa”                                      175%
BB/“its” or Below                                  225%
For purposes of this definition, the “prevailing rating” of shares of FRAPS shall be (i) AA/“aa” or Above, if shares of FRAPS have a rating of AA‑ or better by Standard & Poor's Corporation or its successor (“S&P”) and “aa3” or better by Moody's Investors Service, Inc., or its successor (“Moody's”), or the equivalent of both of such ratings by such agencies or a substitute rating agency or substitute rating agencies selected as provided below, (ii) if not AA/“aa” or Above, then A/“a” if the shares of FRAPS have a rating of A‑ or better by S&P and “a3” or better by Moody's or the equivalent of both of such ratings by such agencies or a substitute rating agency or substitute rating agencies selected as provided below, (iii) if not AA/“aa” or Above or A/“a”, then BBB/“baa”, if the shares of FRAPS have a rating of BBB‑ or better by S&P and “baa3” or better by Moody's or the equivalent of both of such ratings by such agencies or a substitute rating agency or substitute rating agencies selected as provided below, and (iv) if not AA/”aa” or Above, A/”a” or BBB/”baa”, then BB/”ba” or Below. If either S&P or Moody's shall not make such a rating available, Salomon Brothers Inc or its successor shall select a nationally recognized


Exhibit 3.1

securities rating agency or two nationally recognized securities rating agencies to act as substitute rating agency or substitute rating agencies, as the case may be.
(xiv)    There is no minimum Applicable Rate.
(xv)    “Order” shall have the meaning specified in paragraph 7(b)(i) below.
(xvi)    “Outstanding” shall mean, as of any date, shares of FRAPS theretofore issued by the Corporation except, without duplication, (A) any shares of FRAPS theretofore canceled or delivered to the Trust Company for cancelation, or redeemed by the Corporation or as to which a notice of redemption shall have been given by the Corporation, (B) any shares of FRAPS as to which the Corporation or any Affiliate thereof shall be an Existing Holder, (C) any shares of FRAPS represented by any certificate in lieu of which a new certificate has been executed and delivered by the Corporation and (D) any shares of FRAPS theretofore converted into any other security, except as provided in paragraph 7(f) below.
(xvii)    “Person” shall mean and include an individual, a partnership, a corporation, a trust, an unincorporated association, a joint venture or other entity or a government or any agency or political subdivision thereof.
(xviii)    “Potential Holder” shall mean any Person, including any Existing Holder, (A) who shall have executed a Purchaser's Letter and (B) who may be interested in acquiring shares of FRAPS (or, in the case of an Existing Holder, additional shares of FRAPS).
(xix)    “Purchaser's Letter” shall mean a letter addressed to the Corporation, the Trust Company and a Broker-Dealer in which a Person agrees to, among other things, offer to purchase, purchase, offer to sell and/or sell shares of FRAPS as set forth in this paragraph 7.
(xx)    “Securities Depository” shall mean The Depository Trust Company and its successors and assigns or any other securities depository selected by the Corporation which agrees to follow the procedures required to be followed by such securities depository in connection with shares of FRAPS.
(xxi)    “Sell Order” shall have the meaning specified in paragraph 7(b)(i) below.
(xxii)    “Submission Deadline” shall mean 12:30 P.M., New York City time, on any Auction Date or such other time on any Auction Date by which Broker-Dealers are required to submit Orders to the Trust Company as specified by the Trust Company from time to time.
(xxiii)    “Submitted Bid” shall have the meaning specified in paragraph 7(d)(i) below.
(xxiv)    “Submitted Hold Order” shall have the meaning specified in paragraph in paragraph 7(d)(i) below.
(xxv)    “Submitted Order” shall have the meaning specified in paragraph 7(d)(i) below.
(xxvi)    “Submitted Sell Order” shall have the meaning specified in paragraph 7(d)(i) below
(xxvii)    “Sufficient Clearing Bids” shall have the meaning specified in paragraph 7(d)(i) below.
(xxviii)    “Units” means units consisting of 1,000 shares of FRAPS.
(xxix)    “Winning Bid Rate” shall have the meaning specified in paragraph 7(d)(i) below.
(b)     Orders by Existing Holders and Potential Holders . (i) On or prior to each Auction Date:

        (A)    each Existing Holder may submit to a Broker-Dealer information as to:
(1)    the number of Outstanding shares, if any, of FRAPS held by such Existing Holder which such Existing Holder desires to continue to hold without regard to the Applicable Rate for the next succeeding Dividend Period;
(2)    the number of Outstanding shares, if any, of FRAPS held by such Existing Holder which such Existing Holder desires to continue to hold, provided that the Applicable Rate for the next


Exhibit 3.1

succeeding Dividend Period shall not be less than the rate per annum specified by such Existing Holder; and/or
(3)    the number of Outstanding shares, if any, of FRAPS held by such Existing Holder which such Existing Holder offers to sell without regard to the Applicable Rate for the next succeeding Dividend Period; and
(B)    each Broker-Dealer, using a list of Potential Holders that shall be maintained in good faith for the purpose of conducting a competitive Auction shall contact Potential Holders, including Persons that are not Existing Holders, on such list to determine the number of Outstanding shares, if any, of FRAPS which each such Potential Holder offers to purchase, provided that the Applicable Rate for the next succeeding Dividend Period shall not be less than the rate per annum specified by such Potential Holder.
For the purposes hereof, the communication to a Broker-Dealer of information referred to in clause (A) of this paragraph 7(b)(i) is hereinafter referred to as an “Order” and each Existing Holder and each Potential Holder placing an Order is hereinafter referred to as a “Bidder”, an Order containing the information referred to in clause (A)(1) of this paragraph 7(b)(i) is hereinafter referred to as a “Hold Order”; an Order containing the information referred to in clause (A)(2) or (B) of this paragraph 7(b)(i) is hereinafter referred to as a “Bid”; and an Order containing the information referred to in clause (A)(3) of this paragraph 7(b)(i) is hereinafter referred to as a “Sell Order.”
(ii)    (A) A bid by an Existing Holder shall constitute an irrevocable offer to sell:
(1)    the number of Outstanding shares of FRAPS specified in such Bid if the Applicable Rate determined on such Auction Date shall be less than the rate specified therein; or
(2)    such number or a lesser number of Outstanding shares of FRAPS determined as set forth in paragraph 7(e)(i)(D) if the Applicable Rate determined on such Auction Date shall be equal to such specified rate; or
(3)    a lesser number of Outstanding shares of FRAPS to be determined as set forth in paragraph 7(e)(ii)(C) if such specified rate shall be higher than the Maximum Applicable Rate and Sufficient Clearing Bids do not exist.
(B)    A Sell Order by an Existing Holder shall constitute an irrevocable offer to sell;
(1)    the number of Outstanding shares of FRAPS specified in such Sell Order; or
(2)    such number or a lesser number of Outstanding     shares of FRAPS as set forth in paragraph 7(e)(ii)(C) if Sufficient Clearing     Bids do not exist.
(C)    A Bid by a Potential Holder shall constitute an irrevocable offer to purchase;
(1)    the number of Outstanding shares of FRAPS specified in such Bid if the Applicable Rate determined on such Auction Date shall be higher than the rate specified therein; or
(2)    such number or a lesser number of Outstanding shares of FRAPS as set forth in paragraph 7(e)(i)(E) if the Applicable Rate determined on such Auction Date shall be equal to such specified rate.
(c)     Submission of Orders by Broker-Dealers to Trust Company . (i) Each Broker-Dealer shall submit in writing to the Trust Company prior to the Submission Deadline on each Auction Date all Orders obtained by such Broker-Dealer and specifying with respect to each Order;
(A)    the name of the Bidder placing such Order;
(B)    the aggregate number of Outstanding shares of FRAPS that are the subject of such Order;

    (C)    to the extent that such Bidder is an Existing Holder:


Exhibit 3.1

(1)    the number of Outstanding shares, if any, of FRAPS subject to any Hold order placed by such Existing Holder;
(2)    the number of Outstanding shares, if any, of FRAPS subject to any Bid placed by such Existing Holder and the rate specified in such Bid; and
(3)    the number of Outstanding shares, if any, of FRAPS subject to any Sell Order placed by such Existing Holder;
(D)    to the extent such Bidder is a Potential Holder, the rate specified in such Potential Holder's Bid.
(ii)    If any rate specified in any Bid contains more than three figures to the right of the decimal point, the Trust Company shall round such rate up to the next highest one-thousandth (.001) of 1%.
(iii)    If an Order or Orders covering all of the Outstanding shares of FRAPS is not submitted to the Trust Company prior to the Submission Deadline, the Trust Company shall deem a Hold Order to have been submitted covering the number of Outstanding shares of FRAPS not subject to Orders submitted to the Trust Company.
(iv)    If one or more Orders covering in the aggregate more than the number of Outstanding shares of FRAPS held by an Existing Holder are submitted to the Trust Company, such Orders shall be considered valid as follows and in the following order of priority:
(A)    any Hold Order submitted on behalf of such Existing Holder shall be considered valid up to and including the number of Outstanding shares of FRAPS held by such Existing Holder; provided that if more than one Hold Order is submitted on behalf of such Existing Holder and the number of shares of FRAPS subject to such Hold Orders exceeds the number of Outstanding shares of FRAPS held by such Existing Holder, the number of shares of FRAPS subject to such Hold Orders shall be reduced pro rata so that such Hold Orders shall cover the number of Outstanding shares of FRAPS held by such Existing Holder;
(B)(1) any Bid shall be considered valid up to and including the excess of the number of Outstanding shares of FRAPS held by such Existing Holder over the number of shares of FRAPS subject to Hold Orders referred to in paragraph 7(c)(iv)(A);
(2)    subject to clause (1) above, if more than one Bid with the same rate is submitted on behalf of such Existing Holder and the number of Outstanding shares of FRAPS subject to such Bids is greater than such excess, the number of Outstanding shares of FRAPS subject to such Bids shall be reduced pro rata so that such Bids shall cover the number of Outstanding shares of FRAPS equal to such excess, and
(3)    subject to clause (1) above, if more than one Bid with different rates is submitted on behalf of such Existing Holder, such Bids shall be considered valid in the ascending order of their respective rates and in any such event the number, if any, of such Outstanding shares subject to Bids not valid under this clause (B) shall be treated as the subject of a Bid by a Potential Holder; and
(C)    any Sell Order shall be considered valid up to and including the excess of the number of Outstanding shares of FRAPS held by such Existing Holder over the number of Outstanding shares of FRAPS subject to Hold Orders referred to in paragraph 7(c)(iv)(A) and Bids referred to in paragraph 7(c)(iv)(B).
(v)    If more than one Bid is submitted on behalf of any Potential Holder, each Bid submitted shall be a separate Bid with the rate and shares of FRAPS therein specified.
(vi)    Orders by Existing Holders and Potential Holders must specify numbers of shares of FRAPS in whole Units. Any Order that specifies a number of shares of FRAPS other than in whole Units will be invalid and will not be considered a Submitted Order for purposes of an Auction.
(d)     Determination of Sufficient Clearing Bids, Winning Bid Rate and Applicable Rate . i) Not earlier than the Submission Deadline on each Auction Date, the Trust Company shall assemble all Orders submitted to it by the Broker-Dealers (each such Order as submitted or deemed submitted by a Broker-Dealer being hereinafter referred to individually as a “Submitted Hold Order,” a “Submitted Bid” or a “Submitted Sell Order”, as the case may be, or as a “Submitted Order”) and shall determine:


Exhibit 3.1

(A)    the excess of the total number of Outstanding shares of FRAPS over the number of Outstanding shares of FRAPS that are the subject of Submitted Hold Orders (such excess being hereinafter referred to as the “Available FRAPS”);
(B)    from the Submitted Orders whether:
(1)    the number of Outstanding shares of FRAPS that are the subject of Submitted Bids by Potential Holders specifying one or more rates equal to or lower than the Maximum Applicable Rate exceeds or is equal to the sum of:
(2)    [a] the number of outstanding shares of FRAPS that are the subject of Submitted Bids by Existing Holders specifying one or more rates higher than the Maximum Applicable Rate, and
[b] the number of Outstanding shares of FRAPS that are subject to Submitted Sell Orders
(if such excess or such equality exists (other than because the number of Outstanding shares of FRAPS in clauses [a] and [b] above are each zero because all the Outstanding shares of FRAPS are the subject of Submitted Hold Orders ), such Submitted Bids in clause (1) above being hereinafter referred to collectively as “Sufficient Clearing Bids”); and
(C)    if Sufficient Clearing Bids exist, the lowest rate specified in the Submitted Bids (the “Winning Bid Rate”), which if:
(1)    each Submitted Bid from Existing Holders specifying the Winning Bid Rate and all other Submitted Bids from Existing Holders specifying lower rates were rejected, thus entitling such Existing Holders to continue to hold the shares of FRAPS that are the subject of such Submitted Bids, and
(2)    each Submitted Bid from Potential Holders specifying the Winning Bid Rate and all other Submitted Bids from Potential Holders specifying lower rates were accepted, thus entitling the Potential Holders to purchase the shares of FRAPS that are the subject of such Submitted Bids;
would result in the number of shares subject to all Submitted Bids specifying the Winning Bid Rate or a lower rate being at least equal to the Available FRAPS.
(ii)    Promptly after the Trust Company has made the determinations pursuant to paragraph 7(d)(i), the Trust Company shall advise the Corporation of the Maximum Applicable Rate and, based on such determinations, the Applicable Rate for the next succeeding Dividend Period as follows:
(A)    if sufficient Clearing Bids exist, that the Applicable Rate for the next succeeding Dividend Period shall be equal to the Winning Bid Rate so determined;
(B)    if Sufficient Clearing Bids do not exist (other than because all of the Outstanding Shares of FRAPS are the subject of Submitted Hold Orders), that the Applicable Rate for the next succeeding Dividend period shall be equal to the Maximum Applicable Rate; or
(C)    if all of the Outstanding shares of FRAPS are the subject of Submitted Hold Orders, that the Applicable Rate for the next succeeding Dividend Period shall be equal to 59% of the 60-day “AA” Composite Commercial Paper Rate in effect on the day of such Auction.
(e)     Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and Allocation of Shares . Based on the determinations made pursuant to paragraph 7(d)(i), the Submitted Bids and Submitted Sell Orders shall be accepted or rejected and the Trust Company shall take such other action as set forth below:
(i)    If Sufficient Clearing Bids have been made, subject to the provisions of paragraph 7(e)(ii) and 7(e)(iv), Submitted Bids and Submitted Sell Orders shall be accepted or rejected in the following order of priority and all other Submitted Bids shall be rejected:


Exhibit 3.1

(A)    the Submitted Sell Orders of Existing Holders shall be accepted and the Submitted Bid of each of the Existing Holders specifying any rate that is higher than the Winning Bid Rate shall be accepted, thus requiring each such Existing Holder to sell the Outstanding shares of FRAPS that are the subject of such Submitted Bid;
(B)    the Submitted Bid of each of the Existing Holders specifying any rate that is lower than the Winning Bid Rate shall be rejected, thus entitling each such Existing Holder to continue to hold the Outstanding shares of FRAPS that are the subject of such Submitted Bid;
(C)    the Submitted Bid of each of the Potential Holders specifying any rate that is lower than the Winning Bid Rate shall be accepted;
(D)    the Submitted Bid of each of the Existing Holders specifying a rate that is equal to the Winning Bid Rate shall be rejected, thus entitling each such Existing Holder to continue to hold the Outstanding shares of FRAPS that are the subject of such Submitted Bid, unless the number of Outstanding shares of FRAPS subject to all such Submitted Bids shall be greater than the number of Outstanding shares of FRAPS (“remaining shares”) equal to the excess of the Available FRAPS over the number of Outstanding shares of FRAPS subject to Submitted Bids described in paragraphs 7(e)(i)(B) and 7(e)(i)(C), in which event the Submitted Bids of each such Existing Holder shall be accepted, and each such Existing Holder shall be accepted, an each such Existing Holder shall be required to sell Outstanding shares of FRAPS, but only in an amount equal to the difference between (1) the number of Outstanding shares of FRAPS then held by such Existing Holder subject to such Submitted Bid and (2) the number of shares of FRAPS obtained by multiplying (x) the number of remaining shares by (y) a fraction the numerator of which shall be the number of Outstanding shares of FRAPS held by such Existing Holder subject to such Submitted Bid and the denominator of which shall be the sum of the number of Outstanding shares of FRAPS subject to such Submitted Bids made by all such Existing Holders that specified a rate equal to the Winning Bid Rate; and
(E)    the Submitted Bid of each of the Potential Holders specifying a rate that is equal to the Winning Bid Rate shall be accepted but only in an amount equal to the number of Outstanding shares of FRAPS obtained by multiplying (x) the difference between the Available FRAPS and the number of outstanding shares of FRAPS subject to Submitted Bids described in paragraphs 7(e)(i)(B), 7(e)(i)(C) and 7(e)(i)(D) by (y) a fraction the numerator of which shall be the number of Outstanding shares of FRAPS subject to such Submitted Bid and the denominator of which shall be the sum of the number of Outstanding shares of FRAPS subject to such Submitted Bids made by all such Potential Holders that specified rates equal to the Winning Bid Rate.
(ii)    If Sufficient Clearing Bids have not been made (other than because all of the Outstanding shares of FRAPS are subject to Submitted Hold Orders), subject to the provisions of paragraphs 7(e)(iii) and 7(e)(iv), Submitted Orders shall be accepted or rejected as follows in the following order of priority and all other Submitted Bids shall be rejected:
(A)    the Submitted Bid of each Existing Holder specifying any rate that is equal to or lower than the Maximum Applicable Rate shall be rejected, thus entitling such Existing Holder to continue to hold the Outstanding shares of FRAPS that are the subject of such Submitted Bid.
(B)    the Submitted Bid of each Potential Holder specifying any rate that is equal to or lower than the Maximum Applicable Rate shall be accepted, thus requiring such Potential Holder to purchase the Outstanding shares of FRAPS that are the subject of such Submitted Bid; and
(C)    the Submitted Bids of each Existing Holder specifying any rate that is higher than the Maximum Applicable Rate shall be accepted and the Submitted Sell Orders of each Existing Holder shall be accepted, in both cases only in an amount equal to the difference between (1) the number of Outstanding shares of FRAPS then held by such Existing Holder subject to such Submitted Bid or Submitted Sell Order and (2) the number of shares of FRAPS obtained by multiplying (x) the difference between the Available FRAPS and the aggregate number of Outstanding shares of FRAPS subject to Submitted Bids described in paragraphs 7(e)(ii)(A) and 7(e)(ii)(B) by (y) a fraction the numerator of which shall be the number of Outstanding shares of FRAPS held by such Existing Holder subject to such Submitted Bid or Submitted Sell Order and the denominator of which shall be the number of Outstanding Shares of FRAPS subject to all such Submitted Bids and Submitted Sell Orders.
(iii)    If, as a result of the procedures described in paragraph 7(e)(i) or 7(e)(ii), any Existing Holder would be entitled or required to sell, or any Potential Holder would be entitled or required to purchase, a fraction of a Unit of FRAPS on any Auction Date, the Trust Company shall, in such manner as, in its sole discretion, it shall determine, round up or down the number of Units of FRAPS to the purchased or sold by any Existing Holder or Potential Holder on such Auction Date so


Exhibit 3.1

that the number of Outstanding Units purchased or sold by each Existing Holder or Potential Holder on such Auction Date shall be whole units of FRAPS.
(iv)    If, as a result of the procedures described in paragraph 7(e)(i), any Potential Holder would be entitled or required to purchase less than a whole Unit of FRAPS on any Auction Date, the Trust Company shall, in such manner as, in its sole discretion, it shall determine, allocate Units for purchase among Potential Holders so that only whole Units of FRAPS are purchased on such Auction Date by any Potential Holder, even if such allocation results in one or more of such Potential Holders not purchasing shares of FRAPS on such Auction Date.
(v)    Based on the results of each Auction, the Trust Company shall determine the aggregate number of Outstanding shares of FRAPS to be purchased and the aggregate number of Outstanding shares of FRAPS to be sold by Potential Holders and Existing Holders on whose behalf each Broker-Dealer submitted Bids or Sell Orders, and, with respect to each Broker-Dealer, to the extent that such aggregate number of Outstanding shares to be purchased and such aggregate number of Outstanding shares to be sold differ, determine to which other Broker-Dealer or Broker-Dealers acting for one or more purchasers such Broker-Dealer shall deliver, or from which other Broker-Dealer or Broker-Dealers acting for one or more sellers such Broker-Dealer shall receive, as the case may be, Outstanding shares of FRAPS.
(f)     Miscellaneous . The Board of Directors or any duly designated committee thereof may interpret the provisions of this paragraph 7 to resolve any inconsistency or ambiguity, remedy any formal defect or make any other change or modification which does not adversely affect the rights of Existing Holders of FRAPS. An Existing Holder (A) may sell, transfer or otherwise dispose of shares of FRAPS at any time prior to the date of the first Auction, and thereafter only pursuant to a Bid or Sell Order in accordance with the procedures described in this paragraph 7 or to or through a Broker-Dealer or to a Person that has delivered a signed copy of a Purchaser's Letter to the Trust Company, provided, provided that in the case of all transfers on or after the Restricted Transfer Date other than pursuant to Auctions such Existing Holder, its Broker-Dealer or its Agent Member advises the Trust Company of such transfer and (B) shall have the ownership of the shares of FRAPS held by it maintained in book entry form by the Securities Depository in the account of its Agent Member, which in turn will maintain records of such Existing Holder's beneficial ownership. Neither the Corporation not any Affiliate shall submit an Order in an Auction. All of the Outstanding FRAPS shall be represented by a certificate registered in the name of the Securities Depository. In the event that any Existing Holder shall, at any time prior to 9:30 a.m., New York City time, on the Business Day prior to any Auction, have delivered to the Trust Company a request to convert shares of FRAPS but shall have failed by such time to make a “free” delivery of such shares to the Trust Company, as required by the conversion procedures described herein, then, solely for the purpose of conducting such Auction, such shares of FRAPS shall be deemed to be Outstanding and held by such Existing Holder on the applicable Auction Date and such Existing Holder shall be deemed to have submitted a Hold Order for such shares in connection with such Auction, regardless of any previous Order delivered with respect to such shares and regardless of whether such shares are in fact converted into shares of Common Stock on or prior to such Auction.
(g)     Headings of Subdivisions . The headings of the various subdivisions of this paragraph 7 are for convenience of reference only and shall not affect the interpretation of any of the provisions hereof.
IN WITNESS WHEREOF, the Corporation has caused this Statement to be executed in its name by the undersigned, thereunto duly authorized, this 16th day of May, 1990.
    
[SEAL]                        RYDER SYSTEM, INC.,
BY: /s/ M. Anthony Burns            
                                President
/s/ Jeffrey J. Murphy            
                                Secretary
             
STATE OF FLORIDA,    )
                    )    ss:
    COUNTY OF DADE,        )    


Exhibit 3.1

On this day personally appeared before me M. Anthony Burns, President, and Jeffrey J. Murphy, Secretary, of RYDER SYSTEM, INC., a Florida corporation, and acknowledged that they executed the above and foregoing Statement of Resolution Establishing Fixed Rate Auction Preferred Stock, Series A, as officers for and on behalf of said corporation after having been duly authorized so to do.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal at the county and state aforesaid, this 16th day of May, 1990.
    
                             /s/Janice Johnson
                                NOTARY PUBLIC
                                State of Florida at Large
My commission Expires:    


Exhibit 3.1


ARTICLES OF AMENDMENT
STATEMENT OF RESOLUTION ESTABLISHING THE
CUMULATIVE PREFERRED STOCK, SERIES C
OF
RYDER SYSTEM, INC.
Pursuant to the provisions of Section 607.0602 of the Florida Business Corporation Act, the undersigned corporation submits the following statement for the purpose of establishing and designating a series within the class of its preferred stock, without par value (the “Preferred Stock”), and fixing and determining the relative rights and preferences thereof:
1. The name of the corporation is Ryder System, Inc. (the “Corporation”).
2. The following resolutions, establishing and designating a series of Preferred Stock, and fixing and determining the relative rights and preferences thereof, were duly adopted by the Board of Directors of the Corporation on March 8, 1996:
RESOLVED, that pursuant to the authority expressly granted to the Board of Directors by the provisions of Article III of the Restated Articles of Incorporation, as amended, of the Corporation, the Board of Directors hereby establishes a series of Preferred Stock of the Corporation, without par value, designated as Cumulative Preferred Stock, Series C (hereinafter referred to as the “Series C Preferred Stock”), consisting of 900,000 shares of Series C Preferred Stock, which the Corporation has authority to issue.
FURTHER RESOLVED, that the designations, preferences and relative, optional or other special rights of the Series C Preferred Stock and the qualifications, limitations and restrictions thereof are as follows:
1.     Designation and Amount . The shares of such series shall be designated as the “Cumulative Preferred Stock, Series C” (the “Series C Preferred Stock”) and the number of shares constituting such series shall be 900,000 (which number may be increased or decreased by the Board of Directors without a vote of shareholders).
2.     Dividends and Distributions .
(a)    The holders of shares of Series C Preferred Stock, in preference to the holders of Common Stock, par value $.50 per share, of the Corporation (the “Common Stock”) and of any other stock ranking junior to the Series C Preferred Stock as to payment of dividends shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available therefor, quarterly dividends payable in cash in March, June, September and December in each year (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series C Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (i) $10 or (ii) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series C Preferred Stock. In the event the Corporation shall at any time after March 18, 1996 pay any dividend on Common Stock payable in shares of Common Stock or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a divided in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series C Preferred Stock were entitled immediately prior to such event under clause (ii) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.


Exhibit 3.1

(b)    The Corporation shall declare a dividend or distribution on the Series C Preferred Stock as provided in paragraph (a) of this Section 2 immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $10 per share on the Series C Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.
(c)    Dividends shall begin to accrue and be cumulative on outstanding shares of Series C Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series C Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series C Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series C Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series C Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof.
3.     Voting Rights . The holders of shares of Series C Preferred Stock shall have the following voting rights:
(a)    Subject to the provision for adjustment hereinafter set forth, the holder of a whole or fractional share of Series C Preferred Stock shall be entitled to vote on all matters submitted to a vote of the shareholders of the Corporation, on the basis of 100 votes for each share. In the event the Corporation shall at any time after March 18, 1996 pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series C Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(b)    So long as any shares of Series C Preferred Stock are outstanding, and unless the vote or consent of a greater number of shares of such series shall then be required by law, the consent of the holders of a majority of the shares of Series C Preferred Stock at the time outstanding, voting separately as a class, shall be necessary to approve a voluntary dissolution of the Corporation.
(c)    Except as otherwise provided herein or in the Restated Articles of Incorporation of the Corporation, as amended, or by law, the holders of shares of Series C Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of shareholders of the Corporation.
(d)    Except as otherwise provided herein or in the Restated Articles of Incorporation of the Corporation, as amended, or by law, holders of Series C Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.
4.     Certain Restrictions .
(a)    Whenever quarterly dividends or other dividends or distributions payable on the Series C Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series C Preferred Stock outstanding shall have been paid in full, the Corporation shall not:
(i)    declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series C Preferred Stock;


Exhibit 3.1

(ii)    declare or pay dividends on or make any other distribution on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series C Preferred Stock, except dividends paid ratably on the Series C Preferred Stock and all stock ranking on a parity with the Series C Preferred Stock as to dividends and on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;
(iii)    redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series C Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (as to dividends and upon dissolution, liquidation or winding up) to the Series C Preferred Stock; or
(iv)    purchase or otherwise acquire for consideration any shares of Series C Preferred Stock, or any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series C Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.
(b)    The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (a) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.
5.    Redemption.
(a)    The shares of Series C Preferred Stock shall be redeemable, at the option of the Board of Directors of the Corporation, in whole but not in part, out of funds legally available therefor, upon mailing Notice of Redemption pursuant to paragraph (b) of this Section 5 during the following periods:
(i)    any time as there shall be outstanding less that 90,000 shares of Series C Preferred Stock; provided, in the event the Corporation shall at any time after March 18, 1996 pay any dividend on the Series C Preferred Stock payable in shares of Series C Preferred Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Series C Preferred Stock (by reclassification or otherwise than by payment of a dividend in shares of Series C Preferred Stock) into a greater or lesser number of shares of Series C Preferred Stock, then in each such case such number shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Series C Preferred Stock outstanding immediately after such event and the denominator of which is the number of shares of Series C Preferred Stock that were outstanding immediately prior to such event; and provided further, however, that such right of redemption shall not be available during the 90-day period following the first issuance of any share or fraction of a share of Series C Preferred Stock. For purposes of this clause (i), shares of Series C Preferred Stock (A) owned by the Corporation or any of its direct or indirect subsidiaries, or (B) as to which Notice of Redemption pursuant to paragraph (b) of this Section 5 has been duly mailed and a sum sufficient to redeem such shares shall have been deposited with the transfer agent for the Series C Preferred Stock with irrevocable instructions to pay the redemption price to the holders thereof, shall not be considered to be outstanding;
(ii)    during the 90-day period after the date on which the Board of Directors shall have adopted a resolution recommending that the Corporation be dissolved and directing that the question of such dissolution be submitted to a vote of shareholders, at a meeting or otherwise; provided, however, that, unless Notice of Redemption previously has been mailed pursuant to paragraph (b) of this Section 5, such right of redemption shall not be available after the date such dissolution proceedings are abandoned, or the date on which the shareholders of the Corporation entitled to vote on such matter, so voted (until a subsequent resolution of such kind shall have been adopted);
(iii)    during the 90-day period after the date on which the Board of Directors of the Corporation shall have approved a plan of merger or consolidation of the Corporation with or into any other corporation or the sale of all or substantially all of the assets of the Corporation in exchange for stock or securities of another corporation and directed that the plan or the resolution providing for such sale be submitted to a vote


Exhibit 3.1

of shareholders at a meeting or otherwise; provided, however, that, unless Notice of Redemption previously has been mailed pursuant to paragraph (b) of this Section 5, such right of redemption shall not be available after the date such merger, consolidation or sale of assets is abandoned, or voting by the shareholders entitled to vote on such matter is completed (until a subsequent resolution of such kind shall have been approved or solicitation of such kind made).
(b)    Whenever shares of Series C Preferred Stock are to be redeemed, the Corporation shall mail a notice (“Notice of Redemption”) by first-class mail, postage prepaid, to each holder of record of shares of Series C Preferred Stock to be redeemed and to the transfer agent for the Series C Preferred Stock. The Notice of Redemption shall be addressed to the holder at the address of the holder appearing on the stock transfer books of the Corporation maintained by the transfer agent for the Series C Preferred Stock. The Notice of Redemption shall include a statement of (i) the redemption date (which shall be not less than 30 days after the mailing of such Notice of Redemption), (ii) the redemption price (to the extent then determinable or, if not then determinable, the manner in which the redemption price will be calculated), (iii) the number of shares of Series C Preferred Stock to be redeemed, (iv) the place or places where shares of the Series C Preferred Stock are to be surrendered for payment of the redemption price, (v) that the dividends on the shares to be redeemed will cease to accrue on such redemption date, and (vi) the provision under which redemption is made. No defect in the Notice of Redemption or in the mailing thereof shall affect the validity of the redemption proceedings, except as required by law. On and after the date on which a Notice of Redemption shall have been mailed as aforesaid and the Corporation shall have deposited with the transfer agent for the Series C Preferred Stock a sum sufficient to redeem the shares of Series C Preferred Stock as to which Notice of Redemption has been given, with irrevocable instructions and authority to pay the redemption price to the holders thereof, or if no such deposit is made, then upon such date fixed for redemption (unless the Corporation shall default in making payment of the redemption price), all rights of the holders thereof as stockholders of the Corporation by reason of the ownership of such shares (except their right to receive the redemption price thereof, but without interest), shall terminate, and such shares shall no longer be deemed outstanding. The Corporation shall be entitled to receive, from time to time, from the transfer agent for the Series C Preferred Stock the interest, if any, on such monies deposited with it and the holders of any shares so redeemed shall have no claim to any such interest. In case the holder of any shares so called for redemption shall not have properly surrendered the certificate or certificates for his shares in exchange for the redemption price for such shares within one year after the date of redemption, the transfer agent for the Series C Preferred Stock shall, upon demand, pay over to the Corporation such amount remaining on deposit and the transfer agent for the Series C Preferred Stock shall thereupon be relieved of all responsibility to the holder of such shares and such holder of the shares of the Series C Preferred Stock so called for redemption shall look thereafter only to the Corporation for the payment thereof.
(c)    Each share of the Series C Preferred Stock to be redeemed pursuant to paragraph (a) of this Section 5 shall be redeemed at a redemption price equal to, subject to the provision for adjustment hereinafter set forth, 100 times the “current per share market price” of the Common Stock on the date of the mailing of the Notice of Redemption or, if later (in the case of a redemption made pursuant to clause (ii) or (iii) of paragraph (a) of this Section 5), on the tenth business day following the date of the adoption or approval of the Board of Directors referred to in said clause (ii) or (iii), and there shall also be paid with respect to each such share which is redeemed an amount equal to accrued and unpaid dividends on such share (whether or not earned or declared) to the redemption date. In the event the Corporation shall at any time after March 18, 1996 pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series C Preferred Stock were entitled immediately prior to such event under the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
The “current per share market price” on any date shall be deemed to be the average of the closing price per share of such Common Stock for the five consecutive Trading Days (or such lesser number of Trading Days within such period, being at least one, for which there shall be a closing price as defined herein) preceding the second Trading Day prior to that date. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Common Stock is not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if


Exhibit 3.1

the Common Stock is not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotations System or such other system then in use or, if on any such date the Common Stock is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Common Stock selected by the Board of Directors of the Corporation. The term “Trading Day” shall mean a day on which the principal national securities exchange on which the Common Stock is listed or admitted to trading is open for the transaction of business or, if the Common Stock is not listed or admitted to trading on any national securities exchange, a Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions in the State of New York are not authorized or obligated by law or executive order to close.
(d)    Except as set forth under Section 4 of this Statement and except as set forth above with respect to redemptions, nothing contained in this Statement shall limit any legal right of the Corporation to purchase or otherwise acquire any shares of Series C Preferred Stock in privately negotiated transactions or in the over-the-counter market or otherwise.
6.     Reacquired Shares . Any shares of Series C Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of any series of Preferred Stock (including without limitation the Series C Preferred Stock), subject to the conditions and restrictions on issuance set forth in the Restated Articles of Incorporation of the Corporation, as amended.
7.     Liquidation, Dissolution or Winding Up . Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (a) to the holders of shares of stock ranking junior upon liquidation, dissolution or winding up to the Series C Preferred Stock unless, prior thereto, the holders of shares of Series C Preferred Stock shall have received $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not earned or declared, to the date of such payment, or (b) to the holders of stock ranking on a parity upon liquidation, dissolution or winding up with the Series C Preferred Stock, except a distribution made ratably on the Series C Preferred Stock and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up.
8.     Consolidation, Merger, etc . In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series C Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time after March 18, 1996 pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series C Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
9.     Rank . The Series C Preferred Stock shall rank on a parity with all other series of the Corporation's Preferred Stock outstanding as of March 18, 1996, as to the payment of dividends and upon liquidation, dissolution or winding up of the Corporation.
10.     Amendment . The Restated Articles of Incorporation, as amended, of the Corporation shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series C Preferred Stock so as to affect them adversely without the affirmative vote of the holders of two-thirds of the outstanding shares of Series C Preferred Stock, voting together as a single class.
IN WITNESS WHEREOF, the Corporation has caused this statement to be executed in its name by the undersigned, there unto duly authorized, this 5th day of April, 1996.


Exhibit 3.1

(SEAL)                    RYDER SYSTEM, INC.

By: /s/ M. Anthony Burns            
                        Chairman of the Board, President
                        and Chief Executive Officer
                    By: /s/ H. Judith Chozlanin            
                        Secretary
STATE OF FLORIDA    )
                    ) SS:
    COUNTY OF DADE        )
On this day personally appeared before me M. Anthony Burns, Chairman of the Board, President and Chief Executive Officer, and H. Judith Chozlanin, Secretary, of RYDER SYSTEM, INC., a Florida corporation, and acknowledged that they executed the above and foregoing Amended and Restated Statement of Resolution Establishing the Cumulative Preferred Stock, Series C, as officers for and on behalf of said corporation after having been duly authorized so to do.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal at the county and state aforesaid, this 5th day of April, 1996.

    
                     /s/ Lourdes Balomares                
                        NOTARY PUBLIC
                        State of Florida at Large
My Commission Expires:    



Exhibit 3.2



By-Laws

of Ryder System, Inc.






Revision Adopted December 8, 1975
Effective January 1, 1976
Amended April 30, 1976
Amended December 14, 1979
Amended February 22, 1980
Amended June 26, 1981
Amended December 16, 1982
Amended May 4, 1984
Amended October 25, 1984
Amended November 8, 1985
Amended February 28, 1986
Amended December 12, 1986
Amended December 18, 1987
Amended June 22, 1990
Amended February 21, 1992
Amended November 23, 1993
Amended February 18, 1999
Amended July 29, 1999
Amended December 14, 2000
Amended February 16, 2001
Amended October 10, 2008
Amended December 15, 2009
Amended May 3, 2013
Amended May 2, 2014
Amended May 1, 2015
Amended February 22, 2016
Amended May 4, 2018
Amended May 3, 2019

Exhibit 3.2



TABLE OF CONTENTS
Page
ARTICLE I
Name    1
ARTICLE II
Offices    1
ARTICLE III
Corporate Seal    1
ARTICLE IV
Stockholders    2
ARTICLE V
Directors    22
ARTICLE VI
Officers    28
ARTICLE VII
Stock Certificates    31
ARTICLE VIII
Depositories and Checks    33
ARTICLE IX
Fiscal Year    33
ARTICLE X
Dividends    33
ARTICLE XI
Waiver of Notice    33
ARTICLE XII
Indemnification of and Advance to Officers, Directors,     34
Employees and Agents    
        
ARTICLE XIII
By-Law Amendment    37
ARTICLE XIV
Continuing Effect of By-Law Provisions    38


Exhibit 3.2

BY-LAWS
OF
RYDER SYSTEM, INC.

ARTICLE I
Name
The name of this Corporation is RYDER SYSTEM, INC.
ARTICLE II
Offices
Section 1.      Principal Florida Office
The principal office of the Corporation in the State of Florida shall be in Miami, Dade County, Florida.
Section 2.      Other Offices
The Corporation may also have offices in such other places, both within and without the State of Florida, as the Board of Directors or the Chairman of the Board may from time to time designate or as the business of the Corporation may require. The registered office of the Corporation, required by applicable law to be maintained in the State of Florida may be, but need not be, identical with the Corporation’s principal office in the State of Florida, and the address of the registered office may be changed from time to time by the Board of Directors or the Chairman of the Board.
ARTICLE III
Corporate Seal
The corporate seal shall be circular in form and have inscribed thereon the following: “Ryder System, Inc., Incorporated Florida 1955”.
ARTICLE IV
Stockholders
Section 1.      Meetings of Stockholders
a.     Annual Meeting
The annual meeting of stockholders of the Corporation shall be held at such time and place, within or without the State of Florida, as may be designated by the Board of Directors, at which meeting, in accordance with the Restated Articles of Incorporation and these By-Laws, the stockholders shall elect members of the Board of Directors and transact such other business as lawfully may come before it.

Exhibit 3.2

b.     Special Meetings
(1)    Special meetings of the stockholders may be called by the holders of record of not less than one-tenth of all the shares outstanding and entitled to vote at such meeting or by the Board of Directors; and such meetings shall be held at such time and place, within or without the State of Florida, as may be designated by the Board of Directors.
(2)    Before a stockholder may request or demand that a special meeting of the stockholders be held for any purpose, the following procedure must be satisfied:
(A)    Any stockholder seeking to request or demand, or to have the stockholders request or demand, a special meeting shall first, by written notice to the Secretary of the Corporation, request the Board of Directors to fix a record date, pursuant to Section 3.b. of Article V of these By-Laws, for the purpose of determining the stockholders entitled to request the special meeting. The Board of Directors shall promptly, but in all events within 10 days after the date upon which such a request is received, fix such a record date. Every request to fix a record date for determining the stockholders entitled to request a special meeting shall be in writing and shall set forth the purpose or purposes for which the special meeting is requested, the name and address, as they appear in the Corporation’s books, of each stockholder making the request and the class and number of shares of the Corporation which are owned of record by each such stockholder, and shall bear the signature and date of signature of each such stockholder.
In the event of the delivery to the Corporation of any request(s) or demand(s) by stockholders with respect to a special meeting, and/or any related revocation or revocations, the Corporation shall engage nationally recognized independent inspectors of elections for the purpose of performing a prompt ministerial review of the validity of the request(s), demand(s) and/or revocation(s).
(B)    No request or demand with respect to calling a special meeting of stockholders shall constitute a valid and effective stockholder request or demand for a special meeting (i) unless (A) within 60 days of the record date established in accordance with subsection b(2)(A) of this Section, written requests or demands signed by stockholders of record representing a sufficient number of shares as of such record date to request or demand a special meeting pursuant to subsection b(1) of this Section are delivered to the Secretary of the Corporation in person or by facsimile, or sent by U.S. certified mail and received by the Secretary of the Corporation, at the principal executive offices of the Corporation and (B) each request or demand is made in accordance with and contains the information required by Section 5.b of this Article IV and (ii) until such date as the independent inspectors engaged in accordance with this subsection b(2) certify to the Corporation that the requests or demands delivered to the Corporation in accordance with clause (i) of this subsection b(2)(B) represent at least the minimum number of shares that would be necessary to request such a meeting pursuant to subsection b(1) of this Section.
(3)    If the Corporation determines that a stockholder or stockholders have satisfied the notice, information and other requirements specified in subsection b(2)(B)(i) of this Section, then the Board of Directors shall adopt a resolution calling a special meeting of the stockholders and fixing a record date, pursuant to Section 3.b. of Article V, for the purpose of determining the stockholders entitled to notice of and to vote at such special meeting. Notice of such special meeting shall be provided in accordance with Section 1.c. of this Article IV, provided that such notice shall be given within 60 days (or such longer period as from time to time may be permitted by law) after the date the request(s) or demand(s) for such special meeting is (are) delivered to the Corporation in accordance with subsection b(2)(B)(i) of this Section.
(4)    In fixing a meeting date for the special meeting of stockholders, the Board of Directors may consider such factors as it deems relevant within the good faith exercise of its business judgment, including, without limitation, the nature of the action proposed to be taken, the facts and circumstances surrounding the request, and any plan of the Board of Directors to call a special or annual meeting of stockholders for the conduct of related business, provided that such meeting date shall be within 120 days (or such longer period as may from time to time be permitted by law) after the date the request(s) or demand(s) for such special meeting is (are) delivered to the Corporation in accordance with subsection b(2)(B)(i) of this Section.

Exhibit 3.2

(5)    Nothing contained in this Section 1.b. shall in any way be construed to suggest or imply that the Board of Directors or any stockholder shall not be entitled to contest the validity of any request or demand or revocation thereof, or to take any other action (including, without limitation, the commencement, prosecution or defense of any litigation with respect thereto).
c.     Notice of Meetings
Except as otherwise permitted by law, notice of all meetings of stockholders stating the time and place, and, in the case of special meetings, the purpose or purposes for which the meeting is called, shall be given, by mailing, or by transmitting by electronic mail or any other type of electronic transmission, or by any other method permitted by law, to each stockholder entitled to vote (or by a single written notice to stockholders who share an address if they consent, or are deemed to consent, to a single notice) no less than ten days nor more than sixty days before the date set for such meeting. Such notice shall be deemed to be delivered (1) when deposited in the United States mail addressed to the stockholder at his address as it appears on the stock transfer books of the Corporation, with postage thereon prepaid, or (2) at the time the notice is electronically transmitted to the stockholder in a manner authorized by the stockholder if such authorization is required by law, or (3) at such other time as provided by law with respect to other methods of giving such notice as are permitted by law.
d.     Preparation of Voting List of Stockholders
The Secretary shall prepare and make, or cause to be prepared and made, at least ten days before each meeting of stockholders, a complete list of the stockholders entitled to vote at such meeting or any adjournment thereof, with the address of and the number and class and series, if any, of shares held by each stockholder as such information appears on the stock transfer books of the Corporation. Such list shall be kept on file at the principal place of business of the Corporation, shall be open to the examination of any stockholder during normal business hours for said ten day period (or such shorter time as exists between the record date and the meeting) upon receipt by the Secretary of a written request to make such an examination, and shall be produced and kept at the time and place of the meeting, and any adjournment thereof, subject to the inspection of any stockholder who may be present.
Section 2.      Quorum and Vote of Stockholders
a.     Quorum and General Voting Requirements
The holders of a majority of the voting power of the total number of shares outstanding and entitled to vote, present in person or represented by proxy thereat, shall constitute a quorum at a meeting of stockholders for the transaction of business, except as otherwise provided by law or by the Restated Articles of Incorporation. If, however, a quorum does not exist at a meeting, the holders of a majority of the shares present or represented and entitled to vote at such meeting may adjourn the meeting from time to time, without notice other than by announcement at the meeting, until holders of the requisite number of shares entitled to vote shall be present. Except as otherwise required by law, at any such adjourned meeting at which a quorum exists, any business may be transacted which might have been transacted at the meeting as originally noticed. The stockholders present at a duly organized meeting may continue to transact business in accordance with these By-Laws until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.
For purposes of this Section 2, shares entitled to vote on any matter presented for action by stockholders at a meeting, present in person or represented by proxy thereat, shall be counted for purposes of establishing a quorum for the transaction of all business at a meeting.
If a quorum is present, action on a matter (other than the election of directors) shall be approved by the stockholders of the Corporation if the matter receives the affirmative vote of the holders of a majority of the votes cast (in person or by proxy) by the holders of the total number of shares outstanding and entitled to vote on such matter, unless the matter is one upon which, by express provision of law a greater vote is required or from time to time permitted by action of the Board of Directors, or by

Exhibit 3.2

the Restated Articles of Incorporation or these By-Laws a greater or different vote is required, in any which case such express provision shall govern and control the requisite vote requirement. For purposes of clarity, “abstentions,” “withheld” votes and “broker non-votes” shall not be counted as a vote cast with respect to such action.”
b.     Election of Directors
At a meeting where a quorum is present, directors shall be elected by a majority of the votes cast with respect to that director by the holders of the shares represented in person or by proxy and entitled to be voted in the election of directors; provided that if the number of persons to be considered by the stockholders for election as a director exceeds the number of directors to be elected, with such determination thereof to be made by the Secretary of the Corporation as of the close of the notice of nomination periods set forth in Section 5 of this Article IV, directors shall be elected by the vote of a plurality of the votes cast by the holders of the shares represented in person or by proxy and entitled to be voted in the election of directors; further provided that all persons considered for election (other than those recommended for nomination by or at the direction of the Board of Directors or any duly authorized committee thereof) shall have met all applicable requirements and procedures in being placed in nomination and considered for election, including without limitation the requirements set forth in these By-Laws and in all applicable laws, rules and regulations. For purposes of this subsection 2.b., votes cast means votes “for” a director or “withheld” with respect to a director.
Section 3.      Voting by Stockholders
Each stockholder entitled to vote at any meeting may do so in person or by proxy appointed by instrument signed or otherwise authorized by the stockholder or by the stockholder’s attorney-in-fact in writing or in any other manner permitted by law.
Section 4.      Stockholder Action
Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of such holders and or may not be effected by any a consent or consents in writing by such holders the stockholders as provided by, and subject to the limitations in, the Restated Articles of Incorporation .
Section 5.      Notice of Stockholder Business and Director Nominations
a.     Annual Meetings of Stockholders
(1)      General . Nominations of persons for election to the Board of Directors and the proposal of any other business to be considered by the stockholders of the Corporation may be made at any annual meeting of stockholders, only (i) pursuant to the Corporation’s notice of meeting (or any supplement thereto), (ii) by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (iii) by any stockholder of the Corporation who (A) is a stockholder of record at the time of the giving of the notice provided for in this Section 5 and at the time of the annual meeting, (B) is entitled to vote at the annual meeting for the election of directors or the proposal, as applicable, and (C) complies with the notice procedures set forth in this Section 5 and the other requirements of these By-Laws as to such business or nomination. Clause (C) of this Section 5(a)(1) shall be the exclusive means for a stockholder to make nominations or submit other business (other than matters properly brought under Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and included in the Corporation’s notice of meeting) before an annual meeting of stockholders.
(2)      Timely Notice . Without qualification or limitation, for any nominations or any other business to be properly brought before an annual meeting by a stockholder of the Corporation pursuant to Section 5(a)(1)(C) hereof, the stockholder previously must have given timely notice thereof in proper written form (as more fully described in Section 5(a)(3) hereof) to the Secretary of the Corporation and any such other business must constitute a proper matter for stockholder action. To be timely, a stockholder’s notice must be delivered to the Secretary of the Corporation in person or by facsimile, or sent by U.S. certified mail and received by the Secretary of the Corporation, at the principal executive offices of the Corporation, not earlier than the opening

Exhibit 3.2

of business on the 120th day prior and not later than the close of business on the 90th day prior to the first anniversary of the date of the Corporation’s immediately preceding annual meeting; provided, however, that in the event that the date of the annual meeting is more than 30 days earlier or more than 60 days later than such first anniversary date, notice by the stockholder to be timely must be so delivered or received not earlier than the opening of business on the 120th day prior to the date of such annual meeting and not later than the close of business on the later of the 90th day prior to the date of such annual meeting or the 10th day following the day on which public announcement of the date of such annual meeting is first made by the Corporation; provided, however, Section 5(g)(4) shall govern timeliness of nominations submitted pursuant to a Proxy Access Notice pursuant to such Section 5(g). In no event shall any adjournment or postponement of an annual meeting or the public announcement thereof commence a new time period (or extend any time period) for the giving of notice by a stockholder as described above.
In addition, to be considered timely, a stockholder’s notice to the Secretary of the Corporation shall further be updated and supplemented, if necessary, so that the information provided or required to be provided in such notice shall be true and correct as of the record date for the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to the Secretary of the Corporation in person or by facsimile, or sent by U.S. certified mail and received by the Secretary of the Corporation, at the principal executive offices of the Corporation, not later than five (5) business days after the record date for the meeting in the case of the update and supplement required to be made as of the record date, and not later than eight (8) business days prior to the date for the meeting or any adjournment or postponement thereof in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof. For the avoidance of doubt, the obligation to update and supplement as set forth in this paragraph or any other Section of these By-Laws shall not limit the Corporation’s rights with respect to any deficiencies in any notice provided by a stockholder, extend any applicable deadlines hereunder or under any other provision of the By-Laws or enable or be deemed to permit a stockholder who has previously submitted notice hereunder or under any other provision of the By-Laws to amend or update any proposal or to submit any new proposal, including by changing or adding nominees, matters, business and or resolutions proposed to be brought before a meeting of the stockholders.
(3)      Notice in Proper Written Form . To be in proper written form, a stockholder’s notice to the Secretary of the Corporation (whether given pursuant to Section 5(a) or Section 5(b) or Section 5(g) hereof) must set forth in writing:
(A)     as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made:
(i)     the name and address of such stockholder as they appear on the Corporation’s books, and of such beneficial owner, if any;
(ii)      (a)     the class or series and number of shares of the Corporation which are, directly or indirectly, owned of record and/or owned beneficially by the stockholder and such beneficial owner, if any, and a representation that the stockholder and beneficial owner, if any, will notify the Corporation in writing of the class or series and number of such shares owned of record and beneficially as of the record date for the meeting, promptly following the later of the record date and the date notice of the record date is first publicly announced;
(b)      any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Corporation or with a value derived in whole or in part from the value of any class or series of shares of the Corporation, whether or not such instrument or right shall be subject to settlement in the underlying class or series of capital stock of the Corporation or otherwise (a “Derivative Instrument”) directly or indirectly owned beneficially by such stockholder and beneficial owner, if any, and any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Corporation;

Exhibit 3.2

(c)    any proxy, contract, arrangement, understanding or relationship pursuant to which such stockholder and beneficial owner, if any, has a right to vote any shares of any security of the Corporation;
(d)      any short interest in any security of the Corporation (for purposes hereof, a person or entity shall be deemed to have a short interest in a security if such person or entity directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from any decrease in the value of the subject security);
(e)    any rights to dividends on the shares of the Corporation owned beneficially by such stockholder and beneficial owner, if any, that are separated or separable from the underlying shares of the Corporation;
(f)      any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such stockholder and beneficial owner, if any, is a general partner or, directly or indirectly, beneficially owns an interest in a general partner; and
(g)      any performance-related fees (other than an asset-based fee) that such stockholder and beneficial owner, if any, is entitled to based on any increase or decrease in the value of shares of the Corporation or Derivative Instruments, if any, as of the date of such notice, including without limitation any such interests held by such stockholder’s and beneficial owner’s, if any, affiliates, any person or entity with whom such stockholder and beneficial owner, if any, is acting in concert or members of such stockholder’s and beneficial owner’s, if any, immediate family sharing the same household;
(iii)    any other information relating to such stockholder and beneficial owner, if any, that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder;
(iv)      a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such annual meeting on the matter proposed and intends to appear in person or by proxy at such meeting to propose such nomination or other business; and
(v)    if the stockholder intends to solicit proxies in support of such stockholder’s proposal, a representation to that effect.
(B)      if the notice relates to any business that the stockholder proposes to bring before the meeting other than a nomination of a director or directors:
(i)    a brief description of the business desired to be brought before the meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration), the reasons for conducting such business at the meeting, any material interest of such stockholder and beneficial owner, if any, on whose behalf the business is being proposed and of each of their respective affiliates or associates or others acting in concert therewith, if any, in such business and, in the event that such business includes a proposal to amend the By-Laws of the Corporation, the language of the proposed amendment; and
(ii)    a description of all agreements, arrangements and understandings between such stockholder and/or beneficial owner, if any, and any other person or persons (including the names of such persons) in connection with the proposal of such business by such stockholder.
(C)      If the stockholder proposes to nominate a person for election or reelection to the Board of Directors, as to each person whom the stockholder proposes to nominate for election or reelection to the Board of Directors:

Exhibit 3.2

(i)    all information relating to such person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for the election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected) and
(ii)     a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three (3) years, and any other material relationships, between or among such stockholder and beneficial owner, if any, and their respective affiliates and associates, or others acting in concert therewith, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, or others acting in concert therewith, on the other hand, including without limitation all information that would be required to be disclosed pursuant to Rule 404 promulgated by the Securities and Exchange Commission under Regulation S-K (or any successor rule or regulation) if the stockholder making the nomination and any beneficial owner on whose behalf the nomination is made, if any, or any affiliate or associate thereof or person acting in concert therewith, were the “registrant” for purposes of such rule and the nominee were a director or executive officer of such “registrant”; and
(D) If the stockholder proposes to nominate a person for election or reelection to the Board of Directors, with respect to each nominee for election or reelection to the Board of Directors, the notice must also include a completed and signed nominee questionnaire, representation and agreement, as required by Section 6 of this Article IV. Information regarding a nominee for director provided by a stockholder pursuant to this Section 5 shall include such information as may be necessary to enable the Board of Directors to make an informed determination as to whether such nominee, if elected, would be an “independent director” as defined in the rules and regulations of the New York Stock Exchange or any other stock exchange on which the Corporation’s Common Stock is listed or quoted, or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee.
(4)     Notwithstanding anything in paragraph (a)(2) above to the contrary, in the event that the number of directors to be elected to the Board of Directors at an annual meeting of stockholders is increased in accordance with Article V, Section 2 hereof and there is no public announcement naming all of the nominees for directors or specifying the size of the increased Board of Directors made by the Corporation at least 90 days prior to the first anniversary of the date of the immediately preceding annual meeting, a stockholder’s notice required by this Section 5 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary of the Corporation in person or by facsimile, or sent by U.S. certified mail and received by the Secretary of the Corporation, at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation; provided, however, Section 5(g)(4) shall govern timeliness of nominations submitted pursuant to a Proxy Access Notice pursuant to such Section 5(g).
(5)    For purposes of this Section 5, “affiliate” and “associate” shall have the meanings ascribed thereto in Rule 405 under the Securities Act of 1933, as amended; provided, however, that the term “partner” as used in the definition of “associate” shall not include any limited partner that is not involved in the management of the relevant partnership.
b.     Special Meetings of Stockholders .
Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders only (i) by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (ii) by any stockholder of the Corporation who (a) is a stockholder of record at the time of the giving of notice provided for in this Section 5 and at the time of the special meeting, (b) is entitled to vote at the meeting for the election of directors and (c) complies with the notice procedures set forth in this Section 5 as to such nomination. In the event a special meeting of stockholders is properly called by the Corporation for the purpose of electing one or more directors to the Board of Directors,

Exhibit 3.2

any such stockholder may nominate a person or persons (as the case may be), for election to such position(s) as specified in the Corporation’s notice of meeting, if the stockholder’s notice required by Sections 5(a)(2) and 5(a)(3) hereof with respect to any nomination (including the completed and signed questionnaire, representation and agreement required by Section 5(a)(3)(D) hereof) shall be delivered to the Secretary of the Corporation in person or by facsimile, or sent by U.S. certified mail and received by the Secretary of the Corporation, at the principal executive offices of the Corporation not earlier than the opening of business on the 120th day prior to such special meeting and not later than the close of business on the later of the 90th day prior to such special meeting or the 10th day following the day on which public announcement of the date of such special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting is first made by the Corporation. In no event shall any adjournment or postponement of a special meeting or the public announcement thereof commence a new time period (or extend any time period) for the giving of notice by a stockholder as described above.
In addition, to be considered timely, a stockholder’s notice shall further be updated and supplemented, if necessary, so that the information provided or required to be provided in such notice shall be true and correct as of the record date for the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to the Secretary at the principal executive offices of the Corporation not later than five (5) business days after the record date for the meeting in the case of the update and supplement required to be made as of the record date, and not later than eight (8) business days prior to the date for the meeting, any adjournment or postponement thereof in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof.
c.    If the notice requirements set forth in this Section 5 are satisfied by a stockholder and such stockholder’s nominee or proposal has been included in a proxy statement that has been prepared by management of the Corporation to solicit proxies for the applicable meeting of stockholders and such stockholder does not appear or send a qualified representative to present such nominee or proposal at such meeting, the Corporation need not present such nominee or proposal for a vote at such meeting notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Section 5, to be considered a qualified representative of the stockholder, a person must be authorized by a writing executed by such stockholder or an electronic transmission (as defined in the Florida Business Corporation Act, as amended) delivered by such stockholder to the Secretary of the Corporation (in the case of a writing, delivered in person or by facsimile, or sent by U.S. certified mail and received, at the principal executive offices of the Corporation) to act for such stockholder as proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable printed reproduction of such writing or electronic transmission, at the meeting of stockholders.
d.    Only such persons as are nominated in accordance with the procedures set forth in this Article IV, Section 5 or are chosen to fill any vacancy occurring in the Board of Directors in accordance with Article V, Section 1 shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Article IV, Section 5. Except as otherwise provided by law, the Restated Articles of Incorporation or these By-Laws, the chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Article IV, Sections 5-6, as applicable, and, if any proposed nomination or business is not in compliance with this Article IV, Sections 5-6, to declare that such defective proposal or nomination shall be disregarded.
e.    For purposes of this Section 5, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Services, Associated Press or comparable national news service, in a document publicly filed or furnished by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act and the rules and regulations promulgated thereunder, or posted on the Corporation’s website.
f.    Notwithstanding the provisions of this Section 5, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder, and all applicable rules and requirements of the New York Stock Exchange (the “NYSE”) or, if the Corporation’s shares are not listed on the NYSE, the applicable rules and requirements of the primary securities exchange or quotation system on which the Corporation’s shares are listed or quoted, in each case with respect

Exhibit 3.2

to the matters set forth in this Section 5; provided, however, that any references in these By-Laws to the Exchange Act or the rules and regulations promulgated thereunder are not intended to and shall not limit the requirements applicable to nominations or proposals as to any other business to be considered pursuant to Section 5(a)(1)(C) or Section 5(b) hereof. Nothing in this Section 5 shall be deemed to affect any rights (i) of stockholders to request inclusion of proposals or nominations in the Corporation’s proxy statement pursuant to applicable rules and regulations promulgated under the Exchange Act or (ii) of the holders of any class or series of stock having preference over the Common Stock as to dividends or upon liquidation if and to the extent provided for under law, the Restated Articles of Incorporation or these By-Laws.
g.    Inclusion of Stockholder Director Nominations in the Corporation’s Proxy Materials.
(1)    Subject to the terms and conditions set forth in these By-Laws, the Corporation shall include in its proxy materials for an annual meeting of stockholders held after the 2016 annual meeting the name, together with the Required Information (as defined below), of any person nominated for election (a “Stockholder Nominee”) to the Board of Directors by one or more Eligible Stockholders (as defined below) that satisfies the requirements of this Section 5(g), and expressly elects at the time of providing the written notice required by this Section 5(g) (a “Proxy Access Notice”) to have its nominee included in the Corporation’s proxy materials pursuant to this Section 5(g).
(2)    For the purposes of this Section 5(g):
(A)    “Voting Stock” shall mean outstanding shares of capital stock of the Corporation entitled to vote generally for the election of directors;
(B)    “Constituent Holder” shall mean any stockholder, collective investment fund included within a Qualifying Fund (as defined below) or beneficial holder whose stock ownership is counted for the purposes of qualifying as holding the Proxy Access Request Required Shares (as defined below) or qualifying as an Eligible Stockholder; and
(C)    a stockholder (including any Constituent Holder) shall be deemed to “own” only those outstanding shares of Voting Stock as to which the stockholder itself (or such Constituent Holder itself) possesses both (a) the full voting and investment rights pertaining to the shares and (b) the full economic interest in (including the opportunity for profit and risk of loss on) such shares. The number of shares calculated in accordance with the foregoing clauses (a) and (b) shall be deemed not to include (and to the extent any of the following arrangements have been entered into by affiliates of the stockholder (or of any Constituent Holder), shall be reduced by) any shares (x) sold by such stockholder or Constituent Holder (or any of either’s affiliates) in any transaction that has not been settled or closed, including any short sale, (y) borrowed by such stockholder or Constituent Holder (or any of either’s affiliates) for any purposes or purchased by such stockholder or Constituent Holder (or any of either’s affiliates) pursuant to an agreement to resell, or (z) subject to any option, warrant, forward contract, swap, contract of sale, other derivative or similar agreement entered into by such stockholder or Constituent Holder (or any of either’s affiliates), whether any such instrument or agreement is to be settled with shares or with cash based on the notional amount or value of Voting Stock, in any such case which instrument or agreement has, or is intended to have, or if exercised by either party thereto would have, the purpose or effect of (i) reducing in any manner, to any extent or at any time in the future, such stockholder’s or Constituent Holder’s (or either’s affiliates) full right to vote or direct the voting of any such shares, and/or (ii) hedging, offsetting or altering to any degree gain or loss arising from the full economic ownership of such shares by such stockholder or Constituent Holder (or either’s affiliate), other than any such arrangements solely involving an exchange listed multi-industry market index fund in which Voting Stock represents at the time of entry into such arrangement less than 10% of the proportionate value of such index. A stockholder (including any Constituent Holder) shall “own” shares held in the name of a nominee or other intermediary so long as the stockholder itself (or such Constituent Holder itself) retains the right to instruct how the shares are voted with respect to the election of directors and the right to direct the disposition thereof and possesses the full economic interest in the shares. A stockholder’s (including any Constituent Holder’s) ownership of shares shall be deemed to continue during any period in which the stockholder has loaned such shares and retained the unrestricted right to recall such shares upon giving no more than five days’ notice or delegated any voting power over such shares by means of a proxy, power of attorney or other instrument or arrangement and such delegation is

Exhibit 3.2

revocable at any time by the stockholder (and otherwise “owned” as defined herein) through the annual meeting. The terms “owned,” “owning” and other variations of the word “own” shall have correlative meanings.
(3)    For purposes of this Section 5(g), the “Required Information” that the Corporation will include in its proxy statement is (1) the information concerning the Stockholder Nominee and the Eligible Stockholder that the Corporation determines is required to be disclosed in the Corporation’s proxy statement by the regulations promulgated under the Exchange Act; and (2) if the Eligible Stockholder so elects, a Statement (as defined below). The Corporation shall also include the name of the Stockholder Nominee in its proxy card. For the avoidance of doubt, and any other provision of these By-Laws notwithstanding, the Corporation may in its sole discretion solicit against, and include in the proxy statement its own statements or other information relating to, any Eligible Stockholder and/or Stockholder Nominee, including any information provided to the Corporation with respect to the foregoing.
(4)    To be timely, a stockholder’s Proxy Access Notice must be delivered to the Secretary of the Corporation not less than 120 days nor more than 150 days prior to the first anniversary of the date the corporation issued its definitive proxy statement for the preceding year’s annual meeting. In no event shall any adjournment or postponement of an annual meeting or the public announcement thereof commence a new time period (or extend any time period) for the giving of notice by a stockholder as described above.
(5)    The maximum number of Stockholder Nominees (including Stockholder Nominees that were submitted by an Eligible Stockholder for inclusion in the Corporation’s proxy materials pursuant to this Section 5(g) but either are subsequently withdrawn or that the Board of Directors decides to nominate as a nominee of the Board of Directors or otherwise appoint to the Board) appearing in the Corporation’s proxy materials with respect to an annual meeting of stockholders shall not exceed the greater of (x) 2 and (y) the largest whole number that does not exceed 20% of the number of directors in office as of the last day on which a Proxy Access Notice may be delivered in accordance with the methods prescribed for delivery of notice in this Section 5(g) (such greater number, the “Permitted Number”); provided, however, that the Permitted Number shall be reduced by:
(A)    the number of directors in office or director candidates that in either case will be included in the Corporation’s proxy materials with respect to such annual meeting as an unopposed (by the Corporation) nominee pursuant to an agreement, arrangement or other understanding with a stockholder or group of stockholders (other than any such agreement, arrangement or understanding entered into in connection with an acquisition of Voting Stock, by such stockholder or group of stockholders, from the Corporation), other than any such director referred to in this Section 5(g)(5)(A) who at the time of such annual meeting will have served as a director continuously, as a nominee of the Board of Directors, for at least two (2) annual terms; and
(B)    the number of directors in office that will be included in the Corporation’s proxy materials with respect to such annual meeting for whom access to the Corporation’s proxy materials was previously requested or provided pursuant to this Section 5(g), other than any such director referred to in this Section 5(g)(5)(B) who at the time of such annual meeting will have served as a director continuously, as a nominee of the Board of Directors, for at least two (2) annual terms; provided, further, that in the event the Board of Directors resolves to reduce the size of the Board of Directors effective on or prior to the date of the annual meeting, the Permitted Number shall be calculated based on the number of directors in office as so reduced.
An Eligible Stockholder submitting more than one Stockholder Nominee for inclusion in the Corporation’s proxy statement pursuant to this Section 5(g) shall rank such Stockholder Nominees based on the order that the Eligible Stockholder desires such Stockholder Nominees to be selected for inclusion in the Corporation’s proxy statement and include such specified rank in its Proxy Access Notice. If the number of Stockholder Nominees pursuant to this Section 5(g) for an annual meeting of stockholders exceeds the Permitted Number, then the highest ranking qualifying Stockholder Nominee from each Eligible Stockholder will be selected by the Corporation for inclusion in the proxy statement until the Permitted Number is reached, going in order of the amount (largest to smallest) of the ownership position as disclosed in each Eligible Stockholder’s Proxy Access Notice. If the Permitted Number is not reached after the highest ranking Stockholder Nominee from each Eligible

Exhibit 3.2

Stockholder has been selected, this selection process will continue as many times as necessary, following the same order each time, until the Permitted Number is reached.
(6)    An “Eligible Stockholder” is one or more stockholders of record who own and have owned, or are acting on behalf of one or more beneficial owners who own and have owned (in each case as defined above), in each case continuously for at least 3 years as of both the date that the Proxy Access Notice is delivered to the Corporation pursuant to this Section 5(g), and as of the record date for determining stockholders eligible to vote at the annual meeting, at least 3% of the aggregate voting power of the Voting Stock (the “Proxy Access Request Required Shares”), and who continue to own the Proxy Access Request Required Shares at all times between the date such Proxy Access Notice is delivered to the Corporation and the date of the applicable annual meeting, provided that the aggregate number of stockholders, and, if and to the extent that a stockholder is acting on behalf of one or more beneficial owners, of such beneficial owners, whose stock ownership is counted for the purpose of satisfying the foregoing ownership requirement shall not exceed 25. Two or more collective investment funds that are part of the same family of funds by virtue of being under common management and investment control or sponsored by the same employer (a “Qualifying Fund”) shall be treated as one stockholder for the purpose of determining the aggregate number of stockholders in this Section 5(g)(6), provided that each fund included within a Qualifying Fund otherwise meets the requirements set forth in this Section 5(g). No shares may be attributed to more than one group constituting an Eligible Stockholder under this Section 5(g) (and, for the avoidance of doubt, no stockholder or affiliate thereof may be a member of more than one group constituting an Eligible Stockholder). A record holder acting on behalf of one or more beneficial owners will not be counted separately as a stockholder with respect to the shares owned by beneficial owners on whose behalf such record holder has been directed in writing to act, but each such beneficial owner will be counted separately, subject to the other provisions of this Section 5(g), for purposes of determining the number of stockholders whose holdings may be considered as part of an Eligible Stockholder’s holdings. For the avoidance of doubt, Proxy Access Request Required Shares will qualify as such if and only if the beneficial owner of such shares as of the date of the Proxy Access Notice has itself individually beneficially owned such shares continuously for the 3-year period ending on that date and through the other applicable dates referred to above (in addition to the other applicable requirements being met).
(7)    No later than the final date when a Proxy Access Notice may be timely delivered to the Corporation pursuant to this Section 5(g) of this Article IV, an Eligible Stockholder (including each Constituent Holder) must provide, with respect to themselves and its Stockholder Nominee(s), the information required to be disclosed under Section 5(a)(3) of this Article IV in a stockholder’s notice and must provide the following information in writing to the Secretary of the Corporation:
(A)    with respect to each Constituent Holder, the name and address of, and number of shares of Voting Stock owned by such person;
(B)    one or more written statements from the record holder of the shares (and from each intermediary through which the shares are or have been held during the requisite three 3-year holding period) verifying that, as of a date within 7 calendar days prior to the date the Proxy Access Notice is delivered to the Corporation, such person owns, and has owned continuously for the preceding 3 years, the Proxy Access Request Required Shares, and such person’s agreement to provide:
(C)    within 10 days after the record date for the annual meeting, written statements from the record holder and intermediaries verifying such person’s continuous ownership of the Proxy Access Request Required Shares through the record date, together with any additional information reasonably requested to verify such person’s ownership of the Proxy Access Request Required Shares; and
(D)    immediate notice if the Eligible Stockholder ceases to own any of the Proxy Access Request Required Shares prior to the date of the applicable annual meeting of stockholders;
(E)    a representation that such person:

Exhibit 3.2

(i)    acquired the Proxy Access Request Required Shares in the ordinary course of business and not with the intent to change or influence control of the Corporation, and does not presently have such intent;
(ii)    has not nominated and will not nominate for election to the Board of Directors at the annual meeting any person other than the Stockholder Nominee(s) being nominated pursuant to this Section 5(g);
(iii)    has not engaged and will not engage in, and has not and will not be a “participant” in another person’s, “solicitation” within the meaning of Rule 14a-1(1) under the Exchange Act in support of the election of any individual as a director at the annual meeting other than its Stockholder Nominee(s) or a nominee of the Board of Directors;
(iv)    will not distribute to any stockholder any form of proxy for the annual meeting other than the form distributed by the Corporation; and
(v)    will provide facts, statements, and other information in all communications with the Corporation and its stockholders that are and will be true and correct in all material respects and do not and will not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, and will otherwise comply with all applicable laws, rules and regulations in connection with any actions taken pursuant to this Section 5(g);
(F)    in the case of a nomination by a group of stockholders that together is such an Eligible Stockholder, the designation by all group members of one group member that is authorized to act on behalf of all members of the nominating stockholder group with respect to the nomination and matters related thereto, including withdrawal of the nomination; and
(G)    an undertaking that such person agrees to:
(i)    assume all liability stemming from, and indemnify and hold harmless the Corporation and each of its directors, officers, employees, agents and advisors individually against any liability, loss or damages in connection with any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, against the Corporation or any of its directors, officers or employees arising out of any legal or regulatory violation arising out of the Eligible Stockholder’s communications with the stockholders of the Corporation or out of the information that the Eligible Stockholder (including such person) provided to the Corporation;
(ii)    promptly provide to the Corporation such other information as the Corporation may reasonably request; and
(iii)    file with the Securities and Exchange Commission any solicitation by the Eligible Stockholder of stockholders of the Corporation relating to the annual meeting at which the Stockholder Nominee will be nominated.
In addition, no later than the final date when a Proxy Access Notice pursuant to this Section 5(g) may be timely delivered to the Corporation, a Qualifying Fund whose stock ownership is counted for purposes of qualifying as an Eligible Stockholder must provide to the Secretary of the Corporation documentation reasonably satisfactory to the Board of Directors that demonstrates that the funds included within the Qualifying Fund satisfy the criteria specified in the definition of Qualifying Fund.

Exhibit 3.2

In order to be considered timely, any information required by this Section 5(g) to be provided to the Corporation must be supplemented (by delivery to the Secretary of the Corporation) (1) no later than five (5) business days after the record date for the applicable annual meeting, to disclose the foregoing information as of such record date, and (2) no later than eight (8) business days prior to the date of the annual meeting, any adjournment or postponement thereof, to disclose the foregoing information as of the date that is ten (10) business days prior to such annual meeting. For the avoidance of doubt, the requirement to update and supplement such information shall not permit any Eligible Stockholder or other person to change or add any proposed Stockholder Nominee or be deemed to cure any defects or limit the remedies (including without limitation under these By-Laws) available to the Corporation relating to any defect.
(8)    The Eligible Stockholder may provide to the Secretary of the Corporation, at the time the information required by this Section 5(g) is originally provided, a single written statement for inclusion in the Corporation’s proxy statement for the annual meeting, not to exceed 500 words, in support of the candidacy of such Eligible Stockholder’s Stockholder Nominee(s) (the “Statement”). Notwithstanding anything to the contrary contained in this Section 5(g), the Corporation may omit from its proxy materials any information or Statement that it, in good faith, believes is materially false or misleading, omits to state any material fact, directly or indirectly (in each case without factual foundation), impugns the character, integrity or personal reputation of any person or makes charges concerning improper, illegal or immoral conduct or associations with respect to any person or would violate any applicable law or regulation.
(9)    No later than the final date when a Proxy Access Notice pursuant to this Section 5(g) may be timely delivered to the Corporation, each Stockholder Nominee must provide a completed and signed nominee questionnaire, representation and agreement, as required by Section 6 of this Article IV and must provide such additional information as necessary to permit the Board of Directors to determine if any of the matters contemplated by Section 5(g)(10) apply and if such Stockholder Nominee has any direct or indirect relationship with the Corporation other than those relationships that have been deemed categorically immaterial pursuant to the Corporation’s Corporate Governance Guidelines or is or has been subject to any event specified in Item 401(f) of Regulation S-K (or successor rule) of the Securities and Exchange Commission.
Each Stockholder Nominee shall also promptly provide to the Corporation such other information as may be reasonably requested by the Corporation of the Stockholder Nominee. In the event that any information or communications provided by the Eligible Stockholder (or any Constituent Holder) or the Stockholder Nominee to the Corporation or its stockholders ceases to be true and correct in all material respects or omits a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading, each Eligible Stockholder or Stockholder Nominee, as the case may be, shall promptly notify the Secretary of the Corporation of any defect in such previously provided information and of the information that is required to correct any such defect; it being understood for the avoidance of doubt that providing any such notification shall not be deemed to cure any such defect or limit the remedies (including without limitation under these By-Laws) available to the Corporation relating to any such defect.
(10)    Any Stockholder Nominee who is included in the Corporation’s proxy statement for a particular annual meeting of stockholders, but subsequently is determined not to satisfy the eligibility requirements of this Section 5(g) or any other provision of these By-Laws, the Restated Articles of Incorporation or other applicable regulation any time before the annual meeting of stockholders, will not be eligible for election at the relevant annual meeting of stockholders. Without limiting the foregoing or any other provision of these By-Laws, the Corporation shall not be required to include, pursuant to this Section 5(g), a Stockholder Nominee in its proxy materials for any annual meeting of stockholders, or, if the proxy statement already has been filed, to allow the nomination of a Stockholder Nominee (and the Corporation may declare any such nomination ineligible), notwithstanding that proxies in respect of such vote may have been delivered to the Corporation:
(A)    who is not independent under the listing standards of the principal U.S. exchange upon which the Corporation’s Common Stock is listed, any applicable rules of the Securities and Exchange Commission and any publicly disclosed standards used by the Board of Directors in determining and disclosing independence of the Corporation’s directors, in each case as determined by the Board of Directors;

Exhibit 3.2

(B)    who is or has been, within the past three (3) years, an officer or director of a competitor, as defined in Section 8 of the Clayton Antitrust Act of 1914, as amended, is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses), has been convicted in a criminal proceeding within the past ten (10) years, is subject to any order of the type specified in Rule 506(d) of Regulation D promulgated under the Securities Act of 1933, as amended, or whose service as a member of the Board of Directors would violate or cause the Corporation to be in violation of these By-Laws, the Restated Articles of Incorporation, the rules and listing standards of the principal U.S. exchange upon which the Corporation’s Common Stock is listed, or any applicable law, rule or regulation;
(C)    if the Eligible Stockholder (or any Constituent Holder) or applicable Stockholder Nominee otherwise breaches or fails to comply with its obligations pursuant to this Section 5(g) or any agreement, representation or undertaking required by this Section 5(g);
(D)    if the Eligible Stockholder ceases to be an Eligible Stockholder for any reason, including but not limited to not owning the Proxy Access Request Required Shares through the date of the applicable annual meeting; or
(E)    if the Corporation has received one or more stockholder notices nominating director candidates pursuant to Section 5 of this Article IV.
Section 6.      Submission of Questionnaire, Representation and Agreement .
To be eligible to be a stockholder nominee for election as a director of the Corporation, a person must deliver (in accordance with the applicable time periods prescribed for delivery of notice under Section 5 of this Article IV, as applicable) to the Secretary of the Corporation in person or by facsimile, or sent by U.S. certified mail and received by the Secretary of the Corporation, at the principal executive offices of the Corporation , (a) a written questionnaire with respect to the background and qualification of such person and the background of any other person or entity on whose behalf the nomination is being made (which questionnaire shall be provided by the Secretary of the Corporation upon written request) and (b) a written representation and agreement (in the form provided by the Secretary of the Corporation to the requesting stockholder following written request) that such individual:
(1)     is not and will not become a party to (i) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation, and (ii) any Voting Commitment that could limit or interfere with such individual’s ability to comply, if elected as a director of the corporation, with such individual’s fiduciary duties under applicable law;
(2)    is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed to the Corporation;
(3)    in such individual’s personal capacity and on behalf of any person or entity on whose behalf, directly or indirectly, the nomination is being made, would be in compliance, if elected as a director of the Corporation, and will comply, with all applicable corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation publicly disclosed from time to time; and
(4)    with respect to nominations made pursuant to Section 5(g) of this Article IV, consents to being named as a nominee in the Corporation’s proxy statement and in any associated proxy card of the Corporation and agrees to serve if elected as a director of the Corporation.

Exhibit 3.2

ARTICLE V
Directors
Section 1.      Board of Directors
a.     Number, election and terms
Except as otherwise fixed by or pursuant to the provisions of Article III of the Restated Articles of Incorporation relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect additional directors under specified circumstances, the number of the directors of the Corporation shall be 13, but such number may be fixed from time to time at not less than three nor more than 21 by resolution of the Board of Directors. The directors, other than those who may be elected by the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, shall be classified, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as possible. Such classes shall originally consist of one class of four directors who shall be elected at the annual meeting of stockholders held in 1984 for a term expiring at the annual meeting of stockholders to be held in 1985; a second class of three directors who shall be elected at the annual meeting of stockholders held in 1984 for a term expiring at the annual meeting of stockholders to be held in 1986; and a third class of four directors who shall be elected at the annual meeting of stockholders held in 1984 for a term expiring at the annual meeting of stockholders to be held in 1987. The Board of Directors shall increase or decrease the number of directors in one or more classes as may be appropriate whenever it increases or decreases the number of directors pursuant to this Article V, in order to ensure that the three classes shall be as nearly equal in number as possible. At each annual meeting of the stockholders of the Corporation, the successors of the class of directors whose term expires at that meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election. Commencing in 2016, directors, other than those who may be elected by the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, shall be elected to hold office for a term expiring at the next annual meeting of stockholders following their election. Accordingly, at the 2016 annual meeting of stockholders, directors whose terms expire at that meeting shall be elected to hold office for a term expiring at the 2017 annual meeting of stockholders; at the 2017 annual meeting of stockholders, directors whose terms expire at that meeting shall be elected to hold office for a term expiring at the 2018 annual meeting of stockholders; and at the 2018 annual meeting of stockholders and at each annual meeting of stockholders thereafter, all directors shall be elected to hold office for a term expiring at the next annual meeting of stockholders following the year of their election. All directors, subject to such director’s earlier death, resignation, retirement, disqualification or removal from office, shall hold office until the expiration of the term for which he or she was elected, and until his or her successor is duly elected and qualified.
b.     Stockholder nomination of director candidates
Advance notice of stockholder nominations for the election of directors shall be given in the manner provided in Section 5 of Article IV of these By-Laws.
c.     Newly created directorships and vacancies
Except as otherwise provided for or fixed by or pursuant to the provisions of Article III of the Restated Articles of Incorporation relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect directors under specified circumstances, newly created directorships resulting from any increase in the number of directors and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or any other cause shall be filled by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors. Any director elected in accordance with the preceding sentence shall hold office until the next election of directors by the stockholders and until such director’s successor shall have been duly elected and qualified. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. If a director resigns, effective at a future date, such director may vote to fill the vacancy.

Exhibit 3.2

d.     Removal
Subject to the rights of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect directors under specified circumstances, any director may be removed from office, with or without cause, only by the affirmative vote of the holders of a majority of the votes cast (in person or by proxy) by the holders of the outstanding shares of stock entitled to vote generally in the election of directors, voting together as a single class. For purposes of clarity, “abstentions,” “withheld” votes and “broker non-votes” shall not be counted as a vote cast with respect to such action.”

Section 2.      Notification of Nominations
Subject to the rights of holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, nominations for the election of directors may be made by the Board of Directors or a proxy committee appointed by the Board of Directors or by any stockholder entitled to vote in the election of directors generally. However, any stockholder entitled to vote in the election of directors generally may nominate one or more persons for election as directors at a meeting only if such nominee or nominees shall have met all applicable requirements and procedures in being placed in nomination and considered for election, including without limitation the requirements for stockholder nominees for director set forth in Section 5 and Section 6 of Article IV of these By-Laws and in all applicable laws, rules and regulations. The chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure.
Section 3.      Powers of Directors
a.     General Powers
The Board of Directors shall have authority over the entire management of the property, business, and affairs of the Corporation. In addition to such powers as are herein and in the Restated Articles of Incorporation expressly conferred upon it, the Board of Directors shall have and may exercise all the powers of the Corporation, subject to the provisions of law and the Restated Articles of Incorporation.
b.     Establishment of Record Date
The Board of Directors shall fix in advance a date not exceeding sixty (60) days (or such longer period as may from time to time be permitted by law) preceding the date of any meeting of stockholders, or any dividend payment date, or the date necessary to make a determination of stockholders for any purpose, nor less than ten days (or such shorter period as may from time to time be permitted by law) prior to the date of any meeting of stockholders, as a record date for the determination of the stockholders; and in such case only such stockholders as shall be stockholders of record on the date so fixed shall be considered stockholders for purposes of such determination, notwithstanding any transfer of stock on the books of the Corporation after any such record date fixed as aforesaid.
Except as otherwise provided by law, unless the Board of Directors fixes a new record date for any adjourned meeting of stockholders, the record date originally fixed pursuant to this Section 3.b. of Article V for such meeting shall remain the record date for such meeting.
The Board of Directors or any committee of the Board of Directors authorized to fix record dates and declare dividends shall fix in advance a date not exceeding sixty (60) days (or such longer period, not inconsistent with the Restated Articles of Incorporation, as may from time to time be permitted by law) preceding the date of any Preferred Stock dividend payment date as a record date for the determination of the stockholders of such Preferred Stock; and in such case, only such stockholders as shall be holders of record of such Preferred Stock on the date so fixed shall be considered stockholders of the Preferred Stock for purposes of such determination, notwithstanding any transfer of such Preferred Stock on the books of the Corporation after any such record date fixed as aforesaid.

Exhibit 3.2

c.     Appointment of Committees
The Board of Directors may designate one or more committees, consisting of at least two (2) directors each, to perform such duties and exercise such powers as may be determined by the Board, except as prohibited by law. The number of directors composing each such committee and the powers and functions conferred upon each such committee shall be determined by resolution of the Board. Except as prohibited by law, each such committee may designate one or more members of the committee to perform such duties and exercise such powers of the committee as may be determined by the committee.
The Board of Directors, by resolution adopted in accordance with this Section 3.c, may designate one or more directors as alternate members of any such committee, who may act in the place and stead of any absent member or members at any meeting of such committee.
Section 4.      Meetings of Directors
a.     Regular Meetings
Regular meetings of the Board of Directors, or any committee thereof, shall be held at any time or place, within or without the State of Florida, as the Board, or such committee, may from time to time determine; and if so determined, no notice thereof need be given.
b.     Special Meetings
Special meetings of the Board of Directors, or any committee thereof, may be held at any time or place, within or without the State of Florida, whenever called by the Chairman of the Board, the Chief Executive Officer, or at the request of two or more directors or, for a special meeting of a committee, by the chairman of such committee.
Notice of special meetings of the Board, or any committee thereof, stating the time and place, shall be given by mailing the same to each director or committee member, as appropriate, at his residence or business address at least two days before the meeting, or by delivering the same to him personally or by telephone, telegram, e-mail, facsimile or reputable overnight delivery service at least one day before the meeting. Such notice shall be deemed to have been given on the date of mailing, telephoning or telegraphing, or the date of such e-mail, facsimile, or sending by reputable overnight delivery service, as the case may be.
c.     Adjournments
A majority of the directors present, whether or not a quorum exists, may adjourn any meeting of the Board of Directors, or any committee thereof, to another time and place. Notice of any such adjourned meeting shall be given to the directors who are not present at the time of the adjournment, and, unless the time and place of the adjourned meeting are announced at the time of adjournment, to the other directors.
d.     Telephonic Participation at Meetings
Members of the Board of Directors, or any committee thereof, may participate in a meeting of the Board, or any committee thereof, by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time. Participation by such means shall constitute presence in person at such meeting for all purposes.

Exhibit 3.2

e.     Action Without a Meeting
Any action of the Board of Directors or of any committee thereof, which is required or permitted to be taken at a meeting, may be taken without a meeting if written consent to the action signed by all the members of the Board or of the committee, as the case may be, is filed in the minutes of the proceedings of the Board or of the committee.
Section 5.      Quorum and Voting of Directors
A majority of the number of directors fixed in accordance with Section 1 of this Article V shall constitute a quorum of the Board for the transaction of business, and one‑half of the members of any committee shall constitute a quorum of such committee; provided, however, that whenever, for any reason, a vacancy occurs in the Board, or any committee thereof, the quorum shall consist of a majority of the remaining directors until the vacancy has been filled. In all cases, a smaller number of directors may adjourn any meeting until a quorum is present.
When a quorum is present at any meeting of directors, a majority of the members present shall decide any question brought before such meeting, except as otherwise provided by law, the Restated Articles of Incorporation, or these By-Laws.
Section 6.      Compensation of Directors
Directors shall receive such compensation, including reimbursement of expenses, for serving as members of the Board of Directors and for attendance at each meeting of the Board of Directors, and members of committees of the Board of Directors shall receive such compensation, including reimbursement of expenses, for serving as members of a committee and for attendance at each meeting of a committee, as the Board of Directors shall from time to time prescribe.
Section 7.      Chairman of the Board
The Chairman of the Board shall preside at meetings of the Board of Directors and of the stockholders. He shall, subject to the approval of the Board of Directors, submit a report to the stockholders of the Corporation for each fiscal year. He shall perform such other duties as the Board of Directors may from time to time prescribe.
ARTICLE VI

Officers
Section 1.      Numbers and Titles
The officers of the Corporation shall be a Chief Executive Officer, a Chief Financial Officer, a Secretary, a Treasurer and a Controller and may also include one or more Senior Executive Vice Presidents, one or more Executive Vice Presidents, one or more Senior Vice Presidents, and one or more Vice Presidents; all of whom shall be appointed by the Board of Directors or a duly appointed officer authorized by resolution of the Board of Directors to appoint officers. The Board of Directors, or a duly appointed officer authorized by resolution of the Board of Directors to appoint officers, may from time to time appoint such other officers, including one or more Assistant Secretaries, Assistant Treasurers, and Assistant Controllers as they shall deem necessary.
The Chief Executive Officer shall be a member of the Board of Directors, but the other officers need not be members of the Board.
Section 2.      Tenure of Office/Removal of Officers
Officers of the Corporation shall hold their respective offices until their successors are chosen and qualified or until their retirement, resignation or death, provided, however, that any officer may be removed from such office during such term by the Board of Directors, with or without cause, whenever in its judgment the best interests of the Corporation will be served thereby.

Exhibit 3.2

Any officer appointed by any other officer duly authorized as provided in Section 1, may be removed by any other such officer, at any time, with or without cause.
Section 3.      Duties of Officers
a.     Chief Executive Officer
The Chief Executive Officer shall have overall responsibility for supervision of the Corporation and shall report to the Board of Directors. He shall see that the provisions of the By-Laws, all votes of the stockholders and all orders and resolutions of the Board of Directors are carried into effect.
He shall preside at meetings of the stockholders in the absence of the Chairman of the Board.
Unless otherwise directed by the Board of Directors, he or his designee shall have power to vote, and to appoint proxies to vote, and otherwise act on behalf of the Corporation, at any meeting of stockholders or holders of other securities or other ownership interests of or with respect to any action of stockholders or holders of such securities or ownership interests, of any other corporation or other entity in which the Corporation may hold securities or other ownership interests and to otherwise exercise any and all rights and powers which the Corporation may possess by reason of its ownership of securities or other ownership interests in such other corporation or other entity.
He shall perform such other duties as the Board of Directors may from time to time prescribe.
b.     Chief Financial Officer
The Chief Financial Officer shall be the principal financial officer of the Corporation, shall report to the Chief Executive Officer and shall have overall responsibility for supervision of the financial operations of the Corporation.
He shall perform such other duties as the Board of Directors or the Chief Executive Officer may from time to time prescribe.
c.     Multiple Offices
The same person may hold more than one of the offices described in Section 1 above as the Board of Directors may prescribe.
d.     Senior Executive Vice Presidents
The Senior Executive Vice Presidents shall have such powers and perform such duties as the Board of Directors or the Chief Executive Officer may from time to time prescribe.
e.     Executive Vice Presidents
The Executive Vice Presidents shall have such powers and perform such duties as the Board of Directors or the Chief Executive Officer may from time to time prescribe.
f.     Senior Vice Presidents
The Senior Vice Presidents shall have such powers and perform such duties as the Board of Directors or the Chief Executive Officer may from time to time prescribe.

Exhibit 3.2

g.     Vice Presidents
The Vice Presidents shall have such powers and perform such duties as the Board of Directors or the Chief Executive Officer may from time to time prescribe.
h.     Secretary
The Secretary shall be Secretary of and shall attend, or a person designated by him shall attend, all meetings of the stockholders, the Board of Directors and all committees thereof. He, or such designated person, shall record all of the proceedings of such meetings in books kept for that purpose.
He shall be custodian of the corporate seal and shall have the power to affix it to any instrument requiring it and to attest the same.
He shall cause to be maintained a stock transfer book and such other books as the Board of Directors may from time to time determine.
He shall serve all notices required by law, by these By-Laws, or by resolution of the Board of Directors.
He shall, together with the Chief Executive Officer, sign certificates for shares of the Corporation.
He shall perform such other duties as the Board of Directors or the Chief Executive Officer may from time to time prescribe.
i.     Treasurer
The Treasurer shall have the management and custody of the funds and securities of the Corporation and he or persons designated by him, or by others so authorized by the Board of Directors, shall deposit all monies and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors or by persons authorized by the Board of Directors to make such designations.
He shall receive and disburse the funds of the Corporation for corporate purposes and shall render to the Board of Directors and the Chief Executive Officer, whenever they may require it, an account of all his transactions as Treasurer.
He shall perform such other duties as the Board of Directors or the Chief Executive Officer may from time to time prescribe.
j.     Controller
The Controller shall keep full and accurate accounts of all assets, liabilities, commitments, receipts, disbursements, and other financial transactions of the Corporation, including those of subsidiaries of the Corporation, in books belonging to the Corporation, and shall perform all other duties required of the principal accounting officer of the Corporation, and shall render to the Board of Directors and the Chief Executive Officer, whenever they may require it, an account of the financial condition of the Corporation.
He shall perform such other duties as the Board of Directors or the Chief Executive Officer may from time to time prescribe.

Exhibit 3.2

k.     Assistant Secretaries
The Assistant Secretaries shall perform such of the duties of the Secretary as the Chief Executive Officer or the Secretary, or an officer with the authority to appoint an Assistant Secretary may from time to time prescribe and such other duties as the Board of Directors, or an officer with the authority to appoint an Assistant Secretary may from time to time prescribe.
l.     Assistant Treasurers
The Assistant Treasurers shall perform such of the duties of the Treasurer as the Chief Executive Officer or the Treasurer, or an officer with the authority to appoint an Assistant Treasurer may from time to time prescribe and such other duties as the Board of Directors, or an officer with the authority to appoint an Assistant Treasurer may from time to time prescribe.
m.     Assistant Controllers
The Assistant Controllers shall perform such duties of the Controller as the Chief Executive Officer or the Controller, or an officer with the authority to appoint an Assistant Controller may from time to time prescribe and such other duties as the Board of Directors, or an officer with the authority to appoint an Assistant Controller may from time to time prescribe.
Section 4.      Delegation of Duties of Officers
The Board of Directors may delegate the powers or duties of any officer of the Corporation in case of his absence, disability, death or removal, or for any other reason, to any other officer or to any director.

ARTICLE VII

Stock Certificates
Section 1.     Stock Certificates
Except as otherwise provided by resolution of the Board of Directors or the Restated Articles of Incorporation or as permitted by law, every holder of stock in the Corporation shall be entitled to have a certificate, representing all shares to which he is entitled, in such form as may be prescribed by the Board of Directors in accordance with the provisions of law. Such certificates shall be signed by the Chief Executive Officer and by the Secretary or an Assistant Secretary; provided, however, that where any such certificate is signed by a party other than an officer of the Corporation, such as a transfer agent or transfer clerk, and by a registrar, the signatures of the Chief Executive Officer, Secretary, or Assistant Secretary may be facsimiles. All certificates shall be counter‑signed and registered in such manner as the Board of Directors from time to time may prescribe, and there shall be impressed thereon the seal of the Corporation or imprinted thereon a facsimile of such seal.
In case any officer who signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, such signature shall be deemed to be valid and such certificate may be issued by the Corporation with the same effect as if he were such officer at the date of its issuance.
Section 2.      Transfer of Certificated Shares of Stock
Shares of certificated stock of the Corporation may be transferred by delivery of the stock certificate, accompanied either by an assignment in writing on the back of the certificate or by a written power of attorney to sell, assign, and transfer the shares on the books of the Corporation, signed by the person appearing on the certificate to be the owner of the shares represented thereby; and such shares shall be transferable on the books of the Corporation upon surrender thereof so assigned or endorsed. In the case of a series of Preferred Stock, certificated shares of Preferred Stock may be transferred by delivery of the stock certificate, as described above, or by such other method as may be set forth in a statement of resolution establishing such series of Preferred Stock. The person registered on the books of the Corporation as the owner of any shares of stock shall be deemed by the Corporation

Exhibit 3.2

to be the owner thereof for all purposes exclusively and shall be entitled as the owner of such shares, to receive dividends and to vote as such owner with respect thereto.
Section 3.      Treasury Stock
Any shares of stock in the Corporation which may be redeemed, purchased, or otherwise acquired by the Corporation after the issuance thereof, shall have no voting rights and shall not participate in any dividends or allotments of rights while such stock is held by the Corporation.
ARTICLE VIII

Depositories and Checks

Depositories of the funds of the Corporation shall be designated by the Board of Directors or a duly authorized committee thereof or by persons authorized by the Board or such a committee to make such designations; and all checks on funds shall be signed by such officers or other employees of the Corporation as the Board, or a duly authorized committee thereof, from time to time may designate, or by persons authorized by the Board or such a committee to make such designations.

ARTICLE IX

Fiscal Year

The fiscal year of the Corporation shall begin on the first day of January and end on the 31st day of December in each year.
ARTICLE X

Dividends
The Board of Directors may from time to time declare, and the Corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and the Restated Articles of Incorporation.
ARTICLE XI

Waiver of Notice
Any notice required to be given by law, by the Restated Articles of Incorporation, or by these By-Laws may be waived in writing signed by the person entitled to such notice and delivered to the Corporation, whether before or after the time stated therein, except that attendance of a person at a meeting shall constitute a waiver of notice of such meeting unless such attendance is for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.
A director of the Corporation who is present at a meeting of the Board of Directors (or a committee thereof) at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless he votes against such action or abstains from voting in respect thereto because of an asserted conflict of interest.

Exhibit 3.2

ARTICLE XII
Indemnification of and Advance to Officers, Directors, Employees and Agents
Section 1.     Indemnification     
The Corporation shall, and does hereby, indemnify to the fullest extent permitted or authorized by current or future legislation or current or future judicial or administrative decisions (but, in the case of any such future legislation or decisions, only to the extent that it permits the Corporation to provide broader indemnification rights than permitted prior to such legislation or decisions), each person (including here and hereinafter the heirs, executors, administrators or the estate of such person) who was or is a party, or is threatened to be made a party, or was or is a witness, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), against any liability (which for purposes of this Article shall include any judgment, settlement, penalty or fine) or cost, charge or expense (including attorneys’ fees) asserted against him or incurred by him by reason of the fact that such indemnified person (1) is or was a director, officer or employee of the Corporation or (2) is or was an agent of the Corporation as to whom the Corporation has agreed to grant such indemnity or (3) is or was serving, at the request of the Corporation, as a director, officer, or employee of another corporation, partnership, joint venture, trust or other enterprise (including serving as a fiduciary of any employee benefit plan) or is serving as an agent of such other corporation, partnership, joint venture, trust or other enterprise as to whom the Corporation has agreed to grant such indemnity. Each director, officer, employee or agent of the Corporation to whom indemnification rights under this Section 1 of this Article have been granted shall be referred to as an “Indemnified Person”.
Notwithstanding the foregoing, except as specified in Section 3 of this Article, the Corporation shall not be required to indemnify an Indemnified Person in connection with a Proceeding (or any part thereof) initiated by such Indemnified Person unless such authorization for such Proceeding (or any part thereof) was not denied by the Board of Directors of the Corporation prior to sixty (60) days after receipt of notice thereof from such Indemnified Person stating his intent to initiate such Proceeding and only upon such terms and conditions as the Board of Directors may deem appropriate.
Section 2.      Advance of Costs, Charges and Expenses
Costs, charges and expenses (including attorneys’ fees) incurred by an officer, director or employee who is an Indemnified Person in defending a Proceeding shall be paid by the Corporation to the fullest extent permitted or authorized by current or future legislation or current or future judicial or administrative decisions (but, in the case of any such future legislation or decisions only to the extent that it permits the Corporation to provide broader rights to advance costs, charges and expenses than permitted prior to such legislation or decisions) in advance of the final disposition of such Proceeding, upon receipt of an undertaking by or on behalf of the Indemnified Person to repay all amounts so advanced in the event that it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation as authorized in this Article and upon such other terms and conditions, in the case of agents as to whom the Corporation has agreed to grant such indemnity, as the Board of Directors may deem appropriate. The Corporation may, upon approval of the Indemnified Person, authorize the Corporation’s counsel to represent such person in any Proceeding, whether or not the Corporation is a party to such Proceeding. Such authorization may be made by the Chairman of the Board, unless he is a party to such Proceeding, or by the Board of Directors by majority vote, including directors who are parties to such Proceeding.
Section 3.      Procedure for Indemnification and Advancement of Costs, Charges and Expenses
Any indemnification or advancement of costs, charges and expenses under this Article shall be made promptly and in any event within sixty (60) days upon the written request of the Indemnified Person. The right to indemnification or advances as granted by this Article shall be enforceable by the Indemnified Person in any court of competent jurisdiction, if the Corporation denies such request under this Article, in whole or in part, or if no disposition thereof is made within sixty (60) days. Such Indemnified Person’s costs, charges and expenses incurred in connection with successfully establishing his right to indemnification, in whole or in part, in any such action shall also be indemnified by the Corporation. It shall be a defense to any such action that

Exhibit 3.2

the claimant has not met the standard of conduct, if any, required by current or future legislation or by current or future judicial or administrative decisions for indemnification (but, in the case of any such future legislation or decisions, only to the extent that it does not impose a more stringent standard of conduct than permitted prior to such legislation or decisions), but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors or any committee thereof, its independent legal counsel, and its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct, if any, nor the fact that there has been an actual determination by the Corporation (including its Board of Directors or any committee thereof, its independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.
Section 4.     Non-Exclusivity; Survival of Indemnification and Advancement of Costs, Charges and Expenses; Contractual Nature
The indemnification, and the right to advancement of costs, charges and expenses, provided by this Article shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any agreement, vote of stockholders or disinterested directors or recommendation of counsel or otherwise, both as to actions in such person’s official capacity and as to actions in another capacity while holding such office, and shall continue as to an Indemnified Person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors, administrators and estate of such person. The Board of Directors shall have the authority, by resolution, to provide for such indemnification of, and such advancement of costs, charges and expenses to, employees or agents of the Corporation or others and for such other indemnification of, and such other advancement of costs, charges and expenses to, directors, officers, employees or agents as it shall deem appropriate.
    All rights to indemnification and to advancement of costs, charges and expenses, under this Article shall be deemed to be a contract between the Corporation and each Indemnified Person who serves or served in such capacity at any time while this Article is in effect. Any repeal or modification of this Article or any repeal or modification of relevant provisions of Florida corporation law or any other applicable laws shall not in any way diminish any rights to indemnification of, or to advancement of costs, charges and expenses to, such Indemnified Person, or the obligations of the Corporation arising hereunder, then existing or arising out of events, acts or omissions occurring prior to such repeal or modification, including without limitation, the right to indemnification with respect to Proceedings commenced after such repeal or modification to enforce this Article XII with regard to Proceedings arising out of acts, omissions or events arising prior to such repeal or modification for claims relating to matters occurring prior to such repeal or modification.
Section 5.     Insurance, Contracts and Funding
The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (including serving as a fiduciary of an employee benefit plan), against any liability asserted against him and incurred by him in any such capacity or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article XII or the applicable provisions of Florida law. The Corporation may enter into contracts with any director, officer, agent or employee of the Corporation in furtherance of the provisions of this Article XII, and may create a trust fund, grant a security interest or use other means (including, without limitation, a letter of credit) to ensure the payment of such amounts as may be necessary to effect the advancing of expenses and indemnification as provided in this Article XII.
Section 6.     Savings Clause
If this Article or any portion hereof shall be invalidated or held to be unenforceable on any ground by any court of competent jurisdiction, the decision of which shall not have been reversed on appeal, then the Corporation shall nevertheless (i) indemnify each Indemnified Person as to costs, charges and expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement and (ii) advance costs, charges and expenses in accordance with Section 2 of this Article XII, in each case with

Exhibit 3.2

respect to any Proceeding in connection with which he or she is an Indemnified Person, including an action by or in the right of the Corporation, to the full extent permitted by any applicable portion of this Article that shall not have been invalidated or held to be unenforceable and as permitted by applicable law.
ARTICLE XIII
By-Law Amendment
Except as otherwise provided in the Restated Articles of Incorporation, the Board of Directors shall have the power to adopt, alter, amend and repeal the By-Laws of the Corporation (except insofar as the By-Laws of the Corporation adopted by the stockholders shall otherwise provide). Any By-Laws made by the stockholders may prescribe that they may not be altered, amended or repealed by the Board of Directors. Any By-Laws made by the Board of Directors under the powers conferred hereby and by the Restated Articles of Incorporation may be altered, amended or repealed by the Board of Directors or by the stockholders. Amendments to the By-Laws (including any amendment to this Article XIII) shall be effected as follows:
a.     By Action of the Board of Directors
Unless a greater vote is specifically required by the laws of the State of Florida, or a greater or different vote or a vote of stockholders is required by the provisions of the Restated Articles of Incorporation, the Board of Directors may alter, amend or repeal these By-Laws, or adopt such other By-Laws as in their judgment may be advisable for the administration or regulation of the management and affairs of the Corporation, to the extent not inconsistent with the laws of the State of Florida or the Restated Articles of Incorporation, only upon the affirmative vote of at least 75% of the total number of directors as fixed in accordance with Section 1 of Article V of these By-Laws.
b.     By Action of the Stockholders
Unless a greater vote is specifically required by the laws of the State of Florida, or a greater or different vote is required by the provisions of the Restated Articles of Incorporation, the stockholders may alter, amend or repeal these By-Laws, or adopt such other By-Laws as in their judgment may be advisable for the administration or regulation of the management and affairs of the Corporation, to the extent not inconsistent with the laws of the State of Florida or the Restated Articles of Incorporation, at any regular meeting of the stockholders (or at any special meeting thereof duly called for that purpose in accordance with the provisions of these By-Laws), only upon the affirmative vote of the holders of a majority of the votes cast (in person or by proxy) by the holders of the outstanding shares of the Corporation entitled to vote generally in the election of directors, voting together as a single class. For purposes of clarity, “abstentions,” “withheld” votes and “broker non-votes” shall not be counted as a vote cast with respect to such action.
ARTICLE XIV
Continuing Effect of By-Law Provisions
Any provision contained in these By-Laws which, at the time of its adoption, was authorized or permitted by applicable law shall continue to remain in full force and effect until such time as such provision is specifically amended in accordance with these By-Laws, notwithstanding any subsequent modification of such applicable law (except to the extent such By-Law provision expressly provides for its modification by or as a result of any such subsequently enacted law).


Exhibit 10.1

DEFERRED STOCK AWARD
FOR
NON-EMPLOYEE DIRECTOR
ISSUED UNDER
RYDER SYSTEM, INC. 2019 EQUITY AND INCENTIVE COMPENSATION PLAN
20XX TERMS AND CONDITIONS
The following terms and conditions apply to the deferred stock award (the “Award”) granted in 20XX by Ryder System, Inc. (the “Company”) to each of the Company’s Non-Employee Directors who elect to receive some or all of his or her annual retainer in the form of stock on a deferred basis (“Elected Deferred Stock”) under the Ryder System, Inc. 2019 Equity and Incentive Compensation Plan (the “Plan”), which election shall be specified in the applicable Stock Award Distribution Election Form (the “Election Form”). The terms and conditions contained herein may be amended by the Committee as permitted by the Plan. Capitalized terms used herein and not defined shall have the meaning ascribed to such terms in the Plan.
1.
General . This Award represents the right to receive Shares on a specified date on the terms and conditions set forth herein and in the Election Form and the Plan, the applicable terms, conditions and other provisions of which are incorporated by reference herein (collectively, the “Award Documents”). The Award is in the form of Restricted Stock Units (“RSUs”), pursuant to the Election Form. A copy of the Plan and the documents that constitute the “Prospectus” for the Plan under the Securities Act of 1933, have been delivered to the Participant. In the event there is an express conflict between the provisions of the Plan and those set forth in any Award Document, the terms and conditions of the Plan shall govern.
2.
Number of Shares under Award . Pursuant to this Award, RSUs for a number of Shares corresponding to each Non-Employee Directors’ Elected Deferred Stock Award were granted as of the Grant Date specified in the Notification Letter (the “’Grant Date”).
3.
Vesting of RSUs . The RSUs are fully vested as of the Grant Date.
4.
Timing of Delivery of Shares .
(a)
Delivery of the Shares relating to the Award will occur (or, if installment payments are elected pursuant to the Election Form, commence) within 30 days following the Non-Employee Director’s separation from service on the Board. Payment will be made in the form elected in the Election Form (lump sum or equal annual installments).
(b)
Notwithstanding the foregoing, the following provisions apply in the event of a Change of Control:
(i)
In the event that a Change of Control occurs that constitutes a “409A Compliant COC” (as defined below), Shares with respect to all of the then outstanding Award will be delivered to the Non-Employee Director in a lump sum upon the occurrence of such Change of Control.
(ii)
In the event that a Change of Control does not constitute a 409A Compliant COC, the Award will be converted into a right to receive a cash payment equal to the Fair Market Value of a Share on the date on which the Change of Control occurs. Such cash payment will be distributed to the Non-Employee Director in accordance with the otherwise applicable distribution schedule set forth in the Election Form.
(iii)
For purposes of this Agreement, a “409A Compliant COC” means a change “in ownership” or “effective control” or a change in the “ownership of a substantial portion of the assets” of the Company within the meaning of Section 409A of the Code.
5.
Rights as a Shareholder; Dividend Equivalent Rights . The holder of the Award will not have the rights of a shareholder of the Company with respect to Shares subject to the Award until such Shares are actually delivered. However, with respect to all RSUs held by the Non-Employee Director, once per year the Company will credit the Non-Employee Director with dividend equivalents in respect of dividends declared on Shares during the prior year while the RSUs are outstanding, in the form of additional RSUs based on the Fair Market Value of the Shares on the dividend payment date, and such additional RSUs will be paid on the same date and subject to the same terms and conditions as are applicable to the RSUs on which they were credited.
6.
Statute of Limitations and Conflicts of Laws . All rights of action by, or on behalf of the Company or by any shareholder against any past, present, or future member of the Board, officer, or employee of the Company arising out of or in connection with the Award or the Award Documents must be brought within three years from the date of the act or omission in respect of which such right of action


Exhibit 10.1

arises. The Award and the Award Documents shall be governed by the laws of the State of Florida, without giving effect to principles of conflict of laws, and construed accordingly.
7.
No Assignment . A Participant’s rights and interest under the Award may not be assigned or transferred, except as otherwise provided herein, and any attempted assignment or transfer shall be null and void and shall extinguish, in the Company’s sole discretion, the Company’s obligation under the Award or the Award Documents.
8.
Unfunded Plan . Any Shares or other amounts owed under the Award shall be unfunded. The Company shall not be required to establish any special or separate; fund, or to make any other segregation of assets, to assure delivery or payment of any earned amounts.
9.
Section 409A . The Award is intended to comply with Section 409A of the Code or an exemption, and delivery of Shares and other payments pursuant to the Award may only be made upon an event and in a manner permitted by Section 409A, to the extent applicable. All references to a separation from service shall mean a “separation from service” under Section 409A. The Award shall be administered consistent with Section 9.17 of the Plan.
10.
Company Policies . The Award and any cash or Shares delivered pursuant to the Award shall be subject to all applicable policies that may be implemented by the Company’s Board of Directors from time to time, including the Company’s share ownership guidelines as in effect from time to time.




Exhibit 10.2

NON-QUALIFIED STOCK OPTIONS

ISSUED UNDER
 
RYDER SYSTEM, INC. 2019 EQUITY AND INCENTIVE COMPENSATION PLAN

20XX TERMS AND CONDITIONS

The following terms and conditions apply to the non-qualified stock option (“Option”) granted by Ryder System, Inc. (the “Company”) under the Ryder System, Inc. 2019 Equity and Incentive Compensation Plan (the “Plan”) during the 20XX calendar year, as specified in the Stock Option Award Notification (the “Notification”) for the Option which references these terms and conditions. Certain terms of the Option, including the number of Shares subject to the Option, the exercise price, the vesting schedule and the expiration date, are set forth in the Notification. The terms and conditions contained herein may be amended by the Compensation Committee of the Company’s Board of Directors (the “Committee”) as permitted by the Plan. Capitalized terms used herein and not defined shall have the meaning ascribed to such terms in the Plan or in the Notification.

1.
General . The Option represents the right to purchase Shares on the terms and conditions set forth herein, in the Notification and the Plan, the applicable terms, conditions and other provisions of which are incorporated by reference herein. A copy of the Plan and the documents that constitute the “Prospectus” for the Plan under the Securities Act of 1933 have been made available to the Participant prior to or along with delivery of the Notification. In the event there is an express conflict between the provisions of the Plan and those set forth in these terms and conditions, the terms and conditions of the Plan shall govern.

2.
Exercisability of Option . Subject to Sections 4 and 5 below, the Option shall vest and become exercisable pursuant to the vesting schedule set forth in the Notification and shall remain exercisable until the expiration date set forth in the Notification, or such other expiration date designated by the Committee pursuant to Section 7 of the Plan (the “Expiration Date”).

3.
Exercise Procedures. The Option, to the extent exercisable, may be exercised by delivering to the Company’s stock administrator, notice of intent to exercise in the manner designated by the stock administrator on behalf of the Company which may vary based on the Participant’s position with the Company. Payment of the aggregate exercise price and applicable withholding taxes shall be made in the manner, consistent with the Plan and these terms and conditions, designated by the stock administrator on behalf of the Company.

4.
Termination of Option; Forfeiture. Notwithstanding the vesting and expiration dates set forth in the Notification, the Option will terminate upon or following the termination of the Participant’s employment with the Company and its Subsidiaries as described below. Except as otherwise provided in Section 4(d) and 5(a) below, upon the Participant’s termination of employment for any reason, the unvested portion of the Option will immediately terminate. For purposes of these terms and conditions, a Participant shall not be deemed to have terminated his or her employment with the Company and its Subsidiaries if he or she is then employed by the Company or another Subsidiary without a break in service.

(a)
Resignation by the Participant or Termination by the Company or a Subsidiary other than for Cause : Except as otherwise provided in this Section 4 or Section 5(b) below, the vested portion of the Option will terminate at 12:01 a.m. on the 91st day following the Participant’s last day of employment (but not later than the Expiration Date), provided that if the Participant dies during such 90 day period, such portion of the Option will terminate no earlier than 12:01 a.m. on the first anniversary of the date of death (but not later than the Expiration Date) and provided further that, if, upon such termination, the Participant is entitled to severance benefits in the form of salary continuation, then the vested portion of the Option will terminate at 12:01 a.m. on the 91st day following the date that salary continuation is no longer payable to the Participant (but not later than the Expiration Date).

Notwithstanding the foregoing, if the Participant is terminated by the Company or a Subsidiary without Cause and is subsequently re-employed by the Company or a Subsidiary prior to 12:01 a.m. on the 91st day following the later of (i) the last day of employment or (ii) if applicable, the date that salary continuation is no longer payable to the Participant, but in either case, not


Exhibit 10.2

later than the Expiration Date, then the vested, but unexercised, portion of the Options will remain exercisable until the Expiration Date, unless terminated earlier pursuant hereto.

In the event that the Participant voluntarily terminates his or her employment with the Company or a Subsidiary and is subsequently re-employed by the Company or a Subsidiary prior to 12:01 a.m. on the 91 st day following the Participant’s last day of employment (but not later than the Expiration Date), then the vested, but unexercised, portion of the Options will remain exercisable until the Expiration Date, unless terminated earlier pursuant hereto.

(b)     Retirement : If a Participant’s employment terminates for any reason (other than for Cause, death or Disability) at a time when he or she is eligible for Retirement, then the vested portion of the Option will terminate upon the Expiration Date.

(c)      Termination due to Death : If a Participant’s employment terminates on account of the Participant’s death, the vested portion of the Option will expire upon the Expiration Date. Following the Participant’s death, the right to exercise such vested portion will pass to the Participant’s Beneficiary.

(d)
Termination due to Disability : If a Participant’s employment terminates on account of the Participant’s Disability, the unvested portion of the Option that would otherwise have become vested during the three years following Disability will continue to vest as scheduled (without regard to subsequent status changes). The vested portion of the Option, including the portion that becomes vested pursuant to the preceding sentence, will expire upon the Expiration Date.

(e)
Termination for Cause : Notwithstanding the foregoing provisions of this Section 4, the entire Option, including the vested portion, will terminate immediately upon the Participant’s termination of employment for Cause. To the extent the Participant exercised any portion of the Option during the one year period immediately prior to the date of such termination of employment for Cause, the Company shall have the right to reclaim and receive from the Participant all Shares delivered to the Participant upon such exercise, or to the extent the Participant has transferred such Shares, the after-tax equivalent value thereof (as of the date the Shares were transferred by the Participant) in cash, and in each case upon receipt thereof, the Company shall return the exercise price paid by the Participant.

(f)
Proscribed Activity : If, during the Proscribed Period but prior to a Change of Control, the Participant engages in a Proscribed Activity, then any portion of the Option still outstanding shall terminate and the Company shall have the right to reclaim and receive from the Participant all Shares delivered to the Participant upon the exercise of the Option during the one year period immediately prior to, or at any time following, the date of the Participant’s termination of employment, or to the extent the Participant has transferred such Shares, the after-tax equivalent value thereof (as of the date the Shares were transferred by the Participant) in cash, and in each case upon receipt thereof, the Company shall return the exercise price paid by the Participant.

5.
Change of Control.

(a)
Treatment of the Option : In the event of a Change of Control, the Committee may take such actions with respect to the Option as it deems appropriate pursuant to the Plan; provided that if the Option continues in effect after a Change of Control and the Participant’s employment is terminated by the Company without Cause, the Participant terminates employment for Good Reason, or the Participant’s employment is terminated on account of death, Disability or Retirement, in each case, upon or within 24 months following the Change of Control, any unvested portion of the Option shall become fully vested upon such termination of employment.

(b)
Option Termination : Notwithstanding anything contained herein to the contrary and except as otherwise determined by the Committee prior to a Change of Control in accordance with Section 7 or 8 of the Plan, in the event of a Change of Control, any portion of the Option which is vested as of the Change of Control or becomes vested upon or following the Change of Control (whether pursuant to this Section 5 or otherwise) shall remain outstanding until the Expiration Date, but subject to earlier termination under the circumstances described in Sections 4(e) and (f) above.


Exhibit 10.2


(c)
Termination of Employment Prior to a Change of Control : For purposes of this Section 5, the term Option shall refer only to those Options that are outstanding at the time of the Change of Control and not to any unvested Options that have terminated pursuant to Section 4 above, provided that, if (i) the Participant’s employment was terminated by the Company other than for Cause or Disability during the 12 month period prior to the Change of Control, (ii) during such 12 month period, the Participant does not engage in a Proscribed Activity, and (iii) the Committee determines, in its sole and absolute discretion, that the decision related to such termination was made in contemplation of the Change of Control, within 30 days following the Change of Control, with respect to any portion of the Option which the Participant forfeited upon the Participant’s termination of employment, the Participant shall receive a lump sum cash payment per Share equal to the excess, if any, of the Fair Market Value of a Share on the date that the Change of Control occurs, over the exercise price per Share subject to the Option. In addition, in the event that a Participant’s employment terminates on account of Disability prior to a Change of Control, any portion of the Option which is unvested and outstanding as of the Change of Control and would otherwise vest during the three years following Disability in accordance with Section 4(d) above shall become fully vested upon the Change of Control.

6.
U.S. Federal, State and Local Income Withholding. The Participant is solely responsible for the satisfaction of all taxes that may arise in connection with the Option, and the Option may not be exercised unless the Participant makes arrangements satisfactory to the Company to ensure that its withholding tax obligations will be satisfied. At the time of taxation, the Company shall have the right to deduct from other compensation or from amounts payable with respect to the Option, including by withholding Shares otherwise issuable upon the exercise of the Option, an amount equal to the federal (including FICA), state and local income and payroll taxes and other amounts as may be required by law to be withheld with respect to the Option. Notwithstanding the foregoing, the Company may satisfy any tax obligations it may have in any other jurisdiction outside the U.S. in any manner it deems, in its sole and absolute discretion, to be necessary or appropriate.

7.
Definitions .

(a)
“Proscribed Activity” means any of the following:

(i)
the Participant’s breach or violation of (A) any written agreement between the Participant and the Company or any of its Subsidiaries, including any agreement relating to nondisclosure, noncompetition, nonsolicitation and/or nondisparagement, to the extent such agreements are enforceable under applicable law, or (B) any legal obligation it may have to the Company;

(ii)
the Participant’s direct or indirect unauthorized use or disclosure of confidential information or trade secrets of the Company or any Subsidiary, including, but not limited to, such matters as costs, profits, markets, sales, products, product lines, key personnel, pricing policies, operational methods, customers, customer requirements, suppliers, plans for future developments, and other business affairs and methods and other information not readily available to the public;

(iii)
the Participant’s direct or indirect engaging or becoming a partner, director, officer, principal, employee, consultant, investor, creditor or stockholder in/for any business, proprietorship, association, firm or corporation not owned or controlled by the Company or its Subsidiaries which is engaged or proposes to engage in a business competitive directly or indirectly with the business conducted by the Company or its Subsidiaries in any geographic area where such business of the Company or its Subsidiaries is conducted, provided that the Participant’s investment in 1% or less of the outstanding capital stock of any corporation whose stock is listed on a national securities exchange shall not be treated as a Proscribed Activity;

(iv)
the Participant’s direct or indirect, either on the Participant’s own account or for any person, firm or company, soliciting, interfering with or inducing, or attempting to induce, any employee of the Company or any of its Subsidiaries to leave his or her employment


Exhibit 10.2

or to breach his or her employment agreement;

(v)
the Participant’s direct or indirect taking away, interfering with relations with, diverting or attempting to divert from the Company or any Subsidiary any business with any customer of the Company or any Subsidiary, including (A) any customer that has been solicited or serviced by the Company within one year prior to the date of termination of the Participant’s employment with the Company and (B) any customer with which the Participant has had contact or association, or which was under the supervision of the Participant, or the identity of which was learned by the Participant as a result of the Participant’s employment with the Company;

(vi)
following the Participant’s termination of employment, the Participant’s making of any remarks disparaging the conduct or character of the Company or any of its Subsidiaries, or their current or former agents, employees, officers, directors, successors or assigns; or

(vii)
the Participant’s failure to cooperate with the Company or any Subsidiary, for no additional compensation (other than reimbursement of expenses), in any litigation or administrative proceedings involving any matters with which the Participant was involved during the Participant’s employment with the Company or any Subsidiary.

Notwithstanding the foregoing, nothing in these terms and conditions restricts or prohibits the Participant from initiating communications directly with, responding to any inquiries from, providing testimony before, providing confidential information to, reporting possible violations of law or regulation to, or from filing a claim or assisting with an investigation directly with, a self-regulatory authority or a government agency or entity, including the U.S. Equal Employment Opportunity Commission, the Department of Labor, the National Labor Relations Board, the Department of Justice, the Securities and Exchange Commission, Congress, and any agency Inspector General (collectively, the “Regulators”), or from making other disclosures that are protected under the whistleblower provisions of state or federal law or regulation. The Participant does not need the prior authorization of the Company to engage in such communications with the Regulators, respond to such inquiries from the Regulators, provide confidential information or documents to the Regulators, or make any such reports or disclosures to the Regulators. The Participant is not required to notify the Company that the Participant has engaged in such communications with the Regulators.

If the Participant primarily provides services in California, subsection (iii) above shall not apply to the Participant and subsection (v) above shall apply to the Participant only to the extent that the Participant uses or discloses confidential information of the Company or any if its Subsidiaries in performing such Proscribed Activity and to the extent permitted by applicable law.

(b)
“Proscribed Period” means the period beginning on the date of termination of the Participant’s employment and ending on the later of (A) the one year anniversary of such termination date or (B) if the Participant is entitled to severance benefits in the form of salary continuation, the date on which salary continuation is no longer payable to the Participant.

(c)
“Retirement” means termination of employment for any reason (other than for Cause or by reason of death or Disability) upon or following attainment of age 55 and completion of 10 years of service, or upon or following attainment of age 65 without regard to years of service; provided that, Retirement shall not be deemed to occur unless such termination of service constitutes a separation from service, as defined by Section 409A of the Code.

8 .
Company Policies. The Option and any Shares or cash delivered pursuant to the Option shall be subject to all applicable clawback or recoupment policies, share trading policies, share holding and other policies that may be implemented by the Company’s Board of Directors from time to time.

9.
Other Benefits . No amount accrued or paid under this Award shall be deemed compensation for purposes of computing a Participant’s benefits under any retirement plan of the Company or its Subsidiaries, nor affect any benefits under any other benefit plan now or subsequently in effect under which the availability


Exhibit 10.2

or amount of benefits is related to the Participant’s level of compensation.

10.
Defend Trade Secrets Act Notice . Participants are hereby notified that the immunity provisions in Section 1833 of title 18 of the United States Code provide that an individual cannot be held criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade secret that is made (i) in confidence to federal, state or local government officials, either directly or indirectly, or to an attorney, and is solely for the purpose of reporting or investigating a suspected violation of the law, (ii) under seal in a complaint or other document filed in a lawsuit or other proceeding, or (iii) to the Participant’s attorney in connection with a lawsuit for retaliation for reporting a suspected violation of law (and the trade secret may be used in the court proceedings for such lawsuit) as long as any document containing the trade secret is filed under seal and the trade secret is not disclosed except pursuant to court order.


Exhibit 10.3

PERFORMANCE-BASED RESTRICTED STOCK RIGHTS
ISSUED UNDER
RYDER SYSTEM, INC. 2019 EQUITY AND INCENTIVE COMPENSATION PLAN

20XX TERMS AND CONDITIONS

The following terms and conditions apply to the 20XX performance-based restricted stock rights (the “PBRSRs”) granted by Ryder System, Inc. (the “Company”) under the Ryder System, Inc. 2019 Equity and Incentive Compensation Plan (the “Plan”), as specified in the Performance-Based Restricted Stock Right Award Notification (the “Notification”) which references these terms and conditions. Certain terms of the PBRSRs, including the number of Shares underlying the PBRSRs, are set forth in Schedule A and in the Notification. The Compensation Committee of the Company’s Board of Directors (the “Committee”) shall administer the PBRSRs in accordance with the Plan. Capitalized terms used herein and not defined shall have the meaning ascribed to such terms in the Plan or in Schedule A or the Notification.

1.
General . Each PBRSR represents the right to receive one Share on a future date based upon the attainment of certain financial performance goals and continued employment, on the terms and conditions set forth in Schedule A, in the Notification and in the Plan, the applicable terms, conditions and other provisions of which are incorporated by reference herein (collectively, the “Award Documents”). A copy of the Plan and the documents that constitute the “Prospectus” for the Plan under the Securities Act of 1933 have been made available to the Participant prior to or along with delivery of the Notification. In the event there is an express conflict between the provisions of the Plan and those set forth in any other Award Document, the terms and conditions of the Plan shall govern.

The terms and conditions contained herein may be amended by the Committee as permitted by the Plan; none of the terms and conditions of the PBRSRs may be amended or waived without the prior approval of the Committee. Any amendment or waiver not approved by the Committee will be void and have no force or effect. Any employee or officer of the Company who authorizes any such amendment or waiver without the prior approval of the Committee will be subject to disciplinary action up to and including forfeiture of his or her PBRSRs and/or termination of employment (unless otherwise prohibited by law). All decisions and determinations made by the Committee relating to the PBRSRs shall be final and binding on the Participant, his or her beneficiaries and any other person having or claiming an interest under the Plan.

2.
Financial Performance Goals .

The financial performance goals (the “Performance Goals”) applicable to the Award are set forth in Schedule A.

3.
Delivery of Shares . Provided that the Participant remained continuously employed through the end of the Performance Period (but subject to Sections 4 and 5 below), the number of Shares equal to the number of Accrued PBRSRs, net of the number of Shares necessary to satisfy applicable withholding taxes, will be transferred to an account held in the name of the Participant by the Company’s independent stock plan administrator and the Participant will receive notice of such transfer together with all relevant account details. Such transfer will occur in 20XX as soon as practicable after the Committee has determined the Company’s relative attainment with respect to the Performance Goals after the conclusion of the Performance Period, provided that in no event shall the transfer be made after March 15, 20XX. As used herein, the term “Performance Period” shall mean the period from January 1, 20XX through December 31, 20XX.

4.
Termination of the PBRSRs; Forfeiture. The PBRSRs will be cancelled upon the termination of the Participant’s employment with the Company and its Subsidiaries as described below.

(a)
Resignation by the Participant or Termination by the Company or a Subsidiary : Except as provided in subsection (b) or Section 5 below, upon any termination of a Participant’s employment with the Company and its Subsidiaries prior to the end of the Performance Period, all outstanding PBRSRs will be forfeited and the Participant will not have any right to delivery of Shares. In addition, even if a Participant remains employed through the end of the Performance Period, if the Participant’s employment is subsequently terminated by the Company or a Subsidiary for Cause, the right to any undelivered Shares shall be forfeited, and the Company shall have the right to reclaim and receive from the Participant any Shares delivered to the Participant pursuant to Section 3 within the one year period before the date of the Participant’s termination of employment, or to the extent the Participant has transferred such Shares, the equivalent after-tax value thereof (as of the date the Shares were transferred by the Participant) in cash.


Exhibit 10.3


(b)
Termination by reason of Death, Disability or Retirement : Except as otherwise provided in Section 5 below, if a Participant’s employment terminates due to death, Disability or Retirement prior to the end of the Performance Period, the Participant (or his or her Beneficiary, in the event of death) will be entitled to receive a pro-rata number of Shares that would have been delivered pursuant to Section 3, had the Participant remained employed through the end of the Performance Period, based on the number of days during the Performance Period that the Participant is considered to be an active employee as determined by the Company, payable at the time and manner specified in Section 3 above.

(c)
Proscribed Activity : If, during the Proscribed Period but prior to a Change of Control, the Participant engages in a Proscribed Activity, then the Company shall have the right to reclaim and receive from the Participant all Shares delivered to the Participant pursuant to Section 3 during the one year period immediately prior to, or at any time following, the date of the Participant’s termination of employment, or to the extent the Participant has transferred such Shares, the after-tax equivalent value thereof (as of the date the Shares were transferred by the Participant) in cash.

5.
Change of Control . Notwithstanding anything contained herein to the contrary, in the event of a Change of Control during the Performance Period, unless otherwise determined by the Committee prior to the Change of Control, each Participant shall be entitled to delivery of a number of Shares equal to the COC Share Amount (as defined below) (such Shares, the “COC Shares”); provided that, except as set forth in subsections (c) and (d) below, the Participant remains actively employed through the last day of the Performance Period. Except as set forth in subsections (c) and (d) below, the COC Shares shall be delivered at the time and manner specified in Section 3 above.

(a)
Calculation of the COC Share Amount . In the event of a Change of Control during the Performance Period, the Performance Period shall end, and the COC Share Amount shall be determined as of the date of the Change of Control. The COC Share Amount shall be equal to the greater of the Accrued PBRSRs for the Performance Period (measured as though the last day of the Performance Period was the date immediately preceding the date of the Change of Control) or one-hundred percent (100%) of the PBRSR Award.


(b)
Form of Payment . The Committee may determine that the COC Shares shall be (i) converted to and payable in units with respect to shares or other equity interests of the acquiring company or its parent or (ii) payable in cash based on the Fair Market Value of the COC Shares as of the Change of Control.

(c)
Termination without Cause or for Good Reason . If the Participant’s employment is terminated by the Company without Cause or the Participant terminates employment for Good Reason, prior to the end of the Performance Period and upon or within 24 months following a Change of Control, the COC Shares shall be delivered in a lump sum within 60 days following the Participant’s employment termination date, subject to Section 9.17 of the Plan; provided that such Change of Control constitutes a change “in ownership” or “effective control” or a change in the “ownership of a substantial portion of the assets” of the Company under Section 409A of the Code and the rulings and regulations issued thereunder (any such transaction, a “409A Compliant COC”). In the event that such Change of Control does not constitute a 409A Compliant COC (any such transaction, a “Non-409A Compliant COC”), the COC Shares will be delivered to the Participant at the time and manner specified in Section 3 above.

(d)
Termination due to Death, Disability or Retirement . If a Participant’s employment terminates due to death, Disability or Retirement prior to the end of the Performance Period and upon or within 24 months following a Change of Control, the Participant (or his or her Beneficiary, in the event of death) will be entitled to receive the COC Shares, which shall be delivered in a lump sum within 60 days following the Participant’s employment termination date, subject to Section 9.17 of the Plan; provided that, the COC Shares will be delivered to the Participant at the time and manner specified in Section 3 above if the Change of Control is a Non-409A Compliant COC. If such termination occurs more than 24 months following a Change of Control, the COC Payment Amount will be pro-rated, based on the number of days during the Performance Period that the Participant is considered to be an active employee, as determined by the Company, and will be paid at the time


Exhibit 10.3

and manner specified in Section 3 above.

(e)
Termination Prior to a Change of Control . To the extent (i) a Participant’s employment was terminated by the Company other than for Cause or Disability within the 12 months prior to the date on which the Change of Control occurred, (ii) during such 12 month period the Participant did not engage in a Proscribed Activity, and (iii) the Committee determines, in its sole and absolute discretion, that the decision related to such termination was made in contemplation of the Change of Control, then upon the Change of Control, the Participant will become entitled to a cash payment equal to the product of: the Fair Market Value of a Share on the date of the Change of Control and the COC Share Amount. In the event of a 409A Compliant COC, such cash payment will be made in a lump sum within 60 days following the date on which the Change of Control occurs. In the event of a Non-409A Compliant COC, the cash payment will be paid to the Participant at the time and manner specified in Section 3 above. In the event that a Participant’s termination of employment by the Company under this Section 5(e) also meets the requirements of Retirement, this Section 5(e) shall supersede Section 4(b) above.

6.
Rights as a Shareholder; Dividend Equivalent Rights. The Participant will not have the rights of a shareholder of the Company with respect to Shares subject to the PBRSRs until such Shares are actually delivered to the Participant. At the time Shares are delivered to the Participant pursuant to Section 3 or Section 5, as applicable, the Company will make a cash payment equal to the product of (i) the number of Accrued PBRSRs or the COC Share Amount, if applicable, and (ii) the aggregate dividends paid on a Share during the Performance Period.

7.
U.S. Federal, State and Local Income Taxes. The Participant is solely responsible for the satisfaction of all taxes that may arise in connection with the PBRSRs. At the time of taxation, the Company shall have the right to deduct from other compensation or from amounts payable with respect to the PBRSRs, including by withholding Shares otherwise issuable upon settlement of the PBRSRs (as determined by the Company in its sole discretion), an amount equal to the federal (including FICA), state and local income and payroll taxes and other amounts as may be required by law to be withheld with respect to the PBRSRs. The Company intends to satisfy this withholding obligation by reducing the number of Shares and/or cash to be delivered to the Participant under this Agreement in an amount sufficient to satisfy the withholding obligations due (based on the Fair Market Value of the Shares for the related PBRSRs). Notwithstanding the foregoing, the Company may satisfy any tax obligations it may have in any other jurisdiction outside of the U.S. in any manner it deems, in its sole and absolute discretion, to be necessary or appropriate.

8.
Section 409A. The PBRSRs are intended to comply with Section 409A of the Code or an exemption, and delivery of Shares and other payments pursuant to the PBRSRs may only be made upon an event and in a manner permitted by Section 409A, to the extent applicable. The PBRSRs shall be administered consistent with Section 9.17 of the Plan.

9.
Statute of Limitations and Conflicts of Laws. All rights of action by, or on behalf of the Company or by any shareholder against any past, present, or future member of the Board of Directors, officer, or employee of the Company arising out of or in connection with the PBRSRs or the Award Documents, must be brought within three years from the date of the act or omission in respect of which such right of action arises. The PBRSRs and the Award Documents shall be governed by the laws of the State of Florida, without giving effect to principles of conflict of laws, and construed accordingly.

10.
No Employment Right . Neither the grant of the PBRSRs nor any action taken hereunder shall be construed as giving any employee or any Participant any right to be retained in the employ of the Company. The Company is under no obligation to grant PBRSRs hereunder. Nothing contained in the Award Documents shall limit or affect in any manner or degree the normal and usual powers of management, exercised by the officers and the Board of Directors or committees thereof, to change the duties or the character of employment of any employee of the Company or to remove the individual from the employment of the Company at any time, all of which rights and powers are expressly reserved.

11.
No Assignment . A Participant’s rights and interest under the PBRSRs may not be assigned or transferred, except as otherwise provided herein, and any attempted assignment or transfer shall be null and void and shall extinguish, in the Company’s sole discretion, the Company’s obligation under the PBRSRs or the Award Documents.

12.
Unfunded Plan . Any Shares or other amounts owed under the PBRSRs shall be unfunded. The Company shall


Exhibit 10.3

not be required to establish any special or separate fund, or to make any other segregation of assets, to assure delivery or payment of any earned amounts.

13.
Company Policies . Any amounts paid under the PBRSRs are considered “incentive compensation” under the Company’s Recoupment Policy, in effect from time to time. The PBRSRs and any Shares or cash paid pursuant to the PBRSRs shall be subject to all applicable clawback or recoupment policies, share trading policies, share holding and other policies that may be implemented by the Company’s Board of Directors from time to time.

14.
Definitions .

(a)
“Accrual Percentage” means the percentage of the PBRSRs that accrues at the end of the Performance Period pursuant to Section 2 based on the Company’s attainment of the Performance Goals or as described in Section 5.

(b)
“Accrued PBRSRs” means the Accrual Percentage for the Performance Period times one hundred percent (100%) of the PBRSR Award.

(c)
“Performance Period” means the period from January 1, 20XX through December 31, 20XX.

(d)
“Proscribed Activity” means any of the following:

(i)
the Participant’s breach of any written agreement between the Participant and the Company or any of its Subsidiaries, including any agreement relating to nondisclosure, noncompetition, nonsolicitation and/or nondisparagement, to the extent such agreements are enforceable under applicable law;

(ii)
the Participant’s direct or indirect unauthorized use or disclosure of confidential information or trade secrets of the Company or any Subsidiary, including, but not limited to, such matters as costs, profits, markets, sales, products, product lines, key personnel, pricing policies, operational methods, customers, customer requirements, suppliers, plans for future developments, and other business affairs and methods and other information not readily available to the public;

(iii)
the Participant’s direct or indirect engaging or becoming a partner, director, officer, principal, employee, consultant, investor, creditor or stockholder in/for any business, proprietorship, association, firm or corporation not owned or controlled by the Company or its Subsidiaries which is engaged or proposes to engage in a business competitive directly or indirectly with the business conducted by the Company or its Subsidiaries in any geographic area where such business of the Company or its Subsidiaries is conducted, provided that the Participant’s investment in 1% or less of the outstanding capital stock of any corporation whose stock is listed on a national securities exchange shall not be treated as a Proscribed Activity;

(iv)
the Participant’s direct or indirect, either on the Participant’s own account or for any person, firm or company, soliciting, interfering with or inducing, or attempting to induce, any employee of the Company or any of its Subsidiaries to leave his or her employment or to breach his or her employment agreement;

(v)
the Participant’s direct or indirect taking away, interfering with relations with, diverting or attempting to divert from the Company or any Subsidiary any business with any customer of the Company or any Subsidiary, including (A) any customer that has been solicited or serviced by the Company within one year prior to the date of termination of Participant’s employment with the Company and (B) any customer with which the Participant has had contact or association, or which was under the supervision of Participant, or the identity of which was learned by the Participant as a result of Participant’s employment with the Company;

(vi)
following the Participant’s termination of employment, the Participant’s making of any remarks disparaging the conduct or character of the Company or any of its Subsidiaries,


Exhibit 10.3

or their current or former agents, employees, officers, directors, successors or assigns; or

(vii)
the Participant’s failure to cooperate with the Company or any Subsidiary, for no additional compensation (other than reimbursement of expenses), in any litigation or administrative proceedings involving any matters with which the Participant was involved during the Participant’s employment with the Company or any Subsidiary.

Notwithstanding the foregoing, nothing in these terms and conditions restricts or prohibits the Participant from initiating communications directly with, responding to any inquiries from, providing testimony before, providing confidential information to, reporting possible violations of law or regulation to, or from filing a claim or assisting with an investigation directly with, a self-regulatory authority or a government agency or entity, including the U.S. Equal Employment Opportunity Commission, the Department of Labor, the National Labor Relations Board, the Department of Justice, the Securities and Exchange Commission, Congress, and any agency Inspector General (collectively, the “Regulators”), or from making other disclosures that are protected under the whistleblower provisions of state or federal law or regulation. The Participant does not need the prior authorization of the Company to engage in such communications with the Regulators, respond to such inquiries from the Regulators, provide confidential information or documents to the Regulators, or make any such reports or disclosures to the Regulators. The Participant is not required to notify the Company that the Participant has engaged in such communications with the Regulators.

If the Participant primarily provides services in California, subsection (iii) above shall not apply to the Participant and subsection (v) above shall apply to the Participant only to the extent that the Participant uses or discloses confidential information of the Company or any of its Subsidiaries in performing such Proscribed Activity and to the extent permitted by applicable law.

(e)
“Proscribed Period” means the period beginning on the date of termination of Participant’s employment and ending on the later of (i) the one year anniversary of such termination date or (ii) if the Participant is entitled to severance benefits in the form of salary continuation, the date on which salary continuation is no longer payable to the Participant.

(f)
“Retirement” means termination of employment for any reason (other than for Cause or by reason of death or Disability) upon or following attainment of age 55 and completion of 10 years of service, or upon or following attainment of age 65 without regard to years of service; provided that, Retirement shall not be deemed to occur unless such termination of service constitutes a separation from service, as defined by Section 409A of the Code.

(g)
“Performance Period” means the period from January 1, 20XX through December 31, 20XX.

  
13 .
Other Benefits . No amount accrued or paid under the PBRSRs shall be deemed compensation for purposes of computing a Participant’s benefits under any retirement plan of the Company or its Subsidiaries, nor affect any benefits under any other benefit plan now or subsequently in effect under which the availability or amount of benefits is related to the Participant’s level of compensation.

14 . Defend Trade Secrets Act Notice . Participants are hereby notified that the immunity provisions in Section 1833 of title 18 of the United States Code provide that an individual cannot be held criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade secret that is made (i) in confidence to federal, state or local government officials, either directly or indirectly, or to an attorney, and is solely for the purpose of reporting or investigating a suspected violation of the law, (ii) under seal in a complaint or other document filed in a lawsuit or other proceeding, or (iii) to the Participant’s attorney in connection with a lawsuit for retaliation for reporting a suspected violation of law (and the trade secret may be used in the court proceedings for such lawsuit) as long as any document containing the trade secret is filed under seal and the trade secret is not disclosed except pursuant to court order.






Exhibit 10.4

RESTRICTED STOCK RIGHTS
ISSUED UNDER
RYDER SYSTEM, INC. 2019 EQUITY AND INCENTIVE COMPENSATION PLAN

20XX TERMS AND CONDITIONS

The following terms and conditions apply to the Restricted Stock Rights (the “RSRs”) granted in 20XX by Ryder System, Inc. (the “Company”) under the Ryder System, Inc. 2019 Equity and Incentive Compensation Plan (the “Plan”), as specified in the Restricted Stock Rights Award Notification (the “Notification”) for the RSRs which references these terms and conditions. Certain terms of the RSRs, including the number of Shares underlying the RSRs, are set forth in the Notification. The Compensation Committee of the Company’s Board of Directors (the “Committee”) shall administer the RSRs in accordance with the Plan. Capitalized terms used herein and not defined shall have the meaning ascribed to such terms in the Plan or in the Notification.

1.
General . Each RSR represents the right to receive one Share on a future date, on the terms and conditions set forth herein, in the Notification and the Plan, the applicable terms, conditions and other provisions of which are incorporated by reference herein (collectively, the “Award Documents”). A copy of the Plan and the documents that constitute the “Prospectus” for the Plan under the Securities Act of 1933 have been made available to the Participant prior to or along with delivery of the Notification. In the event there is an express conflict between the provisions of the Plan and those set forth in any other Award Document, the terms and conditions of the Plan shall govern.

The terms and conditions contained herein may be amended by the Committee as permitted by the Plan; none of the terms and conditions of the RSRs may be amended or waived without the prior approval of the Committee. Any amendment or waiver not approved by the Committee will be void and have no force or effect. Any employee or officer of the Company who authorizes any such amendment or waiver without the prior approval of the Committee will be subject to disciplinary action up to and including forfeiture of his or her RSRs and/or termination of employment (unless otherwise prohibited by law). All decisions and determinations made by the Committee relating to the RSRs shall be final and binding on the Participant, his or her beneficiaries and any other person     having or claiming an interest under the Plan.

2.
Delivery of Shares . Subject to Sections 3 and 4 below, the RSRs will vest pursuant to the vesting schedule set forth in the Notification, provided the Participant is, on the relevant vesting date, and has been from the date of grant of the RSRs to the relevant vesting date, continuously employed by the Company or one of its Subsidiaries. For purposes of these terms and conditions, the Participant shall not be deemed to have terminated his or her employment with the Company and its Subsidiaries if he or she is then employed by the Company or another Subsidiary without a break in service.

Upon vesting, the Shares subject to the vested RSRs will be transferred to an account held in the name of the Participant by the Company’s independent stock plan administrator and the Participant will receive notice of such transfer together with all relevant account details.

3.
Termination of RSRs; Forfeiture. The RSRs will be cancelled upon or following the termination of the Participant’s employment with the Company and its Subsidiaries as described below.

(a)
Resignation by the Participant or Termination by the Company or a Subsidiary : Except as otherwise provided in subsection (b) or Section 4 below, all outstanding RSRs will be forfeited and the Participant will not have any right to delivery of Shares that did not vest prior to such termination. If the Participant’s employment is terminated by the Company or a Subsidiary for Cause, then the Company shall have the right to reclaim and receive from the Participant any Shares delivered to the Participant pursuant to Section 2 within the one year period before the date of the Participant’s termination of employment, or to the extent the Participant has transferred such Shares, the equivalent after-tax value thereof (as of the date the Shares were transferred by the Participant) in cash.

(b)
Termination by Reason of Death, Disability or Retirement : Except as otherwise provided in Section 4 below, a prorated portion of the RSRs shall vest, calculated as follows: (A) the total number of RSRs awarded, multiplied by a fraction (and rounded down to the nearest whole Share), the numerator of which shall be the number of days from the date of grant of the RSRs to the date of


Exhibit 10.4

death, Disability or Retirement, as the case may be, and the denominator of which shall be the number of days from the date of grant of the RSRs to the last scheduled vesting date for the RSRs set forth in the Notification, less (B) the number of RSRs already vested at the time of the Participant’s death, Disability or Retirement, as the case may be. Shares equal to the prorated number of RSRs that so vest will be delivered to the Participant (or his or her Beneficiary, in the event of death) within 60 days following the date of death, Disability or Retirement, as the case may be, subject to Section 9.17 of the Plan.

(c)
Proscribed Activity : If, during the Proscribed Period but prior to a Change of Control, the Participant engages in a Proscribed Activity, then the Company shall have the right to reclaim and receive from the Participant all Shares delivered to the Participant pursuant to Section 2 during the one year period immediately prior to, or at any time following, the date of the Participant’s termination of employment, or to the extent the Participant has transferred such Shares, the after-tax equivalent value thereof (as of the date the Shares were transferred by the Participant) in cash.

4.
Change of Control . In the event of a Change of Control, the RSRs shall become payable as described in this Section 4, provided that the Committee may take such other actions with respect to the RSRs as it deems appropriate pursuant to Section 7 and 8 of the Plan.

(a)
Form of Payment : The Committee may determine that the unvested RSRs will be (i) converted to and payable in units with respect to shares or other equity interests of the acquiring company or its parent or (ii) payable in cash based on the Fair Market Value of the RSRs as of the date of the Change of Control.

(b)
Continued Employment : If the Participant continues in employment with the Company or one of its Subsidiaries through each applicable vesting date following the Change of Control, the RSRs will vest pursuant to the vesting schedule set forth in the Notification.

(c)
Termination without Cause, for Good Reason or on Account of Death, Disability or Retirement . If the Participant’s employment is terminated by the Company without Cause, the Participant terminates employment for Good Reason, or the Participant’s employment terminates on account of death, Disability or Retirement, in each case, upon or within 24 months following a Change of Control and prior to the last vesting date set forth in the Notification, any unvested RSRs shall become fully vested upon such termination of employment and shall be paid within 60 days following the date of such termination, subject to Section 9.17 of the Plan.

(d)
Termination Prior to a Change of Control : To the extent (i) a Participant’s employment was terminated by the Company other than for Cause or Disability within the 12 months prior to the date on which the Change of Control occurred, (ii) during such 12 month period the Participant did not engage in a Proscribed Activity, and (iii) the Committee determines, in its sole and absolute discretion, that the decision related to such termination was made in contemplation of the Change of Control, then upon the Change of Control, the Participant will become entitled to a cash payment equal to the product of: the Fair Market Value of a Share on the date of the Change of Control and the number of Shares to which the Participant would otherwise have been entitled if the Participant’s employment had continued until the date of the Change of Control and the Participant’s employment had been terminated as described in subsection (c) above as of such date. In the event that the Change of Control constitutes a change “in ownership” or “effective control” or a change in the “ownership of a substantial portion of the assets” of the Company under Section 409A of the Code and the rulings and regulations issued thereunder (any such transaction, a “409A Compliant COC”), such cash payment will be made in a lump sum within 60 days following the date on which the Change of Control occurs. In the event such Change of Control does not constitute a 409A Compliant COC (any such transaction, a “Non-409A Compliant COC”), the cash payment will be distributed to the Participant on the first anniversary of the Participant’s separation from service.

5.
Rights as a Shareholder; Dividend Equivalent Rights. The Participant will not have the rights of a shareholder of the Company with respect to Shares subject to the RSRs until such Shares are actually delivered to the Participant. If and when Shares are delivered to the Participant pursuant to Section 2, 3 or 4, as applicable, the Company will make a cash payment equal to the product of (i) the number of Shares delivered, and (ii) the aggregate dividends paid on a Share during the period from the date of grant of the


Exhibit 10.4

award until the date the Shares are delivered.
  
6.
U.S. Federal, State and Local Income Taxes. The Participant is solely responsible for the satisfaction of all taxes generally that may arise in connection with the RSRs. At the time of taxation, the Company shall have the right to deduct from other compensation or from amounts payable with respect to the RSRs, including by withholding Shares otherwise issuable upon settlement of the RSRs an amount equal to the federal (including FICA), state and local income and payroll taxes required by law to be withheld with respect to the RSRs. The Company intends to satisfy this withholding obligation by reducing the number of Shares and/or cash that are to be delivered to the Participant under this Agreement in an amount sufficient to satisfy the withholding obligations due (based on the Fair Market Value of the Shares for the related RSRs). Notwithstanding the foregoing, the Company may satisfy any tax obligations it may have in any jurisdiction outside the U.S. in any manner it deems, in its sole and absolute discretion, to be necessary or appropriate.

7.
Section 409A. The RSRs are intended to comply with Section 409A of the Code or an exemption, and delivery of Shares and other payments pursuant to the RSRs may only be made upon an event and in a manner permitted by Section 409A, to the extent applicable. The RSRs shall be administered consistent with Section 9.17 of the Plan.

8.
Statute of Limitations and Conflicts of Laws . All rights of action by, or on behalf of the Company or by any shareholder against any past, present, or future member of the Board of Directors, officer, or employee of the Company arising out of or in connection with the RSRs or the Award Documents, must be brought within three years from the date of the act or omission in respect of which such right of action arises. The RSRs and the Award Documents shall be governed by the laws of the State of Florida, without giving effect to principles of conflict of laws, and construed accordingly.

9.
No Employment Right . Neither the grant of the RSRs nor any action taken hereunder shall be construed as giving any employee or any Participant any right to be retained in the employ of the Company. The Company is under no obligation to grant RSRs hereunder. Nothing contained in the Award Documents shall limit or affect in any manner or degree the normal and usual powers of management, exercised by the officers and the Board of Directors or committees thereof, to change the duties or the character of employment of any employee of the Company or to remove the individual from the employment of the Company at any time, all of which rights and powers are expressly reserved.

10.
No Assignment . A Participant’s rights and interest under the RSRs may not be assigned or transferred, except as otherwise provided herein, and any attempted assignment or transfer shall be null and void and shall extinguish, in the Company’s sole discretion, the Company’s obligation under the RSRs or the Award Documents.

11.
Unfunded Plan . Any shares or other amounts owed under the RSRs shall be unfunded. The Company shall not be required to establish any special or separate fund, or to make any other segregation of assets, to assure delivery or payment of any earned amounts.

12.
Company Policies. The RSRs and any cash or Shares delivered pursuant to the RSRs shall be subject to all applicable clawback or recoupment policies, share trading policies, share holding and other policies that may be implemented by the Company’s Board of Directors from time to time.

13.
Definitions .

(a)
“Proscribed Activity” means any of the following:

(i)
the Participant’s breach of any written agreement between the Participant and the Company or any of its Subsidiaries, including any agreement relating to nondisclosure, noncompetition, nonsolicitation and/or nondisparagement, to the extent such agreements are enforceable under applicable law;

(ii)
the Participant’s direct or indirect unauthorized use or disclosure of confidential information or trade secrets of the Company or any Subsidiary, including, but not limited to, such matters as costs, profits, markets, sales, products, product lines, key personnel,


Exhibit 10.4

pricing policies, operational methods, customers, customer requirements, suppliers, plans for future developments, and other business affairs and methods and other information not readily available to the public;

(iii)
the Participant’s direct or indirect engaging or becoming a partner, director, officer, principal, employee, consultant, investor, creditor or stockholder in/for any business, proprietorship, association, firm or corporation not owned or controlled by the Company or its Subsidiaries which is engaged or proposes to engage in a business competitive directly or indirectly with the business conducted by the Company or its Subsidiaries in any geographic area where such business of the Company or its Subsidiaries is conducted, provided that the Participant’s investment in 1% or less of the outstanding capital stock of any corporation whose stock is listed on a national securities exchange shall not be treated as a Proscribed Activity;

(iv)
the Participant’s direct or indirect, either on the Participant’s own account or for any person, firm or company, soliciting, interfering with or inducing, or attempting to induce, any employee of the Company or any of its Subsidiaries to leave his or her employment or to breach his or her employment agreement;

(v)
the Participant’s direct or indirect taking away, interfering with relations with, diverting or attempting to divert from the Company or any Subsidiary any business with any customer of the Company or any Subsidiary, including (A) any customer that has been solicited or serviced by the Company within one year prior to the date of termination of Participant’s employment with the Company and (B) any customer with which the Participant has had contact or association, or which was under the supervision of Participant, or the identity of which was learned by the Participant as a result of Participant’s employment with the Company;

(vi)
following the Participant’s termination of employment, the Participant’s making of any remarks disparaging the conduct or character of the Company or any of its Subsidiaries, or their current or former agents, employees, officers, directors, successors or assigns; or

(vii)
the Participant’s failure to cooperate with the Company or any Subsidiary, for no additional compensation (other than reimbursement of expenses), in any litigation or administrative proceedings involving any matters with which the Participant was involved during the Participant’s employment with the Company or any Subsidiary.        

Notwithstanding the foregoing, nothing in these terms and conditions restricts or prohibits the Participant from initiating communications directly with, responding to any inquiries from, providing testimony before, providing confidential information to, reporting possible violations of law or regulation to, or from filing a claim or assisting with an investigation directly with, a self-regulatory authority or a government agency or entity, including the U.S. Equal Employment Opportunity Commission, the Department of Labor, the National Labor Relations Board, the Department of Justice, the Securities and Exchange Commission, Congress, and any agency Inspector General (collectively, the “Regulators”), or from making other disclosures that are protected under the whistleblower provisions of state or federal law or regulation. The Participant does not need the prior authorization of the Company to engage in such communications with the Regulators, respond to such inquiries from the Regulators, provide confidential information or documents to the Regulators, or make any such reports or disclosures to the Regulators. The Participant is not required to notify the Company that the Participant has engaged in such communications with the Regulators.

If the Participant primarily provides services in California, subsection (iii) above shall not apply to the Participant and subsection (v) above shall apply to the Participant only to the extent that the Participant uses or discloses confidential information of the Company or any of its Subsidiaries in performing such Proscribed Activity and to the extent permitted by applicable law.

(b)
“Proscribed Period” means the period beginning on the date of termination of Participant’s employment and ending on the later of (A) the one year anniversary of such termination date or


Exhibit 10.4

(B) if the Participant is entitled to severance benefits in the form of salary continuation, the date on which salary continuation is no longer payable to the Participant.

(c)
“Retirement” means termination of employment for any reason (other than for Cause or by reason of death or Disability) upon or following attainment of age 55 and completion of 10 years of service, or upon or following attainment of age 65 without regard to years of service; provided that, Retirement shall not be deemed to occur unless such termination of service constitutes a separation from service, as defined by Section 409A of the Code.

14.
Other Benefits . No amount accrued or paid under the RSRs shall be deemed compensation for purposes of computing a Participant’s benefits under any retirement plan of the Company or its Subsidiaries, nor affect any benefits under any other benefit plan now or subsequently in effect under which the availability or amount of benefits is related to the Participant’s level of compensation.

15.
Defend Trade Secrets Act Notice . Participants are hereby notified that the immunity provisions in Section 1833 of title 18 of the United States Code provide that an individual cannot be held criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade secret that is made (i) in confidence to federal, state or local government officials, either directly or indirectly, or to an attorney, and is solely for the purpose of reporting or investigating a suspected violation of the law, (ii) under seal in a complaint or other document filed in a lawsuit or other proceeding, or (iii) to the Participant’s attorney in connection with a lawsuit for retaliation for reporting a suspected violation of law (and the trade secret may be used in the court proceedings for such lawsuit) as long as any document containing the trade secret is filed under seal and the trade secret is not disclosed except pursuant to court order






Exhibit 10.5

STOCK AWARDS
FOR
NON-EMPLOYEE DIRECTORS
ISSUED UNDER
RYDER SYSTEM, INC. 2019 EQUITY AND INCENTIVE COMPENSATION PLAN


20XX TERMS AND CONDITIONS

The following terms and conditions apply to the stock award (the “Award”) granted in [20XX] by Ryder System, Inc. (the “Company”) to the Company’s Non-Employee Directors, under the Ryder System, Inc. 2019 Equity and Incentive Compensation Plan (the “Plan”), as specified in the Restricted Stock Units Award Notification Letter (the “Notification Letter”), to which these terms and conditions are appended and the applicable Stock Award Distribution Election Form (the “Election Form”). Certain terms of the Award, including the number of Shares granted, the date of grant (the “Grant Date”) and the vesting date(s), are set forth in the Notification Letter. The terms and conditions contained herein may be amended by the Committee as permitted by the Plan. Capitalized terms used herein and not defined shall have the meaning ascribed to such terms in the Plan or in the Notification Letter.

1.
General . Each Award represents the right to receive one Share on a specified date on the terms and conditions set forth herein, in the Notification Letter, the Election Form and the Plan, the applicable terms, conditions and other provisions of which are incorporated by reference herein (collectively, the “Award Documents”). The Award may be distributed as Restricted Stock Units (“RSUs”) or payment in Shares after completion of one year of service on the Board of Directors of the Company (the “Board”). A copy of the Plan and the documents that constitute the “Prospectus” for the Plan under the Securities Act of 1933, have been delivered to the Participant prior to or along with delivery of the Notification Letter. In the event there is an express conflict between the provisions of the Plan and those set forth in any Award Document, the terms and conditions of the Plan shall govern.

2.
Number of Shares under Award . Each Non-Employee Director who is serving as such immediately following the [20XX] annual meeting of shareholders of the Company (the “Annual Meeting”) shall receive an Award immediately following such Annual Meeting for a number of Shares equal to (i) [$XXX,XXX] divided by (ii) the Fair Market Value of one Share on the day of the Annual Meeting. If a Non-Employee Director begins his or her service on the Board after the Annual Meeting but prior to December 31, [20XX], on the date on which such Non-Employee Director’s service on the Board begins (“Service Date”), the Non-Employee Director shall receive an Award for a number of Shares equal to the product of (i) a quotient the numerator of which is [$XXX,XXX] and the denominator of which is the Fair Market Value of one Share on the Service Date, times (ii) a quotient, the numerator of which is the total number of days between the Service Date and December 31, [20XX] and the denominator of which is 365.

3.
Election as to Form of Payment .

(a)
Each Non-Employee Director may elect to receive his or her Award in the form of either:
i.
Shares that are distributed within 30 days following the later of the Grant Date or the date on which the Non-Employee Director completes one year of service on the Board, or
ii.
An RSU payable after separation from service according to the terms of the Non-Employee Director’s applicable election form, subject to completion of one year of service on the Board.

(b)
The election must be made by December 31 of the calendar year immediately preceding the calendar year in which the services to which the Award relate are performed (or, in the case of newly elected or appointed Non-Employee Directors, by the end of the thirtieth (30 th ) day immediately following his commencement of service on the Board) (such date, the “Election Date”).

(c)
If a Non-Employee Director fails to make an election by the Election Date, distribution of the Award will be made in the form of a Shares distributed within 30 days following the later of the Grant Date or the date on which the Non-Employee Director completes one year of service on the Board.

4.
Vesting of RSUs .

(a)
If the Non-Employee Director has completed one year of service on the Board as of the Grant Date,


Exhibit 10.5

the Award shall be fully vested as of the Grant Date.

(b)
If the Non-Employee Director has not completed at least one year of service on the Board as of the Grant Date, the Award shall become fully vested on the date on which the Non-Employee Director completes one year of service on the Board. If the Non-Employee Director’s service on the Board ceases before the Non-Employee Director completes one year of service, except as provided in subsection (c) below, upon such cessation of service, the Award will be forfeited, and the Non-Employee Director will not have any right to delivery of Shares hereunder.

(c)
Notwithstanding the foregoing, the Award shall become fully vested upon the Non-Employee Director’s cessation of service on the Board if (i) the Non-Employee Director’s service is terminated by the Company without Cause upon or following a Change of Control or (ii) the Non-Employee Director’s service terminates on account of Disability or death.

(d)
For purposes of the Award Documents, Disability shall mean (i) a determination by the Board that the Non-Employee Director is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months or (ii) a determination by the Social Security Administration that the Non-Employee Director is totally disabled.

5.
Timing of Delivery of Shares .

(a)
For an Award that is payable upon separation from service, delivery of the Shares relating to the Award will occur (or, if installment payments are elected pursuant to Section 5 below, commence) within 30 days following the Non-Employee Director’s separation from service on the Board.

(b)
For an Award that is payable immediately after the Grant Date, delivery of the Shares will occur within 30 days after the Grant Date.

(c)
For an Award that is payable on the date on which the Non-Employee Director completes one year of service on the Board, delivery of the Shares will occur within 30 days following the one-year anniversary date. However, if such Award vests earlier than the one-year anniversary date pursuant to Section 4(c) above, delivery of the Shares will occur within 30 days after the vesting date.

(d)
Notwithstanding the foregoing, the following provisions apply in the event of a Change of Control:

i.
In the event that a Change of Control occurs that constitutes a “409A Compliant COC” (as defined below), Shares with respect to all of the then outstanding fully vested RSUs will be delivered to the Non-Employee Director in a lump sum upon the occurrence of such Change of Control.

ii.
In the event that a Change of Control does not constitute a 409A Compliant COC, each RSU will be converted into a right to receive a cash payment equal to the Fair Market Value of a Share on the date on which the Change of Control occurs. Such cash payment will be distributed to the Non-Employee Director in accordance with the otherwise applicable distribution schedule set forth in the Award Documents.

iii.
Any Awards that are not fully vested as of the date of the Change of Control will be distributed to the Non-Employee Director in a lump sum payment upon vesting, if the Change of Control constitutes as 409A Compliant COC, and, if not, in accordance with the otherwise applicable distribution schedule set forth in the Award Documents.

iv.
For purposes of this Agreement, a “409A Compliant COC” means a change “in ownership” or “effective control” or a change in the “ownership of a substantial portion of the assets” of the Company within the meaning of Section 409A of the Code.

6.
Form of Delivery of RSU Shares . Subject in all cases to Section 409A of the Code and Section 9.17 of the Plan, with respect to each Award of RSUs, a Non-Employee Director may irrevocably elect, by the Election Date, to receive delivery of Shares pursuant to Section 3(a)(ii) in either one lump sum, or in equal annual


Exhibit 10.5

installments over a period not less than 2 years or greater than 10 years, provided that a Non-Employee Director who fails to make an irrevocable election with respect to any RSUs by 5:00 pm on the Election Date shall be deemed to have irrevocably elected to receive delivery of the Shares subject to such award in a lump sum. Notwithstanding the foregoing, in the event of a Change of Control, RSUs will be distributed in accordance with Section 5(d).

7.
Rights as a Shareholder; Dividend Equivalent Rights. A holder of an Award will not have the rights of a shareholder of the Company with respect to Shares subject to the Award until such Shares are actually delivered. However, with respect to all RSUs held by the Non-Employee Director, once per year the Company will credit the Non-Employee Director with dividend equivalents in respect of dividends declared on Shares during the prior year while the RSUs are outstanding, in the form of additional RSUs based on the Fair Market Value of the Shares on the dividend payment date, and such additional RSUs will be paid on the same date and subject to the same terms and conditions as applicable to the RSUs on which they were credited. If a Non-Employee Director has not completed one year of service on the Board and has elected to receive Shares upon completion of one year of service pursuant to Section 3(a)(i), the foregoing dividend equivalent rights shall apply to his or her Award during the period before the Shares are actually delivered.

8.
Statute of Limitations and Conflicts of Laws . All rights of action by, or on behalf of the Company or by any shareholder against any past, present, or future member of the Board, officer, or employee of the Company arising out of or in connection with the Award or the Award Documents, must be brought within three years from the date of the act or omission in respect of which such right of action arises. The Award and the Award Documents shall be governed by the laws of the State of Florida, without giving effect to principles of conflict of laws, and construed accordingly.

9.
No Assignment . A Participant’s rights and interest under the Award may not be assigned or transferred, except as otherwise provided herein, and any attempted assignment or transfer shall be null and void and shall extinguish, in the Company’s sole discretion, the Company’s obligation under the Award or the Award Documents.

10.
Unfunded Plan . Any Shares or other amounts owed under the Award shall be unfunded. The Company shall not be required to establish any special or separate fund, or to make any other segregation of assets, to assure delivery or payment of any earned amounts.

11.
Section 409A. The Award is intended to comply with Section 409A of the Code or an exemption, and delivery of Shares and other payments pursuant to the Award may only be made upon an event and in a manner permitted by Section 409A, to the extent applicable. All references to a separation from service shall mean a “separation from service” under Section 409A. The Award shall be administered consistent with Section 9.17 of the Plan.

12.
Company Policies. The Award and any cash or Shares delivered pursuant to the Award shall be subject to all applicable policies that may be implemented by the Company’s Board of Directors from time to time, including the Company’s share ownership guidelines as in effect from time to time.






Exhibit 10.6

RYDER SYSTEM, INC.
ANNUAL CASH INCENTIVE AWARDS

[20XX] PLAN


The following terms and conditions (“Terms and Conditions”) apply to the 2019 annual incentive cash awards (the “Awards”) granted to certain individuals (each individual, a “Participant”) by Ryder System, Inc. (the “Company”). A description of these Terms and Conditions is set forth in the relevant Guide to the Annual Incentive Compensation Program (the “Guide”). No individual shall receive an Award unless the Company has notified the individual of the Award and delivered these Terms and Conditions and the Guide to the individual. Certain terms of the Award, including the performance goals and target payout amounts, are also set forth in the Guide and the payout grids titled “Incentive Payout Components by Position” (“Payout Grid”) applicable to the Participant.

1.
General . The Award represents the right to receive a cash payment based on the attainment of certain financial performance goals, on the terms and conditions set forth herein, in Schedule A attached hereto and in the Guide, the applicable terms, conditions and other provisions of which are incorporated by reference herein (collectively, the “Award Documents”).

(a)
The Award Documents supersede any and all prior oral representations, promises or guarantees relating to short-term incentives or annual bonuses for the applicable years. All provisions of the Award Documents shall apply unless otherwise prohibited by law. In the event there is an express conflict between the provisions of the Guide and those set forth in these Terms and Conditions, the Terms and Conditions of this Award shall govern. Unless otherwise approved by the Committee, individuals who have written agreements which specifically provide for annual incentive compensation other than that which is provided under the Award or who are participants in any other short-term incentive compensation plan of the Company or its subsidiaries and affiliates are not eligible to receive an Award hereunder. The Company may, in its sole discretion, provide discretionary or other bonuses to Company employees, whether or not they receive an Award.

(b)
The terms and conditions contained herein may be amended by the Committee; none of the terms and conditions of the Award may be amended or waived without the prior approval of the Committee. Any amendment or waiver not approved by the Committee will be void and have no force or effect. Any employee or officer of the Company who authorizes any such amendment or waiver without the prior approval of the Committee will be subject to disciplinary action up to and including forfeiture of an Award and/or termination of employment (unless otherwise prohibited by law). All decisions and determinations made by the Committee relating to the Awards shall be final and binding on the Participant, his or her beneficiaries and any other person having or claiming an interest under this Award.

2.
Financial Performance Goals; Performance Period . The Awards are intended to reward Participants for the attainment by the Company of certain performance goals during the period beginning on January 1, 20XX and ending on December 31, 20XX (the “Performance Period”). The amount payable pursuant to this Award shall be calculated in accordance with the attached Schedule A, subject to the additional terms and conditions of this Award.

3.
Payment . Subject to Sections 4 and 5 below and the provisions of the Guide, amounts payable with respect to the Award will be payable in cash to the Participant following the determination of the Company’s performance, the calculation of the Award pursuant to Schedule A, and approval by the Committee (or the Board, as the case may be) of the payout. Payment shall be made during the 20XX calendar year, but in no event later than March 15, 20XX (the applicable date, the “Payment Date”), provided that, subject to Section 5 below, the Participant is, on the Payment Date, and has been from the first day of the Performance Period through the Payment Date, continuously employed in good standing by the Company or a Subsidiary. No Participant shall have a vested, accrued or contractual right to any payment under the Award. For purposes of these Terms and Conditions, the Participant shall not be deemed to have terminated his or her employment with the Company and its Subsidiaries if he or she is then immediately thereafter employed by the Company or another Subsidiary. Receipt of any payments hereunder is expressly conditioned upon the Participant remaining fully compliant with all Company values, principles, agreements, plans, procedures, protocols and policies and all rules contained in the Award Documents. Notwithstanding anything to the contrary set forth herein, to the fullest extent permitted under applicable law, (i) the Company retains the right, in its sole and absolute discretion, to withhold payment and


Exhibit 10.6

participation from any Participant who violates or has violated any Company value, principle, agreement, plan, procedure, protocol, policy or the rules contained in the Award Documents even if there are no documented performance issues in the Participant’s personnel file and (ii) if the Company has any claim against the Participant for money or assets owed that has not been satisfied by the Participant, the amount otherwise payable pursuant to the Award shall be reduced by any such unpaid claims unless otherwise prohibited by law, including without limitation Section 409A of the Code. The calculation of amounts payable pursuant to the Award with respect to Participants outside of the U.S. will be set forth in the Guide.

4.
New Hire, Promotion or Transfer. Participants who are newly hired, promoted, or transferred into or out of eligible positions, and those who move from one eligibility level to another, will receive a pro-rata incentive based on the terms in effect for his or her Management Level position, the portion of time spent in each position during the Performance Period, the annual rate of pay and the target incentive award for the eligible position(s).

5.
Termination of Employment; Temporary Leave. Except as specifically set forth below, the Award will terminate and no amounts will be paid under the Award following the termination of the Participant’s employment.

(a)
Resignation by the Participant or Termination by the Company or a Subsidiary : Notwithstanding anything herein to the contrary, (i) with respect to Participants who are entitled to severance benefits under the terms and conditions of any individual agreement or under the Company’s Executive Severance Plan, any amounts due will be calculated in accordance with such agreement or plan and (ii) with respect to Participants who are not otherwise entitled to severance benefits under the terms of any individual agreement or the Company’s Executive Severance Plan, if any, the Award will terminate upon termination of employment and no amounts will be paid under the Award, provided that if a Participant’s employment is terminated by the Company after October 1, 20XX but before the Payment Date as a result of a reduction in force by the Company, or a location closing or loss of business, as determined by the Committee, in its sole and absolute discretion, the Participant shall be eligible to receive a payment hereunder on the Payment Date, if the Participant would have received a payment under the Award but for his or her termination. Payment made to a terminated employee pursuant to the preceding sentence shall only be made if the Participant has executed and delivered to the Company a release in favor of the Company in form and substance satisfactory to the Company, which has not been revoked, and shall not be made prior to the effective date of such release.

i.
Notwithstanding the foregoing, if the Participant is terminated by the Company or a Subsidiary prior to the Payment Date and is subsequently re-employed by the Company or a Subsidiary prior to the Payment Date, such Participant shall be eligible to receive a pro-rata payment on the Payment Date based on the number of days during the Performance Period that the Participant was considered to be an active employee, as determined by the Company.

ii.
In the event that the Participant voluntarily terminates his or her employment with the Company prior to the Payment Date, (x) if the Participant is re-employed by the Company or a Subsidiary within 90 days of the effective date of such termination, but in any event prior to the Payment Date, the Participant shall be eligible to receive a pro-rata payment on the Payment Date based on the number of days during the Performance Period that the Participant was considered to be an active employee, as determined by the Company; or (y) unless otherwise provided for herein, if the Participant is re-employed by the Company or a Subsidiary more than 90 days after the effective date of such resignation, but in any event before the end of the Performance Period, the Participant shall be eligible to receive a pro-rata payment on the Payment Date based on the number of days during the Performance Period that the Participant was considered to be an active employee, as determined by the Company, after the Participant was re-employed.

(b)
Death or Disability (including Disability Retirement) : If the Participant’s death or Disability occurs after the end of the Performance Period, the Participant (or his or her Beneficiary, in the event of death) shall receive all amounts otherwise payable to him or her under the Award on the Payment Date. If the death or Disability occurs during the Performance Period and the Participant would have received a payment under the Award but for his or her death or Disability, the Participant (or his or her Beneficiary, in the event of death) will be eligible to receive a pro-rata payment on the Payment Date based on the amount otherwise payable to the Participant and the number of days during the Performance Period that the Participant was considered to be an active employee, as determined by the Company.



Exhibit 10.6

(c) Workers’ Compensation or Approved Leave of Absence : Except as otherwise set forth herein, a Participant who takes an approved workers’ compensation leave or an approved leave of absence during any portion of the Performance Period and is actively employed for at least 180 days during 20XX, as determined by the Company, will be eligible to receive a payment on the Payment Date (to the extent the Participant would have received a payment under the Award but for his or her leave of absence), which will be pro-rated based on the number of days during the Performance Period that the Participant is considered to be an active employee, as determined by the Company.

(d) Military Leave of Absence : A Participant who takes an approved military leave of absence will be eligible to receive a payment on the Payment Date (to the extent the Participant would have received a payment under the Award but for his or her military leave of absence) based on the Participant’s full Eligible Base Salary (as defined on Schedule A ) regardless of the number of days worked during the Performance Period.

(e)
Retirement : If the Participant’s Retirement occurs after December 31, 20XX (the last day worked) and before the Payment Date, the Participant shall receive all amounts due to him or her under the Award on the Payment Date. If the Participant’s Retirement occurs on or prior to December 31, 20XX (the last day worked is December 30 or earlier), the Award will terminate and no amounts will be paid under the Award, unless Section 5(a) or 5(b) applies. As used herein, the term “Retirement” means termination of employment for any reason (other than for Cause or by reason of death or Disability) upon or following attainment of age 55 and completion of 10 years of service, or upon or following attainment of age 65 without regard to years of service.

(f) Proscribed Activity : If, during the Proscribed Period but prior to a Change of Control, the Participant engages in a Proscribed Activity, then the Company shall have the right to reclaim and receive from the Participant all cash paid to the Participant pursuant to Section 3 during the one year period immediately prior to, or at any time following, the date of the Participant’s termination of employment.

6.
Administration .

(a)
Committee . The Committee shall administer the Award. Other provisions of the Award notwithstanding, the Board may perform any function of the Committee under the Award, and any authority specifically reserved to the Board under the terms of this Award, the Company’s Articles of Incorporation or By-Laws, or applicable law shall be exercised by the Board and not by the Committee.

(b)
Powers and Duties of Committee . The Committee shall have full authority and discretion to:

i.
adopt, amend, suspend, and rescind such rules and regulations and appoint such agents as the Committee may deem necessary or advisable to administer the Award;

ii.
correct any defect or supply any omission or reconcile any inconsistency in the Award and to construe and interpret the Award, rules and regulations, Award Documents, or other instrument hereunder;

iii.
make determinations relating to eligibility for and entitlements in respect of the Award, and to make all factual findings related thereto; and

iv.
make all other decisions and determinations as may be required under the terms of the Award or as the Committee may deem necessary or advisable for the administration of the Award.

All determinations and decisions of the Committee shall be final and binding upon the Participant or any person claiming any rights under the Award from or through any Participant, and the Participant or such other person may not further pursue his or her claim in any court of law or equity or other arbitral proceeding

(c) Delegation by Committee. Except to the extent prohibited by applicable law or the applicable rules of a stock exchange, the Committee may delegate, on such terms and conditions as it determines in its sole and absolute discretion, to one or more senior executives of the Company any and all administrative responsibilities. Any such allocation or delegation may be revoked by the Committee at any time.

(d) Limitation of Liability . Each member of the Committee shall be entitled to, in good faith, rely or act upon any report or other information furnished to him or her by any officer or other employee of the Company


Exhibit 10.6

or any Subsidiary, the Company’s independent certified public accountants, or any executive compensation consultant, legal counsel, or other professional retained by the Company to assist in the administration of the Award. No member of the Committee, nor any officer or employee of the Company acting on behalf of the Committee, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Award, and all members of the Committee and any officer or employee of the Company acting on behalf of the Committee or members thereof shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action, determination, or interpretation.

7.
U.S. Federal, State and Local Income Taxes. The Participant is solely responsible for the satisfaction of all taxes that may arise in connection with the Award. At the time of taxation, the Company shall have the right to deduct from other compensation or from amounts payable with respect to the Award an amount equal to the federal (including FICA), state, and local income and payroll taxes and other amounts as may be required by law to be withheld with respect to the Award. Notwithstanding the foregoing, the Company may satisfy any tax obligations it may have in any other jurisdiction outside of the U.S. in any manner it deems, in its sole and absolute discretion, to be necessary or appropriate.

8.
Section 409A. Notwithstanding the other provisions hereof, the Award is intended to comply with the requirements of Code Section 409A, to the extent applicable. Accordingly, all provisions herein shall be construed and interpreted such that the Award either (a) qualifies for an exemption from the requirements of Code Section 409A or (b) satisfies the requirements of Code Section 409A to the maximum extent possible; provided, however, that in no event shall the Company be obligated to reimburse a Participant or a Participant’s Beneficiary for any additional tax (or related penalties and interest) incurred by reason of application of Code Section 409A, and the Company makes no representations that the Award is exempt from or complies with Code Section 409A and makes no undertakings to ensure or preclude that Code Section 409A will apply to the Award. Notwithstanding anything herein to the contrary, in the event that the Award constitutes nonqualified deferred compensation under Code Section 409A, if (x) the Participant is a “specified employee” of the Company as of the specified employee identification date for purposes of Code Section 409A (as determined in accordance with the policies and procedures adopted by the Company) and (y) the delivery of any cash payable pursuant to the Award is required to be delayed for a period of six months after separation from service pursuant to Code Section 409A, such cash shall be paid within 15 days after the end of the six-month period. If the Participant dies during such six-month period, the amounts withheld on account of Code Section 409A shall be paid to the Participant’s Beneficiary within 30 days of the Participant’s death. The Committee shall have the discretion to provide for the payment of an amount equivalent to interest, at such rate or rates fixed by the Committee, on any delayed payment. In the event that the Participant is required to execute a release of claims to receive payment pursuant to the Award and the 60 day period following the Participant’s termination of employment spans two calendar years, notwithstanding any provision herein, payment shall not be made until the later calendar year, if required to comply with Code Section 409A.

9.
Change of Control .

(a)
Notwithstanding anything herein to the contrary, in the event of a Change of Control of the Company during the Performance Period, (i) with respect to Participants who are entitled to Change of Control benefits under the terms of any individual agreement or any severance plan or arrangement, the amount payable pursuant to this Award will be calculated in accordance with such agreement or plan and (ii) with respect to Participants who are not otherwise entitled to Change of Control benefits under the terms of any individual agreement or any severance plan or arrangement, and whose employment is terminated in connection with or as a result of the Change of Control, upon approval by the Committee, the Participant will be entitled to receive a pro-rata payment based on the number of days during the Performance Period that the Participant is considered to be an active employee, as determined by the Company, assuming target performance. This payment shall be made on or before March 15, 20XX.

(b)
Notwithstanding the foregoing, in the event of a Change of Control, the Committee, in its discretion, may determine that the Participant shall receive a payment in settlement of the outstanding Award in such amount as may be determined by the Committee.
 
10.
Sale of Business . If a business unit is sold during the Performance Period, the Participants that are employees of such business unit will receive a pro-rata payment based on performance. Such payment will be made over time or in one lump sum, as determined by the Committee, provided that in any event all payments will be


Exhibit 10.6

made on or before March 15, 20XX.

11.
Statute of Limitations and Conflicts of Laws. All rights of action by, or on behalf of the Company or by any shareholder against any past, present, or future member of the Board, officer, or employee of the Company arising out of or in connection with the Award or the Award Documents, must be brought within three years from the date of the act or omission in respect of which such right of action arises. The Awards and the Award Documents shall be governed by the laws of the State of Florida, without giving effect to principles of conflict of laws, and construed accordingly.

12.
No Employment Right . Neither the grant of the Award, nor any action taken hereunder, shall be construed as giving any employee or any Participant any right to be retained in the employ of the Company. The Company is under no obligation to grant Awards hereunder. Nothing contained in the Award Documents shall limit or affect in any manner or degree the normal and usual powers of management, exercised by the officers and the Board or committees thereof, to change the duties or the character of employment of any employee of the Company or a Subsidiary or to remove the individual from the employment of the Company at any time, all of which rights and powers are expressly reserved. To the extent consistent with Code Section 409A, (a) an approved leave of absence shall not be considered a termination of employment or service for purposes of the Award, and (b) if the Participant is employed by or performs services for a Subsidiary, the Participant shall be considered to have terminated employment or service for purposes of the Award if such Subsidiary is sold or no longer qualifies as a Subsidiary of the Company, unless such Participant remains employed by the Company or another Subsidiary.

13.
Limitation on Transferability/No Assignment . A Participant’s rights and interest under the Award may not be assigned or transferred, except as otherwise provided herein, and any attempted assignment or transfer shall be null and void and shall extinguish, in the Company’s sole discretion, the Company's obligation under the Award to make any payment hereunder. Awards may be transferred to a Beneficiary in the event of the Participant’s death (to the extent the Award survives the Participant’s death). The Award may not be pledged, mortgaged, hypothecated, or otherwise encumbered, and shall not be subject to the claims of creditors.

14.
Unfunded Award . Any amounts owed under the Award shall be unfunded. The Company shall not be required to establish any special or separate fund, or to make any other segregation of assets, to assure payment of any amounts payable under the Award.

15.
Company Policy . This Award is considered “incentive compensation” under the Company’s Recoupment Policy, as in effect from time to time. The Award and any amounts payable hereunder shall be subject to all applicable clawback or recoupment policies, share trading policies, share holding and other policies that may be implemented by the Board from time to time.

16.
Amendments. The Committee may amend, suspend, discontinue, or terminate any Award (including the Award Documents) as the Committee deems appropriate.

17.
Successors and Assigns. The Award may be assigned by the Company to any successor to the Company’s business. The Award shall be binding on all successors and assigns of the Company and a Participant, including the Beneficiary or estate of such Participant and the executor, administrator or trustee of such estate.

18.
Severability of Provisions. If any provision of the Award is held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and the Award shall be construed and enforced as if such provisions had not been included.

19.
Defend Trade Secrets Act Notice . Participants are hereby notified that the immunity provisions in Section 1833 of title 18 of the United States Code provide that an individual cannot be held criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade secret that is made (i) in confidence to federal, state or local government officials, either directly or indirectly, or to an attorney, and is solely for the purpose of reporting or investigating a suspected violation of the law, (ii) under seal in a complaint or other document filed in a lawsuit or other proceeding, or (iii) to the Participant’s attorney in connection with a lawsuit for retaliation for reporting a suspected violation of law (and the trade secret may be used in the court proceedings for such lawsuit) as long as any document containing the trade secret is filed under seal and the trade secret is not disclosed except pursuant to court order.
 


Exhibit 10.6

20.
Definitions . Capitalized terms used above that are not defined have the meanings set forth below:
 
(a)
“Board” means the Board of Directors of the Company.

(b)
“Beneficiary” means the person(s) or trust(s) entitled by will or the laws of descent and distribution to receive any rights with respect to the Award that survive the Participant’s death, provided that if at the time of the Participant’s death, the Participant had on file with the Committee a written designation of a person(s) or trust(s) to receive such rights, then such person(s) (if still living at the time of the Participant’s death) or trust(s) shall be the “Beneficiary” for purposes of the Award.

(c)
“Cause” means (i) fraud, misappropriation, or embezzlement against the Company or any of its Subsidiaries that results in material or potentially material financial or reputational harm to the Company or any of its Subsidiaries, (ii) conviction of, or plea of guilty or nolo contendere to, a misdemeanor involving moral turpitude or dishonesty or a felony, (iii) material breach of any non-competition, non-solicitation, or confidentiality agreement with the Company or any Subsidiary, (iv) willful and continued failure to substantially perform the Participant’s key job duties or responsibilities (other than such failure resulting from the Participant’s Disability) that is not cured within thirty (30) days after the Participant is provided notice of such failure, or (v) willful and material violation of the Company’s Principles of Business Conduct or any analogous code of ethics or similar policy. For purposes of determining “Cause”, no act or omission by the Participant shall be considered “willful” unless the Board determines that it is done or omitted in bad faith or without reasonable belief that the Participant’s action or omission was in the best interests of the Company. Cause shall be determined in the sole discretion of the Board and the Board’s allegations supporting such determination shall be set forth in a written notice to the Participant. The Participant shall have an opportunity within ten (10) business days after receiving such notice to meet with the Board to discuss the Board’s allegations of Cause. Any good faith determination by the Board that the Participant’s action or omission constitutes “Cause” shall be conclusive on the Participant.

(d)
“Change of Control” occurs when:
i.
any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) becomes the beneficial owner, directly or indirectly, of 30% or more of the combined voting power of the Company’s outstanding voting securities ordinarily having the right to vote for the election of directors of the Company; provided, however, that for purposes of this subparagraph (i), the following acquisitions shall not constitute a Change of Control: (y) any acquisition by the Company or any employee benefit plan or plans (or related trust) of the Company and its subsidiaries and affiliates or (z) any acquisition by any corporation pursuant to a transaction which complies with clauses (x), (y), and (z) of subparagraph (iii) below; or

ii.
the individuals who, as of the Effective Date, constituted the Board of Directors (as of the Effective Date, the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the Effective Date whose election, or nomination for election, was approved by a vote or by approval of the proxy statement in which such person is named as a nominee for director, without written objection to such nomination of the persons comprising at least a majority of the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest) shall be, for purposes of this Award, considered as though such person were a member of the Incumbent Board; or

iii.
consummation of a reorganization, merger or consolidation of the Company (a “Business Combination”), in each case, unless, following such Business Combination, (x) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Company’s outstanding Shares and outstanding voting securities ordinarily having the right to vote for the election of directors of the Company


Exhibit 10.6

immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities ordinarily having the right to vote for the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Company’s outstanding Shares and outstanding voting securities ordinarily having the right to vote for the election of directors of the Company, as the case may be, (y) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan or plans (or related trust) of the Company or such corporation resulting from such Business Combination and their subsidiaries and affiliates) beneficially owns, directly or indirectly, 30% or more of the combined voting power of the then outstanding voting securities of the corporation resulting from such Business Combination and (z) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or

iv.
consummation of a liquidation or dissolution of the Company approved by the shareholders; or

v.
consummation of a sale of all or substantially all of the assets of the Company.

(e)
“Code” means the Internal Revenue Code of 1986, as amended.

(f)
“Committee” means the Compensation Committee of the Board, or another committee appointed by the Board to administer the Award or any part thereof, or the Board, where the Board is acting as the Committee or performing the functions of the Committee.

(g)
“Disability” means a determination of disability under the long-term disability plan of the Company or a Subsidiary that is applicable to the Participant.

(h)
“Effective Date” means January 1, 20XX.

(i)
“Exchange Act” means the Securities Exchange Act of 1934, as amended.

(j)
“Proscribed Activity” means any of the following:

i.
the Participant’s breach of any written agreement between the Participant and the Company or any of its Subsidiaries, including any agreement relating to nondisclosure, noncompetition, nonsolicitation and/or nondisparagement, to the extent such agreements are enforceable under applicable law;

ii.
the Participant’s direct or indirect unauthorized use or disclosure of confidential information or trade secrets of the Company or any Subsidiary, including, but not limited to, such matters as costs, profits, markets, sales, products, product lines, key personnel, pricing policies, operational methods, customers, customer requirements, suppliers, plans for future developments, and other business affairs and methods and other information not readily available to the public;

iii.
the Participant’s direct or indirect engaging or becoming a partner, director, officer, principal, employee, consultant, investor, creditor or stockholder in/for any business, proprietorship, association, firm or corporation not owned or controlled by the Company or its Subsidiaries which is engaged or proposes to engage in a business


Exhibit 10.6

competitive directly or indirectly with the business conducted by the Company or its Subsidiaries in any geographic area where such business of the Company or its Subsidiaries is conducted, provided that the Participant’s investment in 1% or less of the outstanding capital stock of any corporation whose stock is listed on a national securities exchange shall not be treated as a Proscribed Activity;

iv.
the Participant’s direct or indirect, either on the Participant’s own account or for any person, firm or company, soliciting, interfering with or inducing, or attempting to induce, any employee of the Company or any of its Subsidiaries to leave his or her employment or to breach his or her employment agreement;

v.
the Participant’s direct or indirect taking away, interfering with relations with, diverting or attempting to divert from the Company or any Subsidiary any business with any customer of the Company or any Subsidiary, including (A) any customer that has been solicited or serviced by the Company within one year prior to the date of termination of Participant’s employment with the Company and (B) any customer with which the Participant has had contact or association, or which was under the supervision of Participant, or the identity of which was learned by the Participant as a result of Participant’s employment with the Company;

vi.
following the Participant’s termination of employment, the Participant’s making of any remarks disparaging the conduct or character of the Company or any of its Subsidiaries, or their current or former agents, employees, officers, directors, successors or assigns; or

vii.
the Participant’s failure to cooperate with the Company or any Subsidiary, for no additional compensation (other than reimbursement of expenses), in any litigation or administrative proceedings involving any matters with which the Participant was involved during the Participant’s employment with the Company or any Subsidiary.

Notwithstanding the foregoing, nothing in these terms and conditions restricts or prohibits the Participant from initiating communications directly with, responding to any inquiries from, providing testimony before, providing confidential information to, reporting possible violations of law or regulation to, or from filing a claim or assisting with an investigation directly with, a self-regulatory authority or a government agency or entity, including the U.S. Equal Employment Opportunity Commission, the Department of Labor, the National Labor Relations Board, the Department of Justice, the Securities and Exchange Commission, Congress, and any agency Inspector General (collectively, the “Regulators”), or from making other disclosures that are protected under the whistleblower provisions of state or federal law or regulation. The Participant does not need the prior authorization of the Company to engage in such communications with the Regulators, respond to such inquiries from the Regulators, provide confidential information or documents to the Regulators, or make any such reports or disclosures to the Regulators. The Participant is not required to notify the Company that the Participant has engaged in such communications with the Regulators.

If the Participant primarily provides services in California, subsection (iii) above shall not apply to the Participant and subsection (v) above shall apply to the Participant only to the extent that the Participant uses or discloses confidential information of the Company or any of its Subsidiaries in performing such Proscribed Activity and to the extent permitted by applicable law.

(k)
“Proscribed Period” means the period beginning on the date of termination of Participant’s employment and ending on the later of (A) the one year anniversary of such termination date or (B) if the Participant is entitled to severance benefits in the form of salary continuation, the date on which salary continuation is no longer payable to the Participant.

(l)
“Shares” means shares of common stock of the Company.
(m)
“Subsidiary” means an entity that is, either directly or through one or more intermediaries,


Exhibit 10.6

controlled by the Company.


Schedule A to [EXECUTIVE NAME]’s
20XX Annual Cash Incentive Award


The following sets forth the method for calculating the payment amount applicable to the Award to which this Schedule A is attached. This Schedule A shall be subject to the Award Documents. Unless otherwise specified in this Schedule A , all defined terms have the meanings set forth in the Award.


(a)
As soon as practical after the end of the Performance Period, the Committee shall apply: (i) the performance metrics (the “Performance Metrics”); (ii) the performance target(s) (the “Performance Targets”); (iii) the weight given to [the/each] performance metric; (iv) the threshold, target and maximum payout amounts (expressed as a percentage of the Participant’s Eligible Base Salary) payable if the Performance Target(s) [is/are] achieved; and (v) any other requirements or limitations of the Award approved by the Committee, in each case as applicable to the Participant and specified in the Guide and the Payout Grid, to calculate the amount payable pursuant to this Award. The Committee may, in its sole discretion, increase or decrease the amount calculated pursuant to this paragraph (a) based on individual performance or such other factors, events or circumstances as the Committee deems appropriate. The Committee shall have sole discretion to determine whether and to what extent an Award will be payable to a Participant.

(b)
The Committee may adjust the Performance Metric(s), the Performance Target(s), and the performance results in its sole discretion based on such factors, events or circumstances as the Committee deems appropriate in its sole discretion, including without limitation, with respect to (i) changes in accounting principle, standard or policy; (ii) changes in law or regulation; (iii) asset impairments; (iv) restructuring charges; (v) discontinued operations; (vi) non-operational or non-recurring items (including, without limitation, those resulting from mergers, acquisitions or divestitures); and (vii) a Change of Control, other corporate transactions, or acquisitions or dispositions of businesses and assets affecting the Company, any Subsidiary or any business unit, or the financial statements of the Company or any Subsidiary.

(c)
For purposes of the Award, Eligible Base Salary means the annual rate of pay for the Performance Period, excluding all other compensation paid to the Participant during the year, including but not limited to bonuses, incentives, commissions, car allowance, employee benefits, relocation expenses, and any imputed income for which the Participant may be eligible (all as more fully described in the Guide).







Exhibit 10.7

Ryder System, Inc.
NON-QUALIFIED STOCK OPTIONS

TERMS AND CONDITIONS

The following terms and conditions apply to the non-qualified stock option (“Option”) granted by Ryder System, Inc. (the “Company”) to Scott T. Parker (the “Participant”) as specified in the Stock Option Award Notification (the “Notification”) for the Option which references these terms and conditions. The Option is granted outside the terms of the Amended and Restated Ryder System, Inc. 2012 Equity and Incentive Compensation Plan (the “Plan), and the share reserve thereunder, as an “employment inducement award” within the meaning of NYSE Manual 303A.08. Subject to these terms and conditions and the Notification, the Option will otherwise be subject to the Plan and will be governed as if it had been granted under the Plan. Certain terms of the Option, including the number of Shares subject to the Option, the exercise price, the vesting schedule and the expiration date, are set forth in the Notification. The terms and conditions contained herein may be amended by the Compensation Committee of the Company’s Board of Directors (the “Committee”) as permitted by the Plan. Capitalized terms used herein and not defined shall have the meaning ascribed to such terms in the Plan or in the Notification.

1.
General . The Option represents the right to purchase Shares on the terms and conditions set forth herein, in the Notification and the Plan, the applicable terms, conditions and other provisions of which are incorporated by reference herein. A copy of the Plan and the documents that constitute the “Prospectus” for the Plan under the Securities Act of 1933 have been made available to the Participant prior to or along with delivery of the Notification.

2.
Exercisability of Option . Subject to Sections 4 and 5 below, the Option shall vest and become exercisable pursuant to the vesting schedule set forth in the Notification and shall remain exercisable until the expiration date set forth in the Notification, or such other expiration date designated by the Committee pursuant to Section 7 of the Plan (the “Expiration Date”).

3.
Exercise Procedures. The Option, to the extent exercisable, may be exercised by delivering to the Company’s stock administrator, notice of intent to exercise in the manner designated by the stock administrator on behalf of the Company which may vary based on the Participant’s position with the Company. Payment of the aggregate exercise price and applicable withholding taxes shall be made in the manner, consistent with the Plan and these terms and conditions, designated by the stock administrator on behalf of the Company.

4.
Termination of Option; Forfeiture. Notwithstanding the vesting and expiration dates set forth in the Notification, the Option will terminate upon or following the termination of the Participant’s employment with the Company and its Subsidiaries as described below. Except as otherwise provided in Section 4(d) and 5(a) below, upon the Participant’s termination of employment for any reason, the unvested portion of the Option will immediately terminate. For purposes of these terms and conditions, a Participant shall not be deemed to have terminated his or her employment with the Company and its Subsidiaries if he or she is then employed by the Company or another Subsidiary without a break in service.

(a)
Resignation by the Participant or Termination by the Company or a Subsidiary other than for Cause : Except as otherwise provided in this Section 4 or Section 5(b) below, the vested portion of the Option will terminate at 12:01 a.m. on the 91st day following the Participant’s last day of employment (but not later than the Expiration Date), provided that if the Participant dies during such 90 day period, such portion of the Option will terminate no earlier than 12:01 a.m. on the first anniversary of the date of death (but not later than the Expiration Date) and provided further that, if, upon such termination, the Participant is entitled to severance benefits in the form of salary continuation, then the vested portion of the Option will terminate at 12:01 a.m. on the 91st day following the date that salary continuation is no longer payable to the Participant (but not later than the Expiration Date).

Notwithstanding the foregoing, if the Participant is terminated by the Company or a Subsidiary without Cause and is subsequently re-employed by the Company or a Subsidiary prior to 12:01 a.m. on the 91st day following the later of (i) the last day of employment or (ii) if applicable, the date that salary continuation is no longer payable to the Participant, but in either case, not later than the Expiration Date, then the vested, but unexercised, portion of the Options will remain


Exhibit 10.7

exercisable until the Expiration Date, unless terminated earlier pursuant hereto.

In the event that the Participant voluntarily terminates his or her employment with the Company or a Subsidiary and is subsequently re-employed by the Company or a Subsidiary prior to 12:01 a.m. on the 91 st day following the Participant’s last day of employment (but not later than the Expiration Date), then the vested, but unexercised, portion of the Options will remain exercisable until the Expiration Date, unless terminated earlier pursuant hereto.

(b)
Retirement : If a Participant’s employment terminates for any reason (other than for Cause, death or Disability) at a time when he or she is eligible for Retirement, then the vested portion of the Option will terminate upon the Expiration Date.

(c)
Termination due to Death : If a Participant’s employment terminates on account of the Participant’s death, the vested portion of the Option will expire upon the Expiration Date. Following the Participant’s death, the right to exercise such vested portion will pass to the Participant’s Beneficiary.

(d)
Termination due to Disability : If a Participant’s employment terminates on account of the Participant’s Disability, the unvested portion of the Option that would otherwise have become vested during the three years following Disability will continue to vest as scheduled (without regard to subsequent status changes). The vested portion of the Option, including the portion that becomes vested pursuant to the preceding sentence, will expire upon the Expiration Date.

(e)
Termination for Cause : Notwithstanding the foregoing provisions of this Section 4, the entire Option, including the vested portion, will terminate immediately upon the Participant’s termination of employment for Cause. To the extent the Participant exercised any portion of the Option during the one year period immediately prior to the date of such termination of employment for Cause, the Company shall have the right to reclaim and receive from the Participant all Shares delivered to the Participant upon such exercise, or to the extent the Participant has transferred such Shares, the after-tax equivalent value thereof (as of the date the Shares were transferred by the Participant) in cash, and in each case upon receipt thereof, the Company shall return the exercise price paid by the Participant.

(f)
Proscribed Activity : If, during the Proscribed Period but prior to a Change of Control, the Participant engages in a Proscribed Activity, then any portion of the Option still outstanding shall terminate and the Company shall have the right to reclaim and receive from the Participant all Shares delivered to the Participant upon the exercise of the Option during the one year period immediately prior to, or at any time following, the date of the Participant’s termination of employment, or to the extent the Participant has transferred such Shares, the after-tax equivalent value thereof (as of the date the Shares were transferred by the Participant) in cash, and in each case upon receipt thereof, the Company shall return the exercise price paid by the Participant.

5.
Change of Control.

(a)
Treatment of the Option : In the event of a Change of Control, the Committee may take such actions with respect to the Option as it deems appropriate pursuant to the Plan; provided that if the Option continues in effect after a Change of Control and the Participant’s employment is terminated by the Company without Cause, the Participant terminates employment for Good Reason, or the Participant’s employment is terminated on account of death, Disability or Retirement, in each case, upon or within 24 months following the Change of Control, any unvested portion of the Option shall become fully vested upon such termination of employment.

(b)
Option Termination : Notwithstanding anything contained herein to the contrary and except as otherwise determined by the Committee prior to a Change of Control in accordance with Section 7 or 8 of the Plan, in the event of a Change of Control, any portion of the Option which is vested as of the Change of Control or becomes vested upon or following the Change of Control (whether pursuant to this Section 5 or otherwise) shall remain outstanding until the Expiration Date, but subject to earlier termination under the circumstances described in Sections 4(e) and (f) above.



Exhibit 10.7

(c)
Termination of Employment Prior to a Change of Control : For purposes of this Section 5, the term Option shall refer only to those Options that are outstanding at the time of the Change of Control and not to any unvested Options that have terminated pursuant to Section 4 above, provided that, if (i) the Participant’s employment was terminated by the Company other than for Cause or Disability during the 12 month period prior to the Change of Control, (ii) during such 12 month period, the Participant does not engage in a Proscribed Activity, and (iii) the Committee determines, in its sole and absolute discretion, that the decision related to such termination was made in contemplation of the Change of Control, within 30 days following the Change of Control, with respect to any portion of the Option which the Participant forfeited upon the Participant’s termination of employment, the Participant shall receive a lump sum cash payment per Share equal to the excess, if any, of the Fair Market Value of a Share on the date that the Change of Control occurs, over the exercise price per Share subject to the Option. In addition, in the event that a Participant’s employment terminates on account of Disability prior to a Change of Control, any portion of the Option which is unvested and outstanding as of the Change of Control and would otherwise vest during the three years following Disability in accordance with Section 4(d) above shall become fully vested upon the Change of Control.

6.
U.S. Federal, State and Local Income Withholding. The Participant is solely responsible for the satisfaction of all taxes that may arise in connection with the Option, and the Option may not be exercised unless the Participant makes arrangements satisfactory to the Company to ensure that its withholding tax obligations will be satisfied. At the time of taxation, the Company shall have the right to deduct from other compensation or from amounts payable with respect to the Option, including by withholding Shares otherwise issuable upon the exercise of the Option, an amount equal to the federal (including FICA), state and local income and payroll taxes and other amounts as may be required by law to be withheld with respect to the Option. Notwithstanding the foregoing, the Company may satisfy any tax obligations it may have in any other jurisdiction outside the U.S. in any manner it deems, in its sole and absolute discretion, to be necessary or appropriate.

7.
Definitions .

(a)
“Proscribed Activity” means any of the following:

(i)
the Participant’s breach or violation of (A) any written agreement between the Participant and the Company or any of its Subsidiaries, including any agreement relating to nondisclosure, noncompetition, nonsolicitation and/or nondisparagement, to the extent such agreements are enforceable under applicable law, or (B) any legal obligation it may have to the Company;

(ii)
the Participant’s direct or indirect unauthorized use or disclosure of confidential information or trade secrets of the Company or any Subsidiary, including, but not limited to, such matters as costs, profits, markets, sales, products, product lines, key personnel, pricing policies, operational methods, customers, customer requirements, suppliers, plans for future developments, and other business affairs and methods and other information not readily available to the public;

(iii)
the Participant’s direct or indirect engaging or becoming a partner, director, officer, principal, employee, consultant, investor, creditor or stockholder in/for any business, proprietorship, association, firm or corporation not owned or controlled by the Company or its Subsidiaries which is engaged or proposes to engage in a business competitive directly or indirectly with the business conducted by the Company or its Subsidiaries in any geographic area where such business of the Company or its Subsidiaries is conducted, provided that the Participant’s investment in 1% or less of the outstanding capital stock of any corporation whose stock is listed on a national securities exchange shall not be treated as a Proscribed Activity;

(iv)
the Participant’s direct or indirect, either on the Participant’s own account or for any person, firm or company, soliciting, interfering with or inducing, or attempting to induce, any employee of the Company or any of its Subsidiaries to leave his or her employment or to breach his or her employment agreement;


Exhibit 10.7

(v)
the Participant’s direct or indirect taking away, interfering with relations with, diverting or attempting to divert from the Company or any Subsidiary any business with any customer of the Company or any Subsidiary, including (A) any customer that has been solicited or serviced by the Company within one year prior to the date of termination of the Participant’s employment with the Company and (B) any customer with which the Participant has had contact or association, or which was under the supervision of the Participant, or the identity of which was learned by the Participant as a result of the Participant’s employment with the Company;

(vi)
following the Participant’s termination of employment, the Participant’s making of any remarks disparaging the conduct or character of the Company or any of its Subsidiaries, or their current or former agents, employees, officers, directors, successors or assigns; or

(vii)
the Participant’s failure to cooperate with the Company or any Subsidiary, for no additional compensation (other than reimbursement of expenses), in any litigation or administrative proceedings involving any matters with which the Participant was involved during the Participant’s employment with the Company or any Subsidiary.

Notwithstanding the foregoing, nothing in these terms and conditions restricts or prohibits the Participant from initiating communications directly with, responding to any inquiries from, providing testimony before, providing confidential information to, reporting possible violations of law or regulation to, or from filing a claim or assisting with an investigation directly with, a self-regulatory authority or a government agency or entity, including the U.S. Equal Employment Opportunity Commission, the Department of Labor, the National Labor Relations Board, the Department of Justice, the Securities and Exchange Commission, Congress, and any agency Inspector General (collectively, the “Regulators”), or from making other disclosures that are protected under the whistleblower provisions of state or federal law or regulation. The Participant does not need the prior authorization of the Company to engage in such communications with the Regulators, respond to such inquiries from the Regulators, provide confidential information or documents to the Regulators, or make any such reports or disclosures to the Regulators. The Participant is not required to notify the Company that the Participant has engaged in such communications with the Regulators.

If the Participant primarily provides services in California, subsection (iii) above shall not apply to the Participant and subsection (v) above shall apply to the Participant only to the extent that the Participant uses or discloses confidential information of the Company or any if its Subsidiaries in performing such Proscribed Activity and to the extent permitted by applicable law.

(b)
“Proscribed Period” means the period beginning on the date of termination of the Participant’s employment and ending on the later of (A) the one year anniversary of such termination date or (B) if the Participant is entitled to severance benefits in the form of salary continuation, the date on which salary continuation is no longer payable to the Participant.

(c)
“Retirement” means termination of employment for any reason (other than for Cause or by reason of death or Disability) upon or following attainment of age 55 and completion of 10 years of service, or upon or following attainment of age 65 without regard to years of service; provided that, Retirement shall not be deemed to occur unless such termination of service constitutes a separation from service, as defined by Section 409A of the Code.

8 .
Company Policies. The Option and any Shares or cash delivered pursuant to the Option shall be subject to all applicable clawback or recoupment policies, share trading policies and other policies that may be implemented by the Company’s Board of Directors from time to time.

9.
Other Benefits . No amount accrued or paid under this Award shall be deemed compensation for purposes of computing a Participant’s benefits under any retirement plan of the Company or its Subsidiaries, nor affect any benefits under any other benefit plan now or subsequently in effect under which the availability or amount of benefits is related to the Participant’s level of compensation.



Exhibit 10.7

10.
Defend Trade Secrets Act Notice . Participants are hereby notified that the immunity provisions in Section 1833 of title 18 of the United States Code provide that an individual cannot be held criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade secret that is made (i) in confidence to federal, state or local government officials, either directly or indirectly, or to an attorney, and is solely for the purpose of reporting or investigating a suspected violation of the law, (ii) under seal in a complaint or other document filed in a lawsuit or other proceeding, or (iii) to the Participant’s attorney in connection with a lawsuit for retaliation for reporting a suspected violation of law (and the trade secret may be used in the court proceedings for such lawsuit) as long as any document containing the trade secret is filed under seal and the trade secret is not disclosed except pursuant to court order.




Exhibit 10.8

Ryder System, Inc.
RESTRICTED STOCK RIGHTS

TERMS AND CONDITIONS

The following terms and conditions apply to the Restricted Stock Rights (the “RSRs”) granted by Ryder System, Inc. (the “Company”) to Scott T. Parker (the “Participant”) as specified in the Restricted Stock Rights Award Notification (the “Notification”) for the RSRs which references these terms and conditions. The RSRs are granted outside the terms of the Amended and Restated Ryder System, Inc. 2012 Equity and Incentive Compensation Plan (the “Plan), and the share reserve thereunder, as an “employment inducement award” within the meaning of NYSE Manual 303A.08. Subject to these terms and conditions and the Notification, the RSRs will otherwise be subject to the Plan and will be governed as if they had been granted under the Plan. Certain terms of the RSRs, including the number of Shares underlying the RSRs, are set forth in the Notification. The Compensation Committee of the Company’s Board of Directors (the “Committee”) shall administer the RSRs in accordance with the Plan. Capitalized terms used herein and not defined shall have the meaning ascribed to such terms in the Plan or in the Notification.

1.
General . Each RSR represents the right to receive one Share on a future date, on the terms and conditions set forth herein, in the Notification and the Plan, the applicable terms, conditions and other provisions of which are incorporated by reference herein (collectively, the “Award Documents”). A copy of the Plan and the documents that constitute the “Prospectus” for the Plan under the Securities Act of 1933 have been made available to the Participant prior to or along with delivery of the Notification.

The terms and conditions contained herein may be amended by the Committee as permitted by the Plan; none of the terms and conditions of the RSRs may be amended or waived without the prior approval of the Committee. Any amendment or waiver not approved by the Committee will be void and have no force or effect. Any employee or officer of the Company who authorizes any such amendment or waiver without the prior approval of the Committee will be subject to disciplinary action up to and including forfeiture of his or her RSRs and/or termination of employment (unless otherwise prohibited by law). All decisions and determinations made by the Committee relating to the RSRs shall be final and binding on the Participant, his or her beneficiaries and any other person     having or claiming an interest under the Plan.

2.
Delivery of Shares . Subject to Sections 3 and 4 below, the RSRs will vest pursuant to the vesting schedule set forth in the Notification, provided the Participant is, on the relevant vesting date, and has been from the date of grant of the RSRs to the relevant vesting date, continuously employed by the Company or one of its Subsidiaries. For purposes of these terms and conditions, the Participant shall not be deemed to have terminated his or her employment with the Company and its Subsidiaries if he or she is then employed by the Company or another Subsidiary without a break in service.

Upon vesting, the Shares subject to the vested RSRs will be transferred to an account held in the name of the Participant by the Company’s independent stock plan administrator and the Participant will receive notice of such transfer together with all relevant account details.

3.
Termination of RSRs; Forfeiture. The RSRs will be cancelled upon or following the termination of the Participant’s employment with the Company and its Subsidiaries as described below.

(a)
Resignation by the Participant or Termination by the Company or a Subsidiary : Except as otherwise provided in subsection (b) or Section 4 below, all outstanding RSRs will be forfeited and the Participant will not have any right to delivery of Shares that did not vest prior to such termination. If the Participant’s employment is terminated by the Company or a Subsidiary for Cause, then the Company shall have the right to reclaim and receive from the Participant any Shares delivered to the Participant pursuant to Section 2 within the one year period before the date of the Participant’s termination of employment, or to the extent the Participant has transferred such Shares, the equivalent after-tax value thereof (as of the date the Shares were transferred by the Participant) in cash.

(b)
Termination b y Reason of Death, Disability or Retirement : Except as otherwise provided in Section 4 below, a prorated portion of the RSRs shall vest, calculated as follows: (A) the total number of RSRs awarded, multiplied by a fraction (and rounded down to the nearest whole Share), the numerator of which shall be the number of days from the date of grant of the RSRs to the date of death, Disability or Retirement, as the case may be, and the denominator of which shall be the


Exhibit 10.8

number of days from the date of grant of the RSRs to the last scheduled vesting date for the RSRs set forth in the Notification, less (B) the number of RSRs already vested at the time of the Participant’s death, Disability or Retirement, as the case may be. Shares equal to the prorated number of RSRs that so vest will be delivered to the Participant (or his or her Beneficiary, in the event of death) within 60 days following the date of death, Disability or Retirement, as the case may be, subject to Section 9.17 of the Plan.

(c)
Proscribed Activity : If, during the Proscribed Period but prior to a Change of Control, the Participant engages in a Proscribed Activity, then the Company shall have the right to reclaim and receive from the Participant all Shares delivered to the Participant pursuant to Section 2 during the one year period immediately prior to, or at any time following, the date of the Participant’s termination of employment, or to the extent the Participant has transferred such Shares, the after-tax equivalent value thereof (as of the date the Shares were transferred by the Participant) in cash.

4.
Change of Control . In the event of a Change of Control, the RSRs shall become payable as described in this Section 4, provided that the Committee may take such other actions with respect to the RSRs as it deems appropriate pursuant to Section 7 and 8 of the Plan.

(a)
Form of Payment : The Committee may determine that the unvested RSRs will be (i) converted to and payable in units with respect to shares or other equity interests of the acquiring company or its parent or (ii) payable in cash based on the Fair Market Value of the RSRs as of the date of the Change of Control.

(b)
Continued Employment : If the Participant continues in employment with the Company or one of its Subsidiaries through each applicable vesting date following the Change of Control, the RSRs will vest pursuant to the vesting schedule set forth in the Notification.

(c)
Termination without Cause, for Good Reason or on Account of Death, Disability or Retirement . If the Participant’s employment is terminated by the Company without Cause, the Participant terminates employment for Good Reason, or the Participant’s employment terminates on account of death, Disability or Retirement, in each case, upon or within 24 months following a Change of Control and prior to the last vesting date set forth in the Notification, any unvested RSRs shall become fully vested upon such termination of employment and shall be paid within 60 days following the date of such termination, subject to Section 9.17 of the Plan.

(d)
Termination Prior to a Change of Control : To the extent (i) a Participant’s employment was terminated by the Company other than for Cause or Disability within the 12 months prior to the date on which the Change of Control occurred, (ii) during such 12 month period the Participant did not engage in a Proscribed Activity, and (iii) the Committee determines, in its sole and absolute discretion, that the decision related to such termination was made in contemplation of the Change of Control, then upon the Change of Control, the Participant will become entitled to a cash payment equal to the product of: the Fair Market Value of a Share on the date of the Change of Control and the number of Shares to which the Participant would otherwise have been entitled if the Participant’s employment had continued until the date of the Change of Control and the Participant’s employment had been terminated as described in subsection (c) above as of such date. In the event that the Change of Control constitutes a change “in ownership” or “effective control” or a change in the “ownership of a substantial portion of the assets” of the Company under Section 409A of the Code and the rulings and regulations issued thereunder (any such transaction, a “409A Compliant COC”), such cash payment will be made in a lump sum within 60 days following the date on which the Change of Control occurs. In the event such Change of Control does not constitute a 409A Compliant COC (any such transaction, a “Non-409A Compliant COC”), the cash payment will be distributed to the Participant on the first anniversary of the Participant’s separation from service.

5.
Rights as a Shareholder; Dividend Equivalent Rights. The Participant will not have the rights of a shareholder of the Company with respect to Shares subject to the RSRs until such Shares are actually delivered to the Participant. If and when Shares are delivered to the Participant pursuant to Section 2, 3 or 4, as applicable, the Company will make a cash payment equal to the product of (i) the number of Shares delivered, and (ii) the aggregate dividends paid on a Share during the period from the date of grant of the award until the date the Shares are delivered.


Exhibit 10.8

  
6.
U.S. Federal, State and Local Income Taxes. The Participant is solely responsible for the satisfaction of all taxes generally that may arise in connection with the RSRs. At the time of taxation, the Company shall have the right to deduct from other compensation or from amounts payable with respect to the RSRs, including by withholding Shares otherwise issuable upon settlement of the RSRs an amount equal to the federal (including FICA), state and local income and payroll taxes required by law to be withheld with respect to the RSRs. The Company intends to satisfy this withholding obligation by reducing the number of Shares and/or cash that are to be delivered to the Participant under this Agreement in an amount sufficient to satisfy the withholding obligations due (based on the Fair Market Value of the Shares for the related RSRs). Notwithstanding the foregoing, the Company may satisfy any tax obligations it may have in any jurisdiction outside the U.S. in any manner it deems, in its sole and absolute discretion, to be necessary or appropriate.

7.
Section 409A. The RSRs are intended to comply with Section 409A of the Code or an exemption, and delivery of Shares and other payments pursuant to the RSRs may only be made upon an event and in a manner permitted by Section 409A, to the extent applicable. The RSRs shall be administered consistent with Section 9.17 of the Plan.

8.
Statute of Limitations and Conflicts of Laws . All rights of action by, or on behalf of the Company or by any shareholder against any past, present, or future member of the Board of Directors, officer, or employee of the Company arising out of or in connection with the RSRs or the Award Documents, must be brought within three years from the date of the act or omission in respect of which such right of action arises. The RSRs and the Award Documents shall be governed by the laws of the State of Florida, without giving effect to principles of conflict of laws, and construed accordingly.

9.
No Employment Right . Neither the grant of the RSRs nor any action taken hereunder shall be construed as giving any employee or any Participant any right to be retained in the employ of the Company. The Company is under no obligation to grant RSRs hereunder. Nothing contained in the Award Documents shall limit or affect in any manner or degree the normal and usual powers of management, exercised by the officers and the Board of Directors or committees thereof, to change the duties or the character of employment of any employee of the Company or to remove the individual from the employment of the Company at any time, all of which rights and powers are expressly reserved.

10.
No Assignment . A Participant’s rights and interest under the RSRs may not be assigned or transferred, except as otherwise provided herein, and any attempted assignment or transfer shall be null and void and shall extinguish, in the Company’s sole discretion, the Company’s obligation under the RSRs or the Award Documents.

11.
Unfunded Plan . Any shares or other amounts owed under the RSRs shall be unfunded. The Company shall not be required to establish any special or separate fund, or to make any other segregation of assets, to assure delivery or payment of any earned amounts.

12.
Company Policies. The RSRs and any cash or Shares delivered pursuant to the RSRs shall be subject to all applicable clawback or recoupment policies, share trading policies and other policies that may be implemented by the Company’s Board of Directors from time to time.

13.
Definitions .

(a)
“Proscribed Activity” means any of the following:

(i)
the Participant’s breach of any written agreement between the Participant and the Company or any of its Subsidiaries, including any agreement relating to nondisclosure, noncompetition, nonsolicitation and/or nondisparagement, to the extent such agreements are enforceable under applicable law;

(ii)
the Participant’s direct or indirect unauthorized use or disclosure of confidential information or trade secrets of the Company or any Subsidiary, including, but not limited to, such matters as costs, profits, markets, sales, products, product lines, key personnel, pricing policies, operational methods, customers, customer requirements, suppliers, plans for future developments, and other business affairs and methods and other information not


Exhibit 10.8

readily available to the public;

(iii)
the Participant’s direct or indirect engaging or becoming a partner, director, officer, principal, employee, consultant, investor, creditor or stockholder in/for any business, proprietorship, association, firm or corporation not owned or controlled by the Company or its Subsidiaries which is engaged or proposes to engage in a business competitive directly or indirectly with the business conducted by the Company or its Subsidiaries in any geographic area where such business of the Company or its Subsidiaries is conducted, provided that the Participant’s investment in 1% or less of the outstanding capital stock of any corporation whose stock is listed on a national securities exchange shall not be treated as a Proscribed Activity;

(iv)
the Participant’s direct or indirect, either on the Participant’s own account or for any person, firm or company, soliciting, interfering with or inducing, or attempting to induce, any employee of the Company or any of its Subsidiaries to leave his or her employment or to breach his or her employment agreement;

(v)
the Participant’s direct or indirect taking away, interfering with relations with, diverting or attempting to divert from the Company or any Subsidiary any business with any customer of the Company or any Subsidiary, including (A) any customer that has been solicited or serviced by the Company within one year prior to the date of termination of Participant’s employment with the Company and (B) any customer with which the Participant has had contact or association, or which was under the supervision of Participant, or the identity of which was learned by the Participant as a result of Participant’s employment with the Company;

(vi)
following the Participant’s termination of employment, the Participant’s making of any remarks disparaging the conduct or character of the Company or any of its Subsidiaries, or their current or former agents, employees, officers, directors, successors or assigns; or

(vii)
the Participant’s failure to cooperate with the Company or any Subsidiary, for no additional compensation (other than reimbursement of expenses), in any litigation or administrative proceedings involving any matters with which the Participant was involved during the Participant’s employment with the Company or any Subsidiary.        

Notwithstanding the foregoing, nothing in these terms and conditions restricts or prohibits the Participant from initiating communications directly with, responding to any inquiries from, providing testimony before, providing confidential information to, reporting possible violations of law or regulation to, or from filing a claim or assisting with an investigation directly with, a self-regulatory authority or a government agency or entity, including the U.S. Equal Employment Opportunity Commission, the Department of Labor, the National Labor Relations Board, the Department of Justice, the Securities and Exchange Commission, Congress, and any agency Inspector General (collectively, the “Regulators”), or from making other disclosures that are protected under the whistleblower provisions of state or federal law or regulation. The Participant does not need the prior authorization of the Company to engage in such communications with the Regulators, respond to such inquiries from the Regulators, provide confidential information or documents to the Regulators, or make any such reports or disclosures to the Regulators. The Participant is not required to notify the Company that the Participant has engaged in such communications with the Regulators.

If the Participant primarily provides services in California, subsection (iii) above shall not apply to the Participant and subsection (v) above shall apply to the Participant only to the extent that the Participant uses or discloses confidential information of the Company or any of its Subsidiaries in performing such Proscribed Activity and to the extent permitted by applicable law.

(b)
“Proscribed Period” means the period beginning on the date of termination of Participant’s employment and ending on the later of (A) the one year anniversary of such termination date or (B) if the Participant is entitled to severance benefits in the form of salary continuation, the date on which salary continuation is no longer payable to the Participant.


Exhibit 10.8


(c)
“Retirement” means termination of employment for any reason (other than for Cause or by reason of death or Disability) upon or following attainment of age 55 and completion of 10 years of service, or upon or following attainment of age 65 without regard to years of service; provided that, Retirement shall not be deemed to occur unless such termination of service constitutes a separation from service, as defined by Section 409A of the Code.

12 .
Other Benefits . No amount accrued or paid under the RSRs shall be deemed compensation for purposes of computing a Participant’s benefits under any retirement plan of the Company or its Subsidiaries, nor affect any benefits under any other benefit plan now or subsequently in effect under which the availability or amount of benefits is related to the Participant’s level of compensation.

13.
Defend Trade Secrets Act Notice . Participants are hereby notified that the immunity provisions in Section 1833 of title 18 of the United States Code provide that an individual cannot be held criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade secret that is made (i) in confidence to federal, state or local government officials, either directly or indirectly, or to an attorney, and is solely for the purpose of reporting or investigating a suspected violation of the law, (ii) under seal in a complaint or other document filed in a lawsuit or other proceeding, or (iii) to the Participant’s attorney in connection with a lawsuit for retaliation for reporting a suspected violation of law (and the trade secret may be used in the court proceedings for such lawsuit) as long as any document containing the trade secret is filed under seal and the trade secret is not disclosed except pursuant to court order.






Exhibit 31.1


CERTIFICATION
I, Robert E. Sanchez, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Ryder System, Inc.;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:
May 8, 2019
/s/ Robert E. Sanchez
 
 
Robert E. Sanchez
Chairman and Chief Executive Officer


Exhibit 31.2


CERTIFICATION
I, Scott Parker, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Ryder System, Inc.;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:
May 8, 2019
/s/ Scott Parker
 
 
Scott Parker
Executive Vice President and Chief Financial Officer



Exhibit 32



CERTIFICATION
In connection with the Quarterly Report of Ryder System, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Robert E. Sanchez, President and Chief Executive Officer of the Company, and Scott Parker, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 
/s/ Robert E. Sanchez
 
Robert E. Sanchez
Chairman and Chief Executive Officer
 
May 8, 2019
 
 
/s/ Scott Parker
 
Scott Parker
Executive Vice President and Chief Financial Officer
 
May 8, 2019