Document:

EX-10.2

 

EXHIBIT 10.2

Severance Agreement

     THIS AGREEMENT between RYDER SYSTEM, INC., a Florida corporation (the
“Corporation”), and name (the “Executive”), dated as of the XXX day of XXXX,
2001.

WITNESSETH:

     WHEREAS, the Executive is an officer and/or key employee of the
Corporation and/or its subsidiaries or affiliates and an integral part of its
management; and

     WHEREAS, in order to retain the Executive, the Corporation desires to
provide severance benefits to the Executive if the Executive’s employment with
the Corporation or its subsidiaries or affiliates terminates as provided herein
prior to a Change of Control (as defined in Section 2);

     NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is hereby agreed by and between the Corporation and the
Executive as follows:

     1.     Term of Agreement. This Agreement shall become effective as of the
date hereof and shall terminate upon the occurrence of the earliest of the
events specified below; provided, however, that Section 5 shall survive
termination:

          (a) the last day of the Severance Period (as defined in Section 3(e));

          (b) the termination of the Executive’s employment by the Executive for any
reason or by the Corporation or its subsidiaries or affiliates for Death,
Disability or Cause (as defined in Sections 3(b) and (a) respectively);

          (c) one (1) year following the date of receipt of a mailing (by overnight
express mail or registered or certified mail, return receipt requested) or hand
delivery to the Executive by the Corporation of written notice of its intent to
terminate this Agreement, provided that the Executive is not then receiving
severance pay and benefits pursuant to Section 4 as a result of his termination
by the Corporation or its subsidiaries or affiliates other than for Death,
Disability or Cause (as defined in Sections 3(b) and (a) respectively) prior to
the end of the one (1) year period;

          (d) a Change of Control of the Corporation (as defined in Section 2),
provided that the Executive is not then receiving severance pay and benefits
pursuant to Section 4 as a result of his termination by the Corporation or its
subsidiaries or affiliates other than for Death, Disability or Cause (as
defined in Sections 3(b) and (a) respectively) prior to the Change of Control;

          (e) the material breach by the Executive of the provisions of Section 5;
or

          (f) the termination of this Agreement pursuant to Section 4(a)(i) or
Section 4(a)(iii)(II).

 

 

          Additionally, notwithstanding anything in this Agreement to the contrary,
if the Executive should die while receiving severance pay or benefits pursuant
to Section 4 as a result of his termination by the Corporation or its
subsidiaries or affiliates other than for Death, Disability or Cause (as
defined in Sections 3(b) and (a) respectively), this Agreement shall terminate
immediately upon the Executive’s death and both parties shall be released from
all obligations under this Agreement other than those under the release
referenced in Section 5(b)(IV) and those relating to amounts or benefits which
are payable under this Agreement within five (5) business days after the
Executive’s Date of Termination (if not yet paid), are vested under any plan,
program, policy or practice or which the Executive is otherwise entitled to
receive upon his death, including, but not limited to, life insurance. Any
payment due pursuant to the preceding sentence upon the Executive’s death shall
be made to the estate of the deceased Executive, unless the plan, program,
policy, practice or law provides otherwise.

     2.     Change of Control. For the purpose of this Agreement, a “Change of
Control” shall be deemed to have occurred if:

          (a) any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
“1934 Act”)) (a “Person”) becomes the beneficial owner, directly or indirectly,
of twenty percent (20%) or more of the combined voting power of the
Corporation’s outstanding voting securities ordinarily having the right to vote
for the election of directors of the Corporation; provided, however, that for
purposes of this subparagraph (a), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition by any employee benefit
plan or plans (or related trust) of the Corporation and its subsidiaries and
affiliates or (ii) any acquisition by any corporation pursuant to a transaction
which complies with clauses (i), (ii) and (iii) of subparagraph (c) of this
Section 2; or

          (b) the individuals who, as of August 18, 1995, constituted the Board of
Directors of the Corporation (the “Board” generally and as of August 18, 1995
the “Incumbent Board”) cease for any reason to constitute at least two-thirds
(2/3) of the Board, provided that any person becoming a director subsequent to
August 18, 1995 whose election, or nomination for election, was approved by a
vote of the persons comprising at least two-thirds (2/3) 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, as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the 1934
Act) shall be, for purposes of this Agreement, considered as though such person
were a member of the Incumbent Board; or

          (c) there is a reorganization, merger or consolidation of the Corporation
(a “Business Combination”), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Corporation’s outstanding
common stock and outstanding voting securities ordinarily having the right to
vote for the election of directors of the Corporation immediately prior to such
Business Combination beneficially own, directly or indirectly, more than fifty
percent (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
Corporation or all

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or substantially all of the Corporation’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 Corporation’s
outstanding common stock and outstanding voting securities ordinarily having
the right to vote for the election of directors of the Corporation, as the case
may be, (ii) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan or plans (or related trust) of the
Corporation or such corporation resulting from such Business Combination and
their subsidiaries and affiliates) beneficially owns, directly or indirectly,
20% or more of the combined voting power of the then outstanding voting
securities of the corporation resulting from such Business Combination and
(iii) at least two-thirds (2/3) 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

          (d) there is a liquidation or dissolution of the Corporation approved by
the shareholders; or

          (e) there is a sale of all or substantially all of the assets of the
Corporation.

If a Change of Control occurs and if the Executive’s employment is terminated
prior to the date on which the Change of Control occurs, and if it is
reasonably demonstrated by the Executive that such termination of employment
(A) was at the request of a third party who has taken steps reasonably
calculated to effect a Change of Control or (B) otherwise arose in connection
with or in anticipation of a Change of Control, a Change of Control shall be
deemed to have retroactively occurred on the date immediately prior to the date
of such termination of employment.

     3.     Certain Definitions.

          (a) Cause. The Executive’s employment may be terminated for Cause only if
the Corporation’s Chief Executive Officer determines that Cause (as defined
below) exists. For purposes of this Agreement, “Cause” means (i) an act or
acts of fraud, misappropriation, or embezzlement on the Executive’s part which
result in or are intended to result in his or another’s personal enrichment at
the expense of the Corporation or its subsidiaries or affiliates, (ii)
conviction of a felony, (iii) conviction of a misdemeanor involving moral
turpitude, (iv) willful failure to report to work for more than thirty (30)
continuous days not attributable to eligible vacation or supported by a
licensed physician’s statement, or (v) any other activity which would
constitute grounds for termination for cause by the Corporation or its
subsidiaries or affiliates. For the purposes of this Section 3(a), any good
faith interpretation by the Corporation of the foregoing definition of “Cause”
shall be conclusive on the Executive.

          (b) Death or Disability.

               (i) The Executive’s employment will be terminated by the Corporation or
its subsidiaries or affiliates automatically upon the Executive’s death
(“Death”).

               (ii) After having established the Executive’s Disability (as defined
below), the Corporation may give to the Executive written notice of the
Corporation’s and/or its subsidiaries’ or affiliates’ intention to terminate
the Executive’s employment for Disability. The

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Executive’s employment will terminate for Disability effective on the thirtieth
(30th) day after the Executive’s receipt of such notice (the “Disability
Effective Date”) if within such thirty (30) day period after such receipt the
Executive shall fail to return to full-time performance of his duties. For
purposes of this Agreement, “Disability” means disability which after the
expiration of more than five (5) months after its commencement is determined to
be total and permanent by a licensed physician selected by the Corporation or
its insurers and reasonably acceptable to the Executive or his legal
representative.

          In the event of the Executive’s termination for Death or Disability, the
Executive and, to the extent applicable, his legal representatives, executors,
heirs, legatees and beneficiaries shall have no rights under this Agreement and
their sole recourse, if any, shall be under the death or disability provisions
of the plans, programs, policies and practices of the Corporation and/or its
subsidiaries and affiliates, as appropriate.

          (c) Notice of Termination. Any termination by the Corporation or its
subsidiaries or affiliates other than for Death shall be communicated by notice
to the Executive setting forth the basis for termination of the Executive’s
employment and, if the Date of Termination (as defined below) is other than the
date of receipt of such notice, specifying the termination date (the “Notice of
Termination”).

          (d) Date of Termination. Date of Termination means the date of receipt of
the Notice of Termination or any later date specified therein, as the case may
be; provided, however, that if the Executive’s employment is terminated by
reason of Death or Disability, the Date of Termination shall be the date of
Death of the Executive or the Disability Effective Date, as the case may be.

          (e) Severance Period. Unless terminated sooner pursuant to Section 1, the
Severance Period means the period set forth below depending on the Executive’s
management level at the time the Notice of Termination was given, which period
shall begin on the day following the Executive’s Date of Termination:

	 	 	 
	Chief Executive Officer	 	
Three (3) years
	Mgmt. Level 19 or above	 	
Three (3) years
	Mgmt. Level 15-18	 	
Two (2) years
	Mgmt. Level 14	 	
One (1) year and six (6) months

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     4.     Obligations of the Corporation.

          (a) Circumstances of Termination.

               (i) If, during the term of this Agreement prior to a Change of Control,
the Corporation or its subsidiaries or affiliates shall terminate the
Executive’s employment for any reason other than for Death, Disability or
Cause, the Corporation agrees to provide the Executive with compensation,
benefits and perquisites in accordance with the terms and provisions set forth
in Subsection (iii) below and the other provisions of this Agreement, and the
Executive agrees that he shall be subject to such terms and provisions. The
Executive shall not be deemed to have terminated his employment with the
Corporation or any of its subsidiaries or affiliates, and thus shall not be
entitled to any amounts or benefits pursuant to this Agreement, if he leaves
the employ of the Corporation or any of its subsidiaries or affiliates for
immediate reemployment with the Corporation or any of its subsidiaries or
affiliates. Additionally, notwithstanding anything in this Agreement to the
contrary, the Executive shall not be entitled to any amounts or benefits
pursuant to this Agreement if, as a result of the sale of all or substantially
all of the stock or assets of one or more of the Corporation’s subsidiaries or
affiliates not constituting a Change of Control, the Executive continues as an
employee of any of the companies whose stock or assets were sold or the
Executive leaves the employ of the Corporation or any of its subsidiaries or
affiliates and the Executive (A) is offered employment with the purchasing
company or any of its subsidiaries or affiliates, or (B) is offered continuing
employment with the Corporation or any of its remaining subsidiaries or
affiliates. In the event of the occurrence of any of the events set forth in
the preceding sentence, this Agreement shall terminate immediately and the
Executive shall not be entitled to any amounts or benefits hereunder; provided,
however, that this Agreement shall continue in effect if the Executive accepts
the offer of continuing employment with the Corporation or any of its remaining
subsidiaries or affiliates.

               (ii) If during the term of this Agreement, the Executive shall terminate
his employment with the Corporation or its subsidiaries or affiliates for any
reason, or the Corporation or its subsidiaries or affiliates shall terminate
the Executive’s employment for Death, Disability or Cause, then the Executive
shall not be entitled to any of the benefits set forth in Subsection (iii)
below or in any other provision of this Agreement, except to the extent of the
amounts which represent vested benefits or which the Executive is otherwise
entitled to receive under any plan, program, policy or practice of the
Corporation or any of its subsidiaries or affiliates at or subsequent to the
Executive’s Date of Termination.

               (iii) If the Executive is entitled to receive severance pay and benefits
under Subsection (i) above, the Corporation agrees to provide the Executive
with the following compensation, benefits and perquisites, subject to Section
5(b):

		
	 	     (I) Cash Entitlement. The Corporation shall pay to the Executive
the aggregate of the amounts determined pursuant to clauses a through e
below:

		
	 	     a. Unpaid Salary and Vacation. If not already paid, the Executive’s
base salary and unused vacation entitlement through the Executive’s Date
of Termination at the rate in effect at the time the Notice of
Termination was given.

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	 	     b. Salary Multiple. A continuation of the Executive’s annual base
salary at the rate in effect at the time the Notice of Termination was
given (“Annual Base Salary”) for the Executive’s applicable Severance
Period (as defined in Section 3(e)).
	 
	 	     c. Tenure - Related Bonus. An amount equal to the product of (i)
the Executive’s Annual Base Salary multiplied by (ii) the stated target
bonus opportunity percentage available to the Executive under the
respective incentive compensation plan immediately preceding the Notice
of Termination multiplied by (iii) the “Executive’s Three Year Average
Bonus Percentage” (as defined below) (the product of (i), (ii) and (iii)
hereinafter referred to as the “Bonus Average”) multiplied by the number
of the Executive’s full and prorated partial years of service with the
Corporation and/or its subsidiaries or affiliates, subject to a maximum
of twelve (12) years, divided by twelve (12).

		
	 	   The “Executive’s Three Year Average Bonus Percentage” is the sum of
the Bonus Percentages Paid to the Executive divided by the stated target
bonus opportunity percentages available to the Executive rounded to one
decimal place (e.g., 86.3%) for each of the three (3) fiscal years
immediately preceding the date the Notice of Termination was given
divided by three (3). Bonus Percentage Paid constitutes the actual bonus
paid to the Executive in the related fiscal year expressed as a
percentage of annual base salary.
	 
	 	   If the Executive has been employed by the Corporation and/or its
subsidiaries or affiliates for less than three (3) fiscal years at the
time the Notice of Termination was given, or if the Executive was not
eligible to receive an incentive compensation award pursuant to an
incentive compensation plan of the Corporation and/or its subsidiaries or
affiliates for one (1) or more of the three (3) fiscal years immediately
preceding the date the Notice of Termination was given, the bonus
percentage to be applied in the “Executive’s Three Year Bonus Percentage”
calculation for any year in which the Executive was not employed or
eligible to receive an incentive award will be the average bonus
percentage paid for such year to all executives in the Corporation or the
Executive’s respective level or division, as appropriate.

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CALCULATION EXAMPLE OF EXECUTIVE’S THREE YEAR AVERAGE

BONUS PERCENTAGE

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(2)	 	 	 	 
	 	 	 	 	(1)	 	Stated	 	(1)/(2)
	 	 	 	 	Bonus	 	Target	 	Bonus
	 	 	 	 	Percentage	 	Bonus	 	Opportunity
	Year	 	Paid	 	Opportunity	 	Percent
	
	 	
	 	
	 	

	 	 	1
	 	 	55.1	%	 	 	70.0	%	 	 	78.7	%
	 	 	2
	 	 	57.9	%	 	 	70.0	%	 	 	82.7	%
	 	 	3
	 	 	55.0	%	 	 	70.0	%	 	 	78.6	%
	 	Sum
	 	 	 	 	 	 	 	 	 	 	240.0	%
	Executive’s Three
Year Average
Bonus Percentage
(Sum divided by 3)
	 	 	 	 	 	 	 	 	 	 	80.0	%

		
	 	     d. Bonus Multiple. For the Chief Executive Officer and executives
in management level 17 and above at the time the Notice of Termination
was given only, an amount equal to the product of the Bonus Opportunity
determined in clause c above multiplied by the following multiple
depending on the Executive’s management level at the time the Notice of
Termination was given:

	 	 	 	 	 
	Chief Executive Officer	 	 	
2	 
	Mgmt. Level 17 or above	 	 	
1	 

		
	 	     e. Prior Year Bonus. If bonuses for the calendar year prior to the
Executive’s Date of Termination have been distributed and the Executive
has not yet been paid his incentive compensation award for such calendar
year, and his Date of Termination is subsequent to the incentive
compensation award payment date for such calendar year, then the
Executive shall receive an additional amount equal to the product of the
actual salary earned by the Executive during the prior calendar year
multiplied by the actual bonus percentage approved for the Executive for
such calendar year under the respective incentive compensation plan.

		
	 	   The Executive agrees that he shall not be eligible for or entitled
to any other incentive compensation award, including any pro rata
incentive compensation award, pursuant to the Corporation’s and/or its
subsidiaries’ or affiliates’ incentive compensation plans. The
Executive’s agreement to this provision is a material consideration for
the Corporation’s executing this Agreement.
	 
	 	   The Corporation shall pay to the Executive the amounts determined in
clauses a through e above as follows:
	 
	 	   Clause a: In a lump sum no later than the next normal pay period
for the Executive, unless otherwise required by law.

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	 	   Clause b: In equal semi-monthly installments on the fifteenth and
last day of each month during the Severance Period.
	 
	 	   Clause d: No later than the first March 1st following the
Executive’s Date of Termination.
	 
	 	   Clauses c and e: In a lump sum within five (5) business days after
the Executive’s Date of Termination.
	 
	 	   (II) Medical, Dental, Disability, Life Insurance and Other Similar
Plans and Programs. Until the earliest to occur of (i) the last day of
the Severance Period, (ii) the date on which the Executive becomes
eligible for the designated coverage as an employee of another employer
which provides or offers such coverage to its employees, or (iii) in the
case of benefits requiring employee contributions, the date the Executive
fails to make such contributions pursuant to the Corporation’s or the
plan’s instructions or otherwise cancels his coverage in accordance with
plan provisions (the “Benefits Continuation Period”), the Corporation
shall continue to provide the benefits which the Executive and/or his
family is or would have been entitled to receive under all medical,
dental, disability, supplemental life, group life, and accidental death
and dismemberment insurance plans and programs, and other similar plans
and programs of the Corporation and/or its subsidiaries or affiliates not
otherwise provided for in this Agreement, in each case on a basis
providing the Executive and/or his family with the opportunity to receive
benefits at least equal to those benefits provided by the Corporation
and/or its subsidiaries or affiliates to their comparably situated active
executives during the Benefits Continuation Period. The non-contributory
benefits will be paid for by the Corporation. The medical and dental
plan benefits, to the extent applicable, will be provided in accordance
with the provisions of the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended (“COBRA”), except that the Corporation shall pay the
COBRA premiums for the standard medical and dental plan benefits during
the Benefits Continuation Period minus the Executive’s contributory
obligation determined as if the Executive were still an executive
employee of the Corporation. If the Executive’s participation in any
such plan or program is barred by COBRA or for any other reason, the
Corporation shall pay or provide for payment of such benefits or
substantially similar benefits to the Executive and/or his family.
Failure of the Executive to accept available coverage from another
employer or to notify the Corporation, in writing, within thirty (30)
days of the Executive’s eligibility for coverage under another employer’s
plan shall terminate the Severance Period and this Agreement immediately,
and the Corporation shall have no further obligations to the Executive
under this Agreement; provided, however, that the Executive will, if
applicable, continue to be subject to the provisions of Section 5 of this
Agreement. Upon termination of his coverage under this paragraph, the
Executive may be eligible under COBRA to continue some of his benefits
for an additional period of time. If such is the case, the Executive
will be responsible for the entire COBRA premium. Additionally, the
Executive has thirty-one (31) days from the last day of coverage in which
to convert his group life insurance, dependent group life insurance
and/or long-term disability to an individual policy (“Insurance
Conversion Period”). For the purposes of short-term disability, coverage
will terminate on the Executive’s Date of Termination unless the
Executive has an established disability. The

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	 	Executive shall not be eligible to receive both severance payments and
short term disability. For the purposes of long-term disability, the
last day of coverage is defined as the last day of the month in which
occurred the Executive’s Date of Termination. The Executive must arrange
for conversion to an individual policy during the Insurance Conversion
Period described above through the Benefits Service Center, or such other
company as is then providing coverage.

		
	 	     (III) Car. Notwithstanding the Executive’s management level, if the
Executive was receiving a car allowance at the time the Notice of
Termination was given, the Corporation shall pay to the Executive, in a
lump sum within five (5) business days after the Executive’s Date of
Termination, an amount equal to the product of the Executive’s monthly
car allowance in effect at the time the Notice of Termination was given
multiplied by 12 multiplied by the following multiple depending on the
Executive’s management level at the time the Notice of Termination was
given:

	 	 	 	 	 
	Chief Executive Officer	 	 	
3	 
	Mgmt. Level 19 or above	 	 	
3	 
	Mgmt. Level 15-18	 	 	
2	 
	Mgmt. Level 14	 	 	
1	
..5

		
	 	     (IV) Outplacement. Until the end of the Severance Period or until
the Executive obtains another full-time job or becomes self-employed,
whichever occurs first, the Corporation shall provide the Executive with
professional outplacement services of the Corporation’s choice and shall
reimburse the Executive for documented incidental outplacement expenses
directly related to job search such as resume mailing, interviewing
trips, and clerical support, subject to a maximum cost of the lesser of
(i) ten percent (10%) of the Executive’s Annual Base Salary (as defined
in clause (I)b above), or (ii) $20,000 if the Executive was in management
level 11-19 at the time the Notice of Termination was given or $30,000 if
the Executive was above management level 19 or Chief Executive Officer at
the time the Notice of Termination was given. The Executive shall not be
entitled to receive cash in lieu of the professional outplacement
services or reimbursed incidental outplacement expenses provided by the
Corporation.

		
	 	     (V) Perquisite, Country Club, and Financial Planning/Tax Preparation
Allowances. For the twelve (12) month perquisite, country club, and
financial planning/tax preparation payment period of the Corporation or
the Executive’s respective division, as appropriate (i.e., January -
December or September - August), in which the Notice of Termination was
given, if not yet paid, and one (1) additional twelve (12) month period
thereafter, but in no event for longer than the Severance Period, the
Corporation shall continue to provide the Executive with the perquisite,
country club, and financial planning/tax preparation, as appropriate, the
Executive would have been entitled to receive under the plans, programs,
policies and practices of the Corporation and/or its subsidiaries or
affiliates (subject to the Corporation’s receipt of appropriate
documented evidence of such expenses), in each case on a basis providing
the Executive with an opportunity to receive benefits at least equal to
those provided by the Corporation and/or its subsidiaries or affiliates
to their comparably situated active executives during the applicable
period.

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	 	     (VI) Split-Dollar Life Insurance. If the Executive is covered by
the Corporation’s split-dollar life insurance policy as of the date of
this Severance Agreement, the Corporation shall continue and pay for the
Executive’s coverage until the end of the Severance Period. At the end
of the Severance Period, the Corporation will recover its collateral
interest in the policy and the Executive shall have the option to (i)
retain the policy and continue its life insurance death benefit or (ii)
surrender the policy for its remaining cash surrender value, if any. If
the Executive elects to continue the life insurance death benefit, the
Executive may be required to make additional premium payments. The
Executive should contact the Corporation’s Vice President, Compensation
and Benefits Administration, to ascertain whether any premiums may be
required.

		
	 	     (VII) Supplemental Long Term Disability Insurance. If applicable,
the cost of the Executive’s Supplemental Long Term Disability insurance
will continue to be paid by the Corporation through the last day of the
Severance Period, provided the Executive remains enrolled in the
underlying basic long term disability coverage with the Standard
Insurance Company of Oregon or any successor carrier appointed by the
Company or has other coverage with an equivalent benefit. If the
Executive obtains other disability coverage during the Severance Period
and/or no longer participates in the Corporation’s basic long term
disability program, the Executive must advise the Corporation of the
amount of coverage the Executive has with the new carrier for purposes of
adjusting the coverage provided under the Supplemental Long Term
Disability insurance.

          (b) If a Change of Control occurs and the Executive is then receiving
severance pay and benefits pursuant to Section 4(a) as a result of his
termination by the Corporation or its subsidiaries or affiliates other than for
Death, Disability or Cause prior to the Change of Control, the Corporation
shall pay to the Executive in a lump sum, within five (5) business days after
the Change of Control, an amount (in lieu of future periodic payments) equal to
the present value of all future cash payments due to the Executive under this
Agreement (including the maximum outplacement and perquisite, country club, and
financial planning/tax preparation allowances, as appropriate) using the First
National Bank of Boston’s base or prime commercial lending rate then in effect
for such computation. The Corporation and the Executive shall continue to be
liable to each other for all of their other respective obligations under this
Agreement.

          (c) Notwithstanding anything in this Agreement to the contrary, no amount
shall be paid or payable under this Agreement unless the Executive has been
employed by the Corporation and/or its subsidiaries or affiliates for at least
twelve (12) consecutive months at the time of his termination. In the event
the Executive is employed for less than twelve (12) consecutive months, the
Executive hereby agrees that he shall not receive or be entitled to anything
under this Agreement.

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     5.     Obligations of the Executive.

          (a) Covenant of Confidentiality. All documents, records, techniques,
business secrets and other information, including this Agreement, of the
Corporation, its subsidiaries and affiliates which have or will come into the
Executive’s possession from time to time during the Executive’s affiliation
with the Corporation and/or any of its subsidiaries or affiliates and which the
Corporation treats as confidential and proprietary to the Corporation and/or
any of its subsidiaries or affiliates shall be deemed as such by the Executive
and shall be the sole and exclusive property of the Corporation, its
subsidiaries and affiliates. The Executive agrees that the Executive will keep
confidential and not use or divulge to any other party any of the Corporation’s
or its subsidiaries’ or affiliates’ confidential information and business
secrets, 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. Additionally, the Executive
agrees that upon his termination of employment, the Executive shall promptly
return to the Corporation any and all confidential and proprietary information
of the Corporation and/or its subsidiaries or affiliates that is in his
possession.

     Executive agrees that the terms and provisions of this Severance
Agreement, as well as any and all incidents leading to or resulting from this
Severance Agreement, are confidential and may not be discussed with anyone
without the prior written consent of the Corporation’s President, except as
required by law.

          (b) If, at any time during the term of this Agreement, the Corporation or
its subsidiaries or affiliates shall terminate the Executive’s employment for
any reason other than for Death, Disability or Cause, and the Executive shall
elect to receive severance pay and benefits in accordance with Section 4, the
Executive shall be subject to the following additional provisions:

		
	 	     (I) Covenant Against Competition. During the Severance Period
(without any reduction or modification), the Executive shall not, without
the prior written consent of the Corporation’s Chief Executive Officer,
directly or indirectly engage or become 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 Corporation or its subsidiaries or affiliates which
is engaged or proposes to engage or hereafter engages in a business
competitive directly or indirectly with the business conducted by the
Corporation or any of its subsidiaries or affiliates in any geographic
area where such business of the Corporation or its subsidiaries or
affiliates is conducted; provided, however, that the Executive is not
prohibited from owning one percent (1%) or less of the outstanding
capital stock of any corporation whose stock is listed on a national
securities exchange.

		
	 	     (II) Covenant of Non-Solicitation. During the Severance Period
(without any reduction or modification), the Executive shall not, either
on the Executive’s own account or for any person, firm or company,
solicit, interfere with or induce, or attempt to induce, any employee of
the Corporation or any of its subsidiaries or affiliates to leave his
employment or to breach his employment agreement, if any.

11

 

		
	 	     (III) Covenant of Non-Disparagement and Cooperation. The Executive
agrees not to make any remarks disparaging the conduct or character of
the Corporation or any of its subsidiaries or affiliates, their current
or former agents, employees, officers, directors, successors or assigns
(“Ryder”). In addition, the Executive agrees to cooperate with Ryder, at
no extra cost, in any litigation or administrative proceedings (e.g.,
EEOC charges) involving any matters with which the Executive was involved
during the Executive’s employment with the Corporation. The Corporation
shall reimburse the Executive for travel expenses approved by the
Corporation or its subsidiaries or affiliates incurred in providing such
assistance.

		
	 	     (IV) Release. Upon his termination of employment, the Executive
shall execute and agree to be bound by a release agreement substantially
in the form attached as Exhibit A and, to the extent applicable, a
resignation letter substantially in the form attached as Exhibit B, prior
to and as a condition to receiving any payments or benefits pursuant to
this Agreement. If applicable, the release agreement may contain
provisions required by federal, state or local law (e.g., the Older
Worker’s Benefit Protection Act) to effectuate a general release of all
claims.

          (c) Specific Remedy. The Executive acknowledges and agrees that if the
Executive commits a material breach of the Covenant of Confidentiality or, if
applicable, the Covenant Against Competition, the Covenant of Non-Solicitation,
or the Covenant of Non-Disparagement and Cooperation (as provided in
Subsections (a) and (b) above, the Corporation shall have the right to have the
covenant specifically enforced by any court having appropriate jurisdiction on
the grounds that any such breach will cause irreparable injury to the
Corporation, and that money damages will not provide an adequate remedy to the
Corporation. The Executive further acknowledges and agrees that the Covenant
of Confidentiality and, if applicable, the Covenant Against Competition, the
Covenant of Non-Solicitation, and the Covenant of Non-Disparagement and
Cooperation contained in this Agreement are fair, do not unreasonably restrict
the Executive’s future employment and business opportunities, and are
commensurate with the compensation arrangements set out in this Agreement. In
addition, once the Executive makes an election to receive severance pay and
benefits pursuant to Section 4 and is subject to Subsection (b) above, the
Executive shall have no right to return any amounts or benefits that are
already paid or to refuse to accept any amounts or benefits that are payable in
the future in lieu of his specific performance of his obligations under
Subsection (b) above.

     6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive’s continuing or future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices provided by the
Corporation or any of its subsidiaries or affiliates and for which the
Executive may qualify, nor shall anything herein limit or otherwise affect such
rights as the Executive may have under such plans, programs, policies or
practices or under any stock option or other agreements with the Corporation or
any of its subsidiaries or affiliates, specifically including but not limited
to the Corporation’s 1980 and 1995 Stock Incentive Plans, the deferred
compensation agreements, the Stock for Merit Increase Replacement Plan, the
Profit Incentive Stock Plan, the Corporation’s and/or its subsidiaries’ or
affiliates’ retirement, 401(k) and profit sharing plans, the Corporation’s
Benefit Restoration Plan, Deferred Compensation Plan, supplemental disability
and retiree life insurance. In the event there are any amounts which

12

 

represent vested benefits or which the Executive is otherwise entitled to
receive under these or any other plans, programs, policies or practices,
including any plan, program, policy or practice adopted after the execution of
this Agreement, of the Corporation or any of its subsidiaries or affiliates at
or subsequent to the Executive’s Date of Termination, the Corporation shall
cause the relevant plan, program, policy or practice to pay such amount, to the
extent not already paid, in accordance with the provisions of such plan,
program, policy or practice. The phrase “Termination Date” as used in the
Corporation’s 1980 and 1995 Stock Incentive Plans shall mean the end of the
Severance Period with respect to Non-Qualified Stock Options granted to the
Executive, if any, pursuant to such plan, and the Executive’s Date of
Termination with respect to Incentive Stock Options and Restricted Stock Rights
granted to the Executive, if any, thereunder. The last day of the Severance
Period will be considered to be the Executive’s termination date for purposes
of the Executive’s deferred compensation agreement(s), if any.

     7.     No Mitigation. In no event shall the Executive be obligated to seek
other employment by way of mitigation of the amounts payable to the Executive
under any of the provisions of this Agreement nor, except as specifically
provided otherwise in this Agreement, shall the amount of any payment provided
for under this Agreement be reduced by any compensation or benefits earned by
the Executive as the result of employment by another employer after the Date of
Termination, or otherwise.

     8.     Assignment. This Agreement is personal to the Executive and the
Executive does not have the right to assign this Agreement or any interest
herein. This Agreement shall inure to the benefit of and be binding upon the
Corporation and its successors.

     9.     Miscellaneous. (a) This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida, without reference to
principles of conflict of laws. The parties hereto agree that the appropriate
forum for any action brought hereunder shall be Miami, Florida. The captions
of this Agreement are not part of the provisions hereof and shall have no force
or effect. The Executive acknowledges and agrees that the Corporation may
amend this Agreement at any time to comply with any federal, state or local law
or regulation or as necessary to enforce the intent of Section 5. Otherwise,
this Agreement may not be amended or modified other than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.

          (b) All notices and other communications hereunder, other than those under
Section 3(c), shall be in writing and shall be given to the other party by hand
delivery, by overnight express mail, or by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:

               If to the Executive: at the Executive’s last address appearing in
the payroll/personnel records of the Corporation.

               If to the Corporation:

               Ryder System, Inc.

               3600 N.W. 82nd Avenue

               Miami, Florida 33166

13

 

               Attention: General Counsel

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.

          (c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.

          (d) The Executive understands and acknowledges that the payments and
benefits provided to the Executive pursuant to this Agreement may be unsecured,
unfunded obligations of the Corporation. The Executive further understands and
acknowledges that the payments and benefits under this Agreement may be
compensation and as such may be included in either the Executive’s W-2 earnings
statements or 1099 statements. The Corporation may withhold from any amounts
payable under this Agreement such federal, state or local taxes as shall be
required to be withheld pursuant to any applicable law or regulation, as well
as any other deductions consented to in writing by the Executive.

          (e) This Agreement, including its attached Exhibits, contains the entire
understanding of the Corporation and the Executive with respect to the subject
matter hereof. No agreements or representations, oral or written, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement and its attached
Exhibits.

          (f) The employment of the Executive by the Corporation or its subsidiaries
or affiliates may be terminated by either the Executive or the Corporation or
its subsidiaries or affiliates at any time and for any reason, with or without
cause. Nothing contained in this Agreement shall affect such rights to
terminate; provided, however, that nothing in this Section 9(f) shall prevent
the terms and provisions of this Agreement from being enforced in the event of
a termination described in Section 4(a).

          (g) Whenever used in this Agreement, the masculine gender shall include
the feminine or neuter wherever necessary or appropriate and vice versa and the
singular shall include the plural and vice versa.

          (h) This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.

IN WITNESS WHEREOF, the Executive has hereunto set his hand and the
Corporation has caused these presents to be executed in its name on its behalf,
and its corporate seal to be hereunto affixed and attested by its assistant
secretary, all as of the day and year first above written.

	 	 	 
	
	 	

	Witness	 	
Executive
	 	 	 
	
	 	

14

 

	 	 	 	 	 
	Witness	 	Social Security Number
	 	 	 	 	 
	ATTEST:	 	RYDER
SYSTEM, INC.

(the “Corporation”)
	 	 	 	 	 
	 	 	
By:	 	 
	
	 	 	 	

	Secretary

	 	 	 	Vice President

	(Seal)
	 	 	 	 

15

 

Severance Agreement

EXHIBIT A

RELEASE AGREEMENT

     FOR AND IN CONSIDERATION OF THE PAYMENT TO ME OF THE SEVERANCE BENEFITS
PURSUANT TO THE SEVERANCE AGREEMENT BETWEEN RYDER SYSTEM, INC. (“THE
CORPORATION”) AND ME
DATED                    ,
19    (THE “SEVERANCE AGREEMENT”),
I, (Executive’s Name), ON BEHALF OF MYSELF, MY HEIRS, SUCCESSORS AND ASSIGNS
(COLLECTIVELY “I” OR “ME”), HEREBY RELEASE AND FOREVER DISCHARGE THE
CORPORATION AND ALL OF ITS SUBSIDIARIES AND AFFILIATES, THEIR CURRENT AND
FORMER AGENTS, EMPLOYEES, OFFICERS, DIRECTORS, SUCCESSORS AND ASSIGNS
(COLLECTIVELY “RYDER”), FROM ANY AND ALL CLAIMS, DEMANDS, ACTIONS, AND CAUSES
OF ACTION, AND ALL LIABILITY WHATSOEVER, WHETHER KNOWN OR UNKNOWN, SUSPECTED OR
UNSUSPECTED, FIXED OR CONTINGENT, WHICH I HAVE OR MAY HAVE AGAINST RYDER AS A
RESULT OF MY EMPLOYMENT BY AND SUBSEQUENT TERMINATION AS AN EMPLOYEE OF RYDER,
UP TO THE DATE OF THE EXECUTION OF THIS RELEASE AGREEMENT. THIS INCLUDES BUT
IS NOT LIMITED TO CLAIMS AT LAW OR EQUITY OR SOUNDING IN CONTRACT (EXPRESS OR
IMPLIED) OR TORT ARISING UNDER FEDERAL, STATE, OR LOCAL LAWS PROHIBITING AGE,
SEX, RACE, DISABILITY, VETERAN OR ANY OTHER FORMS OF DISCRIMINATION. THIS
FURTHER INCLUDES ANY AND ALL CLAIMS ARISING UNDER THE AGE DISCRIMINATION IN
EMPLOYMENT ACT, THE AMERICANS WITH DISABILITIES ACT OF 1990, TITLE VII OF THE
CIVIL RIGHTS ACT OF 1964, OR THE EMPLOYEE RETIREMENT INCOME SECURITY ACT
(“ERISA”), AS AMENDED, OR CLAIMS GROWING OUT OF ANY LEGAL RESTRICTIONS ON
RYDER’S RIGHT TO TERMINATE ITS EMPLOYEES. I COVENANT AND AGREE THAT I WILL NOT
SUE OR FILE ANY LAWSUIT OR ACTION AGAINST RYDER IN THE FUTURE WITH RESPECT TO
ANY CLAIM OR CAUSE OF ACTION RELEASED AS PART OF THIS RELEASE AGREEMENT. I
FURTHER AGREE THAT IF I VIOLATE THIS COVENANT OR ANY OTHER PROVISION OF THIS
RELEASE AGREEMENT OR THE SEVERANCE AGREEMENT, I SHALL INDEMNIFY RYDER FOR ALL
COSTS AND ATTORNEY’S FEES INCURRED BY RYDER IN ENFORCING THIS RELEASE AGREEMENT
AND THE SEVERANCE AGREEMENT.

     This Release Agreement does not release Ryder from any of its current,
future or ongoing obligations under the Severance Agreement, specifically
including but not limited to cash payments and benefits due me.

     I understand and agree that this Release Agreement and the Severance
Agreement shall not in any way be construed as an admission by Ryder of any
unlawful or wrongful acts whatsoever against me or any other person, and Ryder
specifically disclaims any liability to or wrongful acts against me or any
other person.

16

 

     I agree that the terms and provisions of this Release Agreement and the
Severance Agreement, as well as any and all incidents leading to or resulting
from this Release Agreement and the Severance Agreement, are confidential and
that I may not discuss them with anyone without the prior written consent of
the Corporation’s or its successor’s Chief Executive Officer, except as
required by law; provided, however, that I agree to immediately give the
Corporation or its successor notice of any request to discuss this Release
Agreement or the Severance Agreement and to provide the Corporation or its
successor with the opportunity to contest such request prior to my response.

     This Release Agreement shall be governed by and construed in accordance
with the laws of the state of Florida, without reference to principles of
conflict of laws. Except as provided in Sections 5(b)(IV) and 9(a) of the
Severance Agreement, this Release Agreement may not be amended or modified
otherwise than by a written agreement executed by the Corporation and me or our
respective successors and legal representatives.

     The invalidity or unenforceability of any provision of this Release
Agreement shall not affect the validity or enforceability of any other
provision of this Release Agreement.

I CERTIFY THAT I HAVE FULLY READ, HAVE RECEIVED AN EXPLANATION OF, HAVE
NEGOTIATED AND COMPLETELY UNDERSTAND THE PROVISIONS OF THIS RELEASE AGREEMENT,
AND THAT I HAVE BEEN ADVISED BY THE CORPORATION THAT I SHOULD CONSULT WITH AN
ATTORNEY BEFORE SIGNING THIS RELEASE AGREEMENT. I FURTHER CERTIFY THAT I HAVE
HAD ADEQUATE TIME TO REVIEW AND CONSIDER THE PROVISIONS OF THIS RELEASE
AGREEMENT AND THAT I AM SIGNING THIS RELEASE AGREEMENT FREELY AND VOLUNTARILY,
WITHOUT DURESS, COERCION OR UNDUE INFLUENCE.

Executive’s Date of Termination:___________________

Dated this                      day of                    , 19 .

	 	 	 
	
	 	

	Witness	 	
Executive
	 	 	 
	
	 	

	Witness	 	
Social Security Number

17

 

STATE OF _____________ )

                                               )ss:

COUNTY OF ___________ )

Before me personally appeared      , to me well known and
known to me to be the person described in and who executed the foregoing
instrument, and acknowledged to and before me that he/she executed said
instrument for the purposes therein expressed.

WITNESS my hand and official seal this                      day of                    , 19 .

	 	 	 
	 	 	

	 	 	
Notary Public
	 	 	 
	My Commission Expires:	 	 
	 	 	
(Seal)
	 

	 	 

18

 

Severance Agreement

EXHIBIT B

Resignation Letter

TO THE BOARD OF DIRECTORS

OF RYDER SYSTEM, INC.

Ladies and Gentlemen:

Effective immediately, I hereby resign as an officer and/or director of Ryder
System, Inc. and/or its subsidiaries and affiliates and, to the extent
applicable, from all committees of which I am a member.

	 	 	 
	 	 	
Sincerely,
	 	 	 
	 	 	

	 	 	
Executive’s Name
	 	 	 
	 	 	

	 	 	
Date

19EX-10.3(e)

 

EXHIBIT 10.3(e)

	 	 	 
	 	 	
SENIOR MANAGEMENT
	2003 MANAGEMENT INCENTIVE COMPENSATION PLAN	 	
LEVELS MS14 – MS22
	 	 	
PAGE 1

PLAN DESCRIPTION

	 	 	This document is divided in three sections: (1) Plan Description, (2) Plan
Administration, and (3) Eligible Positions. The first two sections contain
highlights of the Management Incentive (“Incentive”) of the Current Year
Management Incentive Compensation Plan (“Plan”). Participants must read all
sections of this Plan document to fully comprehend their purpose and structure.
	 
	 	 	This Plan document supersedes any and all prior Ryder Management Incentive
Compensation Plans and any and all oral representations, promises, or
guarantees. No exceptions to this Plan will be honored without written
approval of the Compensation Committee of the Ryder System, Inc. (“RSI” or “the
Company”) Board of Directors. Any manager or officer who authorizes such an
exception without prior approval of the Compensation Committee will be subject
to disciplinary action up to and including forfeiture of an incentive award
and/or termination.
	 
	 	 	The following material explains the rules, terms, and administration of the
Current Year Plan for Ryder System, Inc. eligible positions evaluated at the
Management Levels listed below (“Participants”). The Plan is intended to serve
as a single source of information about the Incentive.
	 
	 	 	TARGET INCENTIVE AWARD
	 
	 	 	Target Incentive Award is expressed as a percentage of eligible base salary for
each Participant. The following table summarizes the Target Incentive Award
for each participating management level:

	 	 	 	 	 
	Management Level	 	Target Incentive Award
	
	 	

	Management Level 22
	 	 	100	%
	Management Level 20
	 	 	85	%
	Management Level 17-19
	 	 	75	%
	Management Level 14-16
	 	 	70	%

 

 

	 	 	 
	 	 	
SENIOR MANAGEMENT
	2003 MANAGEMENT INCENTIVE COMPENSATION PLAN	 	
LEVELS MS14 – MS22
	 	 	
PAGE 2

PLAN DESCRIPTION (continued)

	 	 	INCENTIVE PAYOUT CALCULATION – PART I
	 
	 	 	Part I of the Incentive Payout Calculation is based on 70% RSI EVA and 30% RSI
Dry Operating Revenue Attainment, focusing at the Senior Management level on
total company objectives. The Plan is intended to provide Participants with
competitive compensation for achieving and exceeding targeted performance
levels. Incentive Payout(s) will be calculated when performance is at or above
Threshold. The following table highlights target and payout multiples for the
RSI EVA and Dry Operating Revenue Attainment component used in the Incentive
Payout calculation.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Threshold	 	Target	 	2 Times
	Weight	 	Incentive Payout Component	 	(Payout = 25%)	 	(Payout = 100%)	 	(Payout = 200%)
	
	 	
	 	
	 	
	 	

	70%
	 	RSI EVA ($MM)	 	($	66.2	)	 	($	37.6	)	 	$	15.4	 
	30%
	 	RSI Dry Operating Revenue Attainment ($MM)	 	$	3,678.67	 	 	$	3,811.93	 	 	$	4,002.52	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Dry Operating Revenue is defined as RSI Gross Revenue minus RSI FUM minus FMS fuel revenue	 	 	 	 	 	 	 	 	 	 	 	 

	 	 	THRESHOLD, TARGET, AND TWO TIMES PERFORMANCE
	 
	 	 	If RSI does not attain the ($66.2) MM EVA threshold for the Current Year
performance, all incentive payments are forfeited for all Plan Participants.
	 
	 	 	The following table highlights incentive multiples for Threshold, Target and
Two times Performance.

	 	 	 	 	 
	Threshold

(Payout = 25%)	 	
Target

(Payout = 100%)
	 	2 Times

(Payout = 200%)

 

 

	 	 	 
	 	 	
SENIOR MANAGEMENT
	2003 MANAGEMENT INCENTIVE COMPENSATION PLAN	 	
LEVELS MS14 – MS22
	 	 	
PAGE 3

PLAN DESCRIPTION (continued)

	 	 	EXAMPLE:
	 
	 	 	A Participant whose annual rate of pay (as defined in the “Eligible Base Salary
Calculation” section) is $154,500, qualifies for a target incentive payout of
70% or $108,150 (based on Level 14).

	 	 	 	 	 	 	 	 	 
	Eligible Base Salary	 	Target Incentive Payout(%)	 	Target Incentive Payout
	
	 	
	 	

	$154,500
	 	 	70	%	 	$	108,150	 

	 	 	Assume that, during the plan year, the Incentive Multiple is 105.00% for RSI
EVA and 90.00% for RSI Dry Operating Revenue. The Participant would be
eligible for a total incentive payout calculated as follows:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Target	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Eligible	 	 	 	 	 	Incentive	 	 	 	 	 	 	 	 	 	 	 	 	 	Incentive	 	 	 	 	 	 	 	 
	 	 	Base	 	 	 	 	 	Payout	 	 	 	 	 	 	 	 	 	 	 	 	 	Multiple	 	 	 	 	 	 	 	 
	Components	 	Salary	 	 	 	 	 	(%)	 	 	 	 	 	Weight	 	 	 	 	 	Percentage	 	 	 	 	 	Payout
	
	 	
	 	 	 	 	 	
	 	 	 	 	 	
	 	 	 	 	 	
	 	 	 	 	 	

	RSI EVA
	 	$	154,500	 	 	 	x	 	 	 	70	%	 	 	x	 	 	 	70	%	 	 	x	 	 	 	105.00	%	 	 	=	 	 	$	79,490	 
	RSI Dry Rev
	 	$	154,500	 	 	 	x	 	 	 	70	%	 	 	x	 	 	 	30	%	 	 	x	 	 	 	90.00	%	 	 	=	 	 	$	29,201	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 
	Total Calculated Incentive
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	=	 	 	$	108,691	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 

	 	 	INCENTIVE PAYOUT CALCULATION – PART II
	 
	 	 	Part II of the Incentive Payout Calculation focuses on a behavioral performance
modifier, consisting of seven behavioral components. The goal of the Plan is
not only to achieve the targeted financial results but also to reach them
utilizing the right behaviors. Participants will be rated on how well the Plan
objectives are achieved, while demonstrating the appropriate behaviors. The
behavioral performance modifier rating may result in an incentive payment up to
25% above or up to 50% below the calculated payout, given company performance
for the Current Year.
	 
	 	 	The following are the components of the behavioral performance modifier:

   Behavioral Components*

	 	 	 	 	 
	1.	 	
Impact:
	 	Thought leader and change agent
	2.	 	
Diversity:
	 	Respects differences and promotes diversity
	3.	 	
Teamwork:
	 	Fosters teamwork
	4.	 	
Customer Focus:
	 	Customer and externally focused
	5.	 	
Ownership:
	 	Takes ownership
	6.	 	
Leadership 1:
	 	Ethics and integrity
	7.	 	
Leadership 2:
	 	Vision and purpose

	 	 	* Additional information on how the behavioral components may impact your
incentive will be distributed to you at a later date.

 

 

	 	 	 
	 	 	
SENIOR MANAGEMENT
	2003 MANAGEMENT INCENTIVE COMPENSATION PLAN	 	
LEVELS MS14 – MS22
	 	 	
PAGE 4

PLAN ADMINISTRATION

	 	 	The following rules apply to all Plan Participants. The Company reserves the
right to alter, modify, change or terminate any of the provisions described
below at any time, with or without notice at its sole discretion.

	•	 	 	Base Salary Calculation
	 
	 	 	 	For the purpose of incentive calculations, Eligible Base Salary is defined
as the annual rate of pay for the calendar year, excluding all other
compensation paid to the Participant during the year, including but not
limited to bonus, incentives, commissions, employee benefits, relocation
expenses, and any imputed income for which the Participant may be eligible.
	 
	 	 	 	Employees 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 pro-rata incentive based on the annual rate of pay and
Target Incentive Award in eligible positions, provided they are employed in
good standing without any performance issues (see Exclusion Criteria) at
the time incentives are distributed.
	 
	 	 	 	The annual rate of pay for a Participant whose base salary changes within
the calendar year is calculated below. Salaried employees are paid
semi-monthly, each check representing 1/24 of the annual base salary.
Daily pay for a salaried employee is calculated by dividing the annual
salary by 365 days per year.

	 	 	 	Eligible Base Salary Calculation Example
	 
	 	 	 	Annual rate of pay would be calculated as follows for a Participant who
begins a calendar year with a base salary of $150,000, then effective
April 1, receives an increase to a base salary of $156,000:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	January 1 through March 31:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Total # of days in period
	 	=	 	90	 	=	 	0.247 x $150,000	 	=	 	$	37,050
	 	
	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 
	 	Total # of days in Year
	 	 	 	365	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	April 1 through December 31:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	365 - 90
	 	=	 	275	 	=	 	0.753 x $156,000	 	=	 	$	117,468
	 	
	 	 	 	
	 	 	 	 	 	 	 	 	 	 	

	 	Total # of days in year
	 	 	 	365	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Annual Rate of Pay for Calendar Year
	 	 	 	 	 	 	 	 	 	 	 	=	 	$	154,500*
	*Rounded to nearest hundred for ease of computation in Example
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

 

 

	 	 	 
	 	 	
SENIOR MANAGEMENT
	2003 MANAGEMENT INCENTIVE COMPENSATION PLAN	 	
LEVELS MS14 – MS22
	 	 	
PAGE 5

PLAN ADMINISTRATION (continued)

	 	•	Change of Control
	 
	 	 	Notwithstanding anything in this Plan to the contrary, in the event of a
Change of Control of the Company (as defined and adopted by the Board of
Directors on August 18, 1995 and which definition may be changed from time
to time), the funds necessary to pay the incentive for Participants, will be
placed in a trust administered by an outside financial institution. The
amount of each Participant’s incentive will be determined in accordance with
the provisions of the Plan by an accounting firm chosen by the Company.
Should a Change of Control occur during the current plan year, Participants
will receive instructions regarding the collection of incentive awards.
	 
	 	•	Currency
	 
	 	 	Each incentive component’s multiple will be calculated based on the
in-country currency, as shown on the unit’s business plan. The
Participant’s incentive payout will be calculated based on the currency the
eligible base salary is expressed in.
	 
	 	•	Disability, Permanent Disability Retirement, or Death
	 
	 	 	Participants who leave the Company during the calendar year via disability
or permanent disability retirement may be eligible, subject to the Exclusion
Criteria, for pro-rata incentive. The spouse or legal representative of a
deceased Participant may be eligible, subject to the Exclusion Criteria, for
a pro rata incentive as well.
	 
	 	•	Eligibility
	 
	 	 	Employees whose positions are designated in the Eligible Position table and
who are employed in good standing, without any performance issues (see
Exclusion Criteria) at the time of payout are eligible to participate in
this Plan. Individuals who have written agreements which specifically
provide for incentive compensation other than that which is provided in this
Plan or who are Participants in any other short-term incentive compensation
plan of RSI, its subsidiaries or affiliates are not eligible to participate
in this Plan.
	 
	 	 	Employees 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 pro-rata incentive based on the annual rate of pay and Target
Incentive Award in eligible positions, provided they are employed in good
standing without any performance issues (see Exclusion Criteria) at the time
incentives are distributed.

 

 

	 	 	 
	 	 	
SENIOR MANAGEMENT
	2003 MANAGEMENT INCENTIVE COMPENSATION PLAN	 	
LEVELS MS14 – MS22
	 	 	
PAGE 6

PLAN ADMINISTRATION (continued)

	 	•	Exclusion Criteria
	 
	 	 	Participation in the Plan is not a right, but a privilege subject to annual
review by the Company. The Company retains the right, at its sole and
absolute discretion, to withhold payment from any Participant who violates
or who has violated any Company principle or policy, or the rules contained
in this Plan, even if there are no documented performance issues in the
Participant’s personnel file.
	 
	 	•	Maximum Incentive Award Opportunity
	 
	 	 	The maximum incentive opportunity will be two times Payout. The Participant
may exceed the two times cap only through the Behavioral Performance
Modifier.
	 
	 	•	No Guarantee
	 
	 	 	Eligible employees who participate in this Plan, by virtue of participation,
are not assured that they will receive any incentive. The achievement of the
Plan components and the Behavioral Performance Modifier, will determine the
extent to which Participants will be entitled to receive a payout. If RSI
does not attain the ($66.2) MM EVA threshold for the Current Year
performance, all incentive payments are forfeited for all Plan Participants.
All incentive payouts are subject to the sole discretion of the Board of
Directors of the Company.
	 
	 	•	Plan Scale for Current Plan Year – RSI EVA
	 
	 	 	The following scale illustrates how the Plan Scale works for the RSI EVA
portion of the Incentive Payout Calculation. Noted are the points where
Threshold, Target and Two Times are achieved. Incentive amounts are
dependent on the multiple declared, based solely on RSI EVA. Earnings Per
Share or “EPS” is shown only as a frame of reference.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Threshold	 	Target	 	Two Times
	 	 	
	 	
	 	

	EVA ($MM)
	 	$	(66.2	)	 	$	(37.6	)	 	$	15.4	 
	EPS
	 	$	1.57	 	 	$	2.05	 	 	$	2.95	 
	Payout
	 	 	25	%	 	 	100	%	 	 	200	%

 

 

	 	 	 
	 	 	
SENIOR MANAGEMENT
	2003 MANAGEMENT INCENTIVE COMPENSATION PLAN	 	
LEVELS MS14 – MS22
	 	 	
PAGE 7

PLAN ADMINISTRATION (continued)

	 	•	Promotion
	 
	 	 	A Participant who is promoted during the calendar year will receive a
pro-rata incentive based on the annual rate of pay and the Target Incentive
Award in the eligible positions. The Participant will receive a pro-rata
incentive based on the appropriate Plan for his/her management level,
position and the portion of time spent in each position during the year.
	 
	 	•	Retirement
	 
	 	 	Only Participants who retire on or after December 31st of the calendar year
(under the provisions of one of the Company’s retirement plans) are eligible
for full payouts of incentive. No pro-rata incentives will be paid upon
retirement except as noted under the Disability, Permanent Disability
Retirement, or Death section.
	 
	 	•	Sale of Business
	 
	 	 	If a business is sold, the Participants of the sold business will receive a
pro-rata incentive for the year in which the business is sold. Such payment
will be made in a lump sum or over time at the Company’s discretion. The
Participants need to be employed in good standing, without any performance
issues (see Exclusion Criteria), at the time incentives are distributed.
	 
	 	•	Termination
	 
	 	 	Participants leaving the Company under any conditions other than those
outlined in the Change of Control, Disability, Permanent Disability
Retirement, or Death or Eligibility sections of this Plan are not eligible
for the incentive for the year in which they leave, nor are they eligible
for the preceding year, if such incentives have not yet been distributed,
unless otherwise required by law.
	 
	 	•	Workers’ Compensation or Leave of Absence (“LOA”)
	 
	 	 	A Participant who leaves the payroll due to a workers’ compensation leave or
LOA will be eligible to receive a pro-rata incentive for the year in which
they leave the payroll, provided the employee worked for at least six months
of the calendar year, unless otherwise required by law.

 

 

	 	 	 
	 	 	
SENIOR MANAGEMENT
	2003 MANAGEMENT INCENTIVE COMPENSATION PLAN	 	
LEVELS MS14 – MS22
	 	 	
PAGE 8

DEFINITIONS

Definitions are for informational and explanatory purposes only. The Company
can change and interpret the defined terms below at its sole discretion.

	•	 	Dry Operating Revenue
	 
	 	 	RSI Gross Revenue minus RSI Freight Under Management (FUM) minus Fleet
Management Solutions (FMS) fuel revenue.
	 
	•	 	Eligible Base Salary
	 
	 	 	For the purpose of incentive calculations, the annual rate of pay for the
calendar year, excluding all other compensation paid to the employee during
the year, including but not limited to bonus, incentives, commissions,
employee benefits, relocation expenses, and any imputed income for which the
Participant may be eligible.
	 
	•	 	EVA
	 
	 	 	Economic Value Added. EVA is a measurement tool that determines whether a
business is earning more than its true cost of capital by incorporating the
cost of equity capital as well as debt capital. EVA can be expressed in the
following formula: EVA = Net Earnings After Tax (NAT) minus “an equity
charge.”
	 
	•	 	Equity Charge
	 
	 	 	The Average Equity times the Cost of Equity as determined by the Chief
Financial Officer.
	 
	•	 	Incentive Interval
	 
	 	 	The Incentive Interval (“Interval”) is the (i) improvement needed, over and
above Targeted performance, to declare a two times payout and (ii) the
shortfall from Target that will cause a lower payout. The following chart
illustrates the Interval concept for the RSI EVA component.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	25% Payout (Threshold)
	

	 	 	 	 	 	 	Interval	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Threshold to	 	Threshold Payout	 	Threshold
	Component	 	Target	 	Target	 	Calculation	 	Payout
	
	 	
	 	
	 	
	 	

	RSI EVA ($MM)
	 	 	($37.6	)	 	$	28.6	 	 	 	($37.6) - $28.6 = ($66.2	)	 	 	($66.2	)

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	2x Payout
	

	 	 	 	 	 	 	Interval	 	 	 	 	 	 	 	 
	Component	 	Target	 	Target to 2x	 	2x Payout Calculation	 	2x Payout
	
	 	
	 	
	 	
	 	

	RSI EVA ($MM)
	 	 	($37.6	)	 	$	53.0	 	 	 	($37.6) + $53.0 = $15.4	 	 	$	15.4	 

 

 

	 	 	 
	 	 	
SENIOR MANAGEMENT
	2003 MANAGEMENT INCENTIVE COMPENSATION PLAN	 	
LEVELS MS14 – MS22
	 	 	
PAGE 9

PLAN ADMINISTRATION (continued)

	•	 	Incentive Multiple
	 
	 	 	
The Incentive Multiple for each component is the difference (positive or
negative) between Actual and Target, divided by the Interval of that
component adjusted for the slope of the payout percentage, plus or minus
100%. Assume RSI’s Actual EVA for the Current Year is ($34.95) MM. The RSI
Incentive Multiple would be calculated as illustrated in the following two
steps:

STEP 1:
“Percent Above Target” Calculation

	 	 	 	 	 	 	 	 	 
	Actual RSI EVA
	 	 	 	 	($	34.95)  MM
	Target RSI EVA
	 	 	–	 	($	37.60)  MM
	 
	 	 	 	 	 	

	Variance from Target RSI EVA
	 	 	=	 	$	2.65  MM
	RSI Incentive Interval*
	 	 	÷	 	$	53.00  MM
	 
	 	 	 	 	 	

	Percent Above Target
	 	 	=	 	 	5.00%

STEP 2:
“Incentive Multiple” Calculation

	 	 	 	 	 	 	 	 	 	 	 
	 	 	Target RSI EVA
	 	 	 	 	 	 	100.00	%
	Percent Above Target
	 	 	+	 	 	 	5.00	%
	 
	 	 	 	 	 	 	
	 
	 	Incentive Multiple
	 	 	=	 	 	 	105.00	%

	 	 	*If Actual RSI EVA is below Target, the interval is $28.6 MM. If Actual RSI
EVA is above Target, the interval is $53.0 MM.
	 
	 	 	For more information on the Incentive Multiple and its relationship to the
various components of the Incentive Payout, please refer to the Incentive
Payout Calculation example illustrated in the Plan Description.
	 
	•	 	Incentive Payout or Calculated Incentive

The potential Incentive Payout determined by multiplying the Participant’s
Target Incentive Award, the Weight and the Incentive Multiple.
	 
	•	 	NAT

The consolidated Net Earnings After Tax for the year, including appropriate
accruals for all incentive estimated to be payable for that year.
	 
	•	 	Participant

Any employee of the Company designated to be eligible to participate in this
Management Incentive Plan.
	 
	•	 	Target Incentive Award

The Target Incentive Award per Participant is the percentage of the
Participant’s Eligible Base Salary to which the Incentive Payout Calculation
will be applied.

 

 

	 	 	 
	 	 	
SENIOR MANAGEMENT
	2003 MANAGEMENT INCENTIVE COMPENSATION PLAN	 	
LEVELS MS14 – MS22
	 	 	
PAGE 10

ELIGIBLE POSITIONS

2003 SENIOR MANAGEMENT ELIGIBLE POSITIONS

	 	 	 	 	 	 	 
	 	 	 	 	Position
	 	 	Position Title	 	Number
	 	 	
	 	

	1	 	
Chairman, President and CEO
	 	 	9349	 
	2	 	
SR EVP Finance & CFO
	 	 	1069	 
	3	 	
EVP General Counsel and Secretary
	 	 	1512	 
	4	 	
EVP HR, Public Affairs, and Corporate Communications
	 	 	9296	 
	5	 	
EVP Domestic Supply Chain Solutions
	 	 	9489	 
	6	 	
EVP Fleet Management Solutions
	 	 	9201	 
	7	 	
EVP International SCS
	 	 	9202	 
	8	 	
SVP & CIO
	 	 	9224	 
	9	 	
SVP FMS Operations
	 	 	9326	 
	10	 	
SVP Sales and Marketing
	 	 	9220	 
	11	 	
SVP AAI Operations
	 	 	9494	 
	12	 	
SVP Strategic Planning and Development
	 	 	9520	 
	13	 	
SVP Field Finance
	 	 	9217	 
	14	 	
SVP and Treasurer
	 	 	9176	 
	15	 	
SVP High Tech and Consumer Industries
	 	 	9492	 
	16	 	
SVP Business & Accounting Services
	 	 	9328	 
	17	 	
SVP Asset Management
	 	 	9463	 
	18	 	
VP/Managing Director Europe
	 	 	N/A	 
	19	 	
VP/GM Canada
	 	 	0002	 
	20	 	
VP Corporate Communications
	 	 	9007	 
	21	 	
VP & Controller
	 	 	9330	 
	22	 	
VP Compensation and Benefits
	 	 	1265	 
	23	 	
VP Tax
	 	 	9331	 
	24	 	
VP Public Affairs
	 	 	1277	 
	25	 	
VP Dedicated Contract Carriage
	 	 	9281	 
	26	 	
VP/MD Latin America
	 	 	9284	 
	27	 	
VP Product and Technology Development
	 	 	9154	 
	28	 	
VP Region
	 	 	9034	 
	29	 	
VP Sales
	 	 	9297	 
	30	 	
VP Automotive
	 	 	9040	 
	31	 	
VP Strategic Sourcing
	 	 	9346	 
	32	 	
VP Safety Health and Security
	 	 	9046	 
	33	 	
VP Maintenance
	 	 	1005	 
	 
	**	 	
Other positions may be added through the course of the year

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