SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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Landstar System, Inc.
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[LANDSTAR LOGO]
LANDSTAR SYSTEM, INC.
13410 SUTTON PARK DRIVE SOUTH
JACKSONVILLE, FLORIDA 32224
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 15, 2003
Notice is hereby given that the 2003 Annual Meeting of Stockholders of
Landstar System, Inc., a Delaware corporation (the "Company"), will be held in
the First Floor Conference Room of the principal offices of Landstar System,
Inc., at the above address, on Thursday, May 15, 2003, at 10:00 a.m., local
time, for the following purposes:
(1) To elect two Class I Directors for terms to expire at the 2006 Annual
Meeting of Stockholders;
(2) To ratify the appointment of KPMG LLP as the Company's independent
auditors for fiscal year 2003;
(3) To consider approval of the Company's 2003 Directors Stock Compensation
Plan;
(4) To consider approval of an amendment to Article IV of the Company's
Restated Certificate of Incorporation to increase the authorized shares
of Common Stock of the Company;
(5) To consider approval of a separate amendment to Article IV of the
Company's Restated Certificate of Incorporation to increase the
authorized shares of Preferred Stock of the Company; and
(6) To transact such other business as may properly come before the meeting
or any adjournment thereof.
Only stockholders of record at the close of business on March 18, 2003 will
be entitled to notice of and to vote at the meeting. A list of stockholders
eligible to vote at the meeting will be available for inspection at the meeting
at the address set forth above and during business hours from May 2, 2003 to the
date of the meeting at the Company's corporate headquarters as set forth above.
All stockholders are cordially invited to attend the meeting in person.
Whether you expect to attend the Annual Meeting or not, your proxy vote is very
important. TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN AND DATE
THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO ADDITIONAL POSTAGE IF MAILED IN THE UNITED STATES OR CANADA.
By Order of the Board of Directors
/s/ Robert C. Larose
ROBERT C. LAROSE
Vice President,
Chief Financial Officer
and Secretary
Jacksonville, Florida
March 26, 2003
IT IS IMPORTANT THAT THE ENCLOSED PROXY CARD BE COMPLETED
AND RETURNED PROMPTLY
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LANDSTAR SYSTEM, INC.
PROXY STATEMENT
March 26, 2003
INTRODUCTION
This Proxy Statement is furnished to the stockholders of Landstar System,
Inc. (the "Company") in connection with the solicitation of proxies on behalf of
the Board of Directors of the Company (the "Board") to be voted at the Annual
Meeting of Stockholders to be held on Thursday, May 15, 2003 at 10:00 a.m.,
local time (the "2003 Annual Meeting"). The 2002 Annual Report to Stockholders
(which does not form a part of the proxy solicitation material), including the
financial statements of the Company for fiscal year 2002, is enclosed herewith.
The mailing address of the principal executive offices of the Company is 13410
Sutton Park Drive South, Jacksonville, Florida 32224. This Proxy Statement,
accompanying form of proxy, Notice of Meeting and 2002 Annual Report are being
mailed to the stockholders of the Company on or about March 26, 2003.
RECORD DATE
The Board has fixed the close of business on March 18, 2003 as the record
date for the 2003 Annual Meeting. Only stockholders of record on that date will
be entitled to vote at the meeting in person or by proxy.
PROXIES
Shares cannot be voted at the meeting unless the owner thereof is present
in person or by proxy. The proxies named on the enclosed proxy card were
appointed by the Board to vote the shares represented by the proxy card. If a
stockholder does not return a signed proxy card, his or her shares cannot be
voted by proxy. Stockholders are urged to mark the boxes on the proxy card to
show how their shares are to be voted. All properly executed and unrevoked
proxies in the accompanying form that are received in time for the meeting will
be voted at the meeting or any adjournment thereof in accordance with any
specification thereon, or if no specification is made, will be voted "FOR" each
of the following proposals: (i) the election of the named nominees, (ii) the
ratification of KPMG LLP as independent auditors for the Company, (iii) the
approval of the Company's 2003 Directors Stock Compensation Plan, (iv) the
approval of the amendment to Article IV of the Company's Restated Certificate of
Incorporation (the "Certificate of Incorporation") to increase the number of
authorized shares of Common Stock of the Company and (v) the approval of a
separate amendment to Article IV of the Certificate of Incorporation to increase
the number of authorized shares of Preferred Stock of the Company. Each of these
five proposals is more fully described in this Notice of 2003 Annual Meeting.
The proxy card also confers discretionary authority on the proxies to vote on
any other matter not presently known to management that may properly come before
the 2003 Annual Meeting.
Any proxy delivered pursuant to this solicitation is revocable at the
option of the person(s) executing the same (i) upon receipt by the Company
before the proxy is voted of a duly executed proxy bearing a later date, (ii) by
written notice of revocation to the Secretary of the Company received before the
proxy is voted or (iii) by such person(s) voting in person at the 2003 Annual
Meeting.
The Board has selected The Bank of New York as Inspectors of Election (the
"Inspectors") pursuant to Article I of the Company's Bylaws, as amended and
restated (the "Bylaws"). The Inspectors shall ascertain the number of shares
outstanding, determine the number of shares represented at the 2003 Annual
Meeting by proxy or in person and count all votes and ballots. Each stockholder
shall be entitled to one vote for each share of Common Stock (as defined
hereafter) and such votes may be cast either in person or by written proxy.
1
PROXY SOLICITATION
The cost of the preparation of proxy materials and the solicitation of
proxies will be paid by the Company. The Company has engaged Georgeson
Shareholder Communications, Inc. as the proxy solicitor for the meeting for a
fee of approximately $6,500 plus reasonable expenses. In addition to the use of
the mails, certain directors, officers or employees of the Company may solicit
proxies by telephone or personal contact. Upon
request, the Company will reimburse brokers, dealers, banks and trustees, or
their nominees, for reasonable expenses incurred by them in forwarding proxy
materials to beneficial owners of shares.
VOTING SECURITIES
Shares of the Company's common stock, par value $.01 per share (the "Common
Stock") are the only class of voting securities of the Company which are
outstanding. On March 18, 2003, 15,754,977 shares of Common Stock were
outstanding. At the 2003 Annual Meeting, each stockholder of
record at the close of business on March 18, 2003 will be entitled to one vote
for each share of Common Stock owned on that date as to each matter properly
presented to the 2003 Annual Meeting. The holders of a majority of the total
number of the issued and outstanding shares of Common Stock shall constitute
a quorum for purposes of the 2003 Annual Meeting.
PROPOSAL NUMBER ONE -- ELECTION OF DIRECTORS
The Board is divided into three classes (Class I, Class II and Class III),
with Directors in each class serving staggered three-year terms. At each annual
meeting of stockholders, the terms of Directors in one of these three classes
expire. At that annual meeting of stockholders, Directors are elected in a class
to succeed the Directors whose terms expire, with the terms of that class of
Directors so elected to expire at the third annual meeting of stockholders
thereafter. Pursuant to the Company's Bylaws, new Directors elected by the
remaining Board members to fill a vacancy on the Board shall hold office for a
term expiring at the annual meeting of stockholders at which the term of office
of the class of which they have been elected expires and until such Director's
successors shall have been duly elected and qualified. There are seven members
of the Board of Directors: two Class I Directors to be elected at the 2003
Annual Meeting of Stockholders (whose members' terms will expire at the 2006
Annual Meeting of Stockholders), three Class II Directors whose terms will
expire at the 2004 Annual Meeting of Stockholders and two Class III Directors
whose terms will expire at the 2005 Annual Meeting of Stockholders.
It is intended that the shares represented by the accompanying form of
proxy will be voted at the 2003 Annual Meeting for the election of nominees
Ronald W. Drucker and Henry H. Gerkens as Class I Directors, unless the proxy
specifies otherwise. Each Class I Director's term will expire at the 2006 Annual
Meeting of Stockholders. Each nominee has indicated his willingness to serve as
a member of the Board, if elected.
If, for any reason not presently known, either or both of Ronald W. Drucker
or Henry H. Gerkens are not available for election at the time of the 2003
Annual Meeting, the shares represented by the accompanying form of proxy may be
voted for the election of substitute nominee(s) designated by the Board or a
committee thereof, unless the proxy withholds authority to vote for all such
substitute nominees.
Assuming the presence of a quorum, to be elected, a nominee must receive
the affirmative vote of the holders of a majority of the Common Stock, present,
in person or by proxy, at the 2003 Annual Meeting. Abstentions from voting and
broker non-votes will have no effect on the outcome of this proposal.
THE BOARD RECOMMENDS A VOTE FOR THIS PROPOSAL
2
DIRECTORS OF THE COMPANY
The following information describes the principal occupation or employment,
other affiliations and business experience of each nominee named above and to
the other persons whose terms as Directors will continue after the 2003 Annual
Meeting.
NAME AGE BUSINESS EXPERIENCE
---- --- -------------------
CLASS I -- NOMINEES TO SERVE AS DIRECTORS UNTIL THE 2006 ANNUAL MEETING
Ronald W. Drucker.............. 61 Mr. Drucker has been a Director of the Company and a
Director of Landstar System Holdings, Inc. (a wholly-owned
subsidiary of the Company) ("LSHI") since April 1994. Mr.
Drucker is a consultant. He served as Chairman of the Board
of Encompass, a global logistics information joint venture
of AMR and CSX Corporations from 1989 through 1997. Between
1966 and 1992, Mr. Drucker served with CSX Corporation
predecessor companies in various capacities. He is a member
of the American Railway Engineering and Maintenance-of-Way
Association and the American Society of Civil Engineers and
serves as a member of the Board of Directors of SunTrust
Bank-North Florida, The Cooper Union for the Advancement of
Science and Art, and the National Defense Transportation
Association ("NDTA").
Henry H. Gerkens............... 52 Mr. Gerkens has been a Director of the Company and LSHI
since May 2000. Mr. Gerkens has been President and Chief
Operating Officer of the Company and LSHI since December
2001. He was President and Chief Financial Officer of the
Company and LSHI from July 2001 to December 2001. He served
as Executive Vice President and Chief Financial Officer of
the Company and LSHI from November 1994 to July 2001. He
served as Vice President and Chief Financial Officer of the
Company from January 1993 to November 1994 and held the same
positions at LSHI from August 1988 to November 1994. He is a
member of the Board of Directors of each of the wholly-owned
direct or indirect subsidiaries (the "Subsidiaries") of
LSHI: Landstar Gemini, Inc. ("Landstar Gemini"), Landstar
Inway, Inc. ("Landstar Inway"), Landstar Ligon, Inc.
("Landstar Ligon"), Landstar Contractor Financing, Inc.
("LCFI"), Landstar Carrier Services, Inc. ("LCS"), Risk
Management Claim Services, Inc., ("RMCS"), Landstar Ranger,
Inc. ("Landstar Ranger"), Signature Technology Services,
Inc. ("STSI"), Signature Insurance Company ("Signature"),
Landstar Corporate Services, Inc. ("LCSI"), Landstar Express
America, Inc. ("Landstar Express America") and Landstar
Logistics, Inc. ("Landstar Logistics").
CLASS II -- DIRECTORS WHOSE TERMS EXPIRE AT THE 2004 ANNUAL MEETING
Merritt J. Mott................ 57 Mr. Mott has been a Director of the Company and LSHI since
August 1994. He is the Owner and Chief Executive Officer of
Rockford Sanitary Systems, Inc. Mr. Mott serves as a consultant
to various private enterprises. From 1980 through 1996, he
served in various capacities at Mott Bros. Company including
Executive Vice President and Chief Financial Officer. Mr.
Mott was a Director of Rockford Health Plans from 1994
through 1997. He serves as a Director of Blackhawk Bancorp,
Inc. and has served as a trustee of the William Howard Trust
since 1984.
3
DIRECTORS OF THE COMPANY (continued)
NAME AGE BUSINESS EXPERIENCE
---- --- -------------------
William S. Elston.............. 62 Mr. Elston has been a Director of the Company and LSHI since
February 1998 and an Executive Recruiting Consultant since
December 1999. He was President and Chief Executive Officer
of Clean Shower, L.P. from November 1998 to December 1999.
He served as Managing Director/Executive Vice President of
DHR, International, an executive recruiting firm, from
February 1995 to November 1998. He was Executive Vice
President of Operations, Steelcase, Inc., from April 1994 to
January 1995. Mr. Elston was President and Chief Executive
Officer of GATX Logistics, Inc. from 1990 through March
1994.
Diana M. Murphy................ 46 Ms. Murphy has been a Director of the Company and LSHI since
February 1998 and has been a Managing Director in the
private equity firm of Chartwell Capital Management Company
since 1997. Ms. Murphy was an associate with Chartwell
Capital and served as interim President for one of
Chartwell's portfolio companies, Strategic Media Research,
Inc. in 1996. She was Senior Vice President for The
Baltimore Sun, a division of The Tribune Corporation from
1992 to 1995. Ms. Murphy also serves on the Board of
Directors of Raymedica, Inc., eMotion and Enterworks, Inc.
CLASS III -- DIRECTORS WHOSE TERMS EXPIRE AT THE 2005 ANNUAL MEETING
David G. Bannister............. 47 Mr. Bannister has been a Director of the Company since April
1991 and a Director of LSHI since October 1988. Mr.
Bannister is a General Partner of Grotech Capital Group, a
private equity and venture capital firm. Prior to joining
Grotech in May 1998, Mr. Bannister was a Managing Director
at BT Alex. Brown Incorporated. Mr. Bannister also serves on
the Board of Directors of Allied Holdings, Inc.,
SimonDelivers.com, Inc. and Trivirix, Inc.
Jeffrey C. Crowe............... 56 Mr. Crowe has been Chairman of the Board and Chief Executive
Officer of the Company since April 1991. Mr. Crowe was
President of the Company from April 1991 to June 2001. He
has been Chief Executive Officer of LSHI since June 1989 and
Chairman of the Board of LSHI since March 1991. Mr. Crowe
has been President of Signature since February 1997. Mr.
Crowe is a member of the Board of Directors of each
of the Subsidiaries except Signature. Mr. Crowe has
served as a Director of the U.S. Chamber of Commerce
since February 1998 and commenced serving as Vice Chairman
of the U.S. Chamber of Commerce in June 2002. Mr. Crowe
served in a number of capacities at the American Trucking
Associations, Inc. ("ATA") including as Secretary, as a
member of the ATA Executive Committee and as a Director of
the ATA Foundation since November 1989 until his resignation
from ATA in 1998. He has also served as Chairman of the NDTA
since October 1993. He has served as a Director of Silgan
Holdings Inc. since May 1997, a Director of the National
Chamber Foundation since November 1997 and a Director of
SunTrust Bank-North Florida since January 1999. He has
served as a member of the Board of Advisors for the U.S.
Merchant Marine Academy Global Maritime and Transportation
School since April 2001, and he has served as a Director
for the ENO Transportation Foundation, Inc. since October
2001.
4
INFORMATION REGARDING BOARD OF DIRECTORS AND COMMITTEES
The business of the Company is managed under the direction of the Board.
The Board meets on a regularly scheduled basis four times a year to review
significant developments affecting the Company and to act on matters requiring
Board approval. It also holds special meetings and acts by written consent when
important matters require Board action between scheduled meetings.
ATTENDANCE AT BOARD MEETINGS
During the 2002 fiscal year, the Board held four regularly scheduled
meetings, four telephonic meetings and acted by unanimous written consent five
times. During such fiscal year, all Directors attended 75% or more of the
combined total meetings of the Board and its respective committees during the
period in which they served as Directors or committee members.
INDEPENDENT DIRECTORS
Each of David G. Bannister, Ronald W. Drucker, William S. Elston, Merritt
J. Mott and Diana M. Murphy is an "independent director", as defined in Rule
4200(a)(15) of the National Association of Securities Dealers ("NASD") listing
standards (such Directors are, collectively, the "Independent Directors"). Each
such Director also qualifies as an "independent director" under Section 301 of
the Sarbanes-Oxley Act and the proposed new rules of the NASD regarding
independent directors. The Independent Directors of the Board held two meetings
during fiscal year 2002 without the presence of management or any inside
directors.
COMMITTEES OF THE BOARD
The Board has established an Audit Committee, a Compensation Committee, a
Nominating Committee, a Safety Committee and a Strategic Planning Committee to
devote attention to specific subjects and to assist in the discharge of its
responsibilities. The functions of those committees and the number of meetings
held during 2002 are described below. The Board does not have an Executive
Committee. In addition, the Board has ratified the establishment of a Disclosure
Committee comprised of members of management, including the two employee members
of the Board, to formalize processes to ensure accurate and timely disclosure in
the Company's periodic reports filed with the Securities and Exchange Commission
and to implement certain disclosure controls and procedures.
The Audit Committee, Compensation Committee and Nominating Committee are
each comprised of all of the Independent Directors. The Safety Committee and
Strategic Planning Committee are each comprised of all members of the Board of
Directors.
AUDIT COMMITTEE
The Audit Committee appoints the independent auditors for the Company and
monitors the performance of such firm; reviews and approves the scope and
results of the annual audit; and evaluates with the independent auditors the
Company's annual audit and annual consolidated financial statements; reviews
with management the status of internal accounting controls; and reviews problem
areas having a potential financial impact on the Company which may be brought to
its attention by management, the independent auditors or the Board. In addition,
the Audit Committee preapproves all non-audit related services provided by the
independent auditors and approves the independent auditors' fees for services
rendered to the Company. During the 2002 fiscal year, the Audit Committee held
three meetings, four telephonic meetings and did not act by written consent.
COMPENSATION COMMITTEE
The Compensation Committee functions include (i) reviewing and making
determinations with respect to matters having to do with the compensation of
senior executive officers and Directors of the Company and
(ii) administering certain plans relating to the compensation of officers.
During the 2002 fiscal year, the Compensation Committee held four meetings and
did not act by written consent.
5
NOMINATING COMMITTEE
The Nominating Committee functions include identifying persons for future
nomination for election to the Board of Directors. During the 2002 fiscal year,
the Nominating Committee held one meeting and did not act by written consent.
Stockholders who wish to submit names to the Nominating Committee for
consideration should do so in writing addressed to the Nominating Committee, c/o
Corporate Secretary, Landstar System, Inc., 13410 Sutton Park Drive South,
Jacksonville, Florida 32224.
SAFETY COMMITTEE
The Safety Committee functions include the development and implementation
of safety goals and strategies to be implemented by the Company. During the 2002
fiscal year, the Safety Committee held three meetings and did not act by written
consent.
STRATEGIC PLANNING COMMITTEE
The Strategic Planning Committee functions include the development of
strategic objectives and policies and procedures to achieve the strategic
objectives of the Company. The Strategic Planning Committee solicits the views
of the Company's senior management and determines strategic directions for
implementation. During the 2002 fiscal year, the Strategic Planning Committee
held three meetings and did not act by written consent.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board is responsible for providing independent,
objective oversight of the Company's accounting functions and internal controls.
The Audit Committee has the sole authority and responsibility to select,
evaluate and, when appropriate, replace the Company's independent auditors. The
Audit Committee is comprised of all of the Independent Directors. The Audit
Committee operates under a written charter approved by the Board of Directors.
Management is responsible for the Company's internal controls and financial
reporting process. The independent auditors are responsible for performing an
independent audit of the Company's consolidated financial statements in
accordance with generally accepted auditing standards accepted in the United
States of America and to issue a report thereon. The Audit Committee's
responsibility is to monitor these processes. The Audit Committee is not,
however, professionally engaged in the practice of accounting or auditing and
does not provide any expert or other special assurance as to such financial
statements concerning compliance with laws, regulations or generally accepted
accounting principles or as to auditor independence. The Audit Committee
relies, without independent verification, on the information provided to it and
on presentations and statements of fact made by management and the independent
auditors.
In connection with these responsibilities, as discussed elsewhere in this
Proxy, the Audit Committee held three meetings and four telephonic meetings
during 2002. These meetings were designed, among other things, to facilitate and
encourage communication among the Audit Committee, management and the
independent auditors. The Audit Committee discussed with the independent
auditors the overall scope and plans for their audit. The Audit Committee met
with the independent auditors, with and without management present, to discuss
the December 28, 2002 financial statements and their observations of the
Company's internal controls. The Audit Committee also discussed with the
independent auditors the matters required by Statement on Auditing Standards No.
61 (Communication with Audit Committees). The Audit Committee also received
written disclosures from the independent auditors required by Independence
Standards Board Standard No. 1 (Independence Discussions with Audit Committees),
and the Audit Committee discussed with the independent auditors that firm's
independence, including the new rules governing auditor independence promulgated
under the Sarbanes-Oxley Act. The Audit Committee had discussions with
management concerning the process used to support certifications by the
Company's Chief Executive Officer and Chief Financial Officer that are
required by the Securities and Exchange Commission and the Sarbanes-Oxley
Act to accompany the Company's periodic filings with the Securities and
Exchange Commission.
6
During 2002, the Audit Committee preapproved the continuation of all
non-audit services to be rendered to the Company by the independent auditors in
2002 (which services are disclosed elsewhere in this Proxy Statement) and
concluded that these services were compatible with maintaining the independence
of these auditors. For each fiscal year commencing with fiscal 2003, the Audit
Committee expects to preapprove all non-audit services rendered to the Company
by the independent auditors, including all related fee arrangements. The Audit
Committee also reviewed and discussed the December 28, 2002 financial statements
with management.
Based upon the Audit Committee's discussions with management and the
independent auditors, and the Audit Committee's review of the representations of
management and the independent auditors, the Audit Committee recommended that
the Board of Directors include the audited consolidated financial statements in
the Company's Annual Report on Form 10-K for the year ended December 28, 2002,
to be filed with the Securities and Exchange Commission. The Audit Committee has
also selected KPMG LLP as the Company's independent auditors for the fiscal year
ended December 27, 2003 and have recommended to the Board that this selection be
presented to the stockholders for ratification.
THE AUDIT COMMITTEE
David G. Bannister, Chairman
Ronald W. Drucker
William S. Elston
Merritt J. Mott
Diana M. Murphy
7
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the name, age, principal occupation and
business experience during the last five years of each of the current executive
officers of the Company. The executive officers of the Company serve at the
discretion of the Board and until their successors are duly elected and
qualified. For information regarding ownership of Common Stock by the executive
officers of the Company, see "Security Ownership by Management and Others."
There are no family relationships among any of the Directors and executive
officers of the Company or any of the Subsidiaries.
NAME AGE BUSINESS EXPERIENCE
---- --- -------------------
Jeffrey C. Crowe.......................... 56 See previous description under "Directors of the
Company."
Henry H. Gerkens.......................... 52 See previous description under "Directors of the
Company."
Robert C. LaRose.......................... 48 Mr. LaRose has been Vice President, Chief Financial
Officer and Secretary of the Company and LSHI since
December 2001. He served as Vice President of
Finance, Treasurer and Assistant Secretary of the
Company and LSHI from September 2001 to December
2001. He served as Vice President of Finance and
Treasurer of the Company and LSHI from October 1995
to September 2001. He served as Vice President and
Controller of the Company from January 1993 to
October 1995 and held the same positions at LSHI
from March 1989 to October 1995. Mr. LaRose was
Assistant Treasurer of the Company from May 1991 to
January 1993. He is also an officer of each of the
Subsidiaries.
8
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION OF DIRECTORS. During 2002, Directors who were not employees
of the Company received an annual Director's fee of $20,000, plus a fee of
$2,000 for each Board meeting attended and a fee of $1,000 for each meeting of a
committee attended if the committee meeting was held on a day other than a day
on which a Board meeting was held. During 2003, Directors who are not employees
of the Company will receive an annual Director's fee of $25,000, plus a fee of
$2,000 for each Board meeting attended in person, plus a fee of $1,000 for each
telephonic Board meeting attended and a fee of $1,000 for each in person or
telephonic meeting of a committee attended if the committee meeting is held on a
day other than a day on which a Board meeting is held. In addition commencing in
2003, each Director, upon election or re-election to the Board, will also
receive a Director's retainer fee of $25,000. Directors are also reimbursed for
expenses incurred in connection with attending Board meetings. Pursuant to the
Company's 1994 Directors Stock Option Plan, each Director who was an Eligible
Director (as defined therein) on November 30, 1994 received an option to
purchase 24,000 shares of the Company's Common Stock. Also, pursuant to the
Company's 1994 Directors Stock Option Plan, commencing in 1996, on the first
business day after each annual meeting of stockholders of the Company, each
Eligible Director who was elected or re-elected as a Director at such annual
meeting received an award of options (a "Term Award") to purchase an additional
24,000 shares of the Company's Common Stock. (All share information in this
Proxy reflect a two for one stock split effected in the form of a 100% stock
dividend distributed August 12, 2002.)
At a regularly scheduled meeting of the Board of Directors on December 9,
1998, the Board acted to approve a recommendation of the Compensation Committee
to reduce the number of shares available for a Term Award on an annual basis
from 24,000 options to 18,000 options to purchase shares of the Company's Common
Stock. The 1994 Directors Stock Option Plan has been amended to reflect this
reduction. All of such options have an exercise price equal to the fair market
value of the Company's Common Stock on the date of grant and are subject to
vesting requirements and other terms of the Company's 1994 Directors Stock
Option Plan. Directors who are also officers of the Company do not receive any
additional compensation for services as a Director or for services on committees
of the Board or for meetings or attendance fees.
Subject to the requisite approval of the Company's stockholders at the 2003
Annual Meeting (see proposal number three below), the 1994 Directors Stock
Option Plan will be replaced by a new Directors Stock Compensation Plan. Under
the terms of the proposed plan, each non-employee Director, upon election or
re-election to the Board, will receive 1,500 shares of the Company's Common
Stock subject to certain restrictions on transfer. Under the proposed plan, Mr.
Drucker, a Director Nominee eligible for re-election at the annual meeting of
stockholders scheduled to be held on May 15, 2003, will receive 1,500 shares
pursuant to the Directors Stock Compensation Plan. However, if for any reason
the requisite approval of stockholders of the Directors Stock Compensation Plan
is not obtained at the 2003 Annual Meeting to which this Proxy Statement
relates, the Company will revert to the 1994 Directors Stock Option Plan and Mr.
Drucker will receive 18,000 stock options pursuant to the 1994 Directors Stock
Option Plan.
COMPENSATION OF EXECUTIVE OFFICERS. The following table summarizes the
compensation paid to the Chief Executive Officer and each of the Company's two
other executive officers for services rendered to the Company and its
Subsidiaries during the 2002, 2001 and 2000 fiscal years (collectively, the
"Executive Officers"). The following table also includes such information with
respect to Messrs. Hartter and Hertwig, who are the two most highly compensated
non-executive officers of the Company (collectively, with the Executive
Officers, the "Named Executives").
9
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
------------
NO. OF
ANNUAL COMPENSATION SECURITIES
-------------------------------------- UNDERLYING
ANNUAL OTHER ANNUAL OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS COMPENSATION(2) GRANTED COMPENSATION(3)
--------------------------- ---- --------- ----- --------------- ---------- ---------------
Jeffrey C. Crowe............... 2002 $420,000 $950,000 $ 65,979 120,000 $114,891
Chairman of the Board & 2001 420,000 0 163,893 30,600 246,522
Chief Executive Officer 2000 420,000 765,000 114,718 32,800 145,963
Henry H. Gerkens............... 2002 300,000 690,000 16,425 90,000 30,486
Director, President & 2001 287,500 0 68,223 46,800 104,131
Chief Operating Officer 2000 275,000 440,000 56,918 22,800 68,929
Robert C. LaRose............... 2002 220,000 350,000 13,649 60,000 23,006
Vice President, Chief
Financial 2001 200,000 0 36,644 23,000 54,830
Officer & Secretary 2000 200,000 225,000 34,435 14,800 40,659
Gary W. Hartter................ 2002 220,000 300,000 2,943 48,000 10,579
President of Landstar Ranger, 2001 212,500 0 3,046 23,600 10,279
Landstar Gemini, Landstar 2000 205,000 165,000 19,232 12,400 9,846
Inway & Landstar Ligon
James R. Hertwig............... 2002 200,000 200,000 9,325 42,000 21,706
President of Landstar 2001 200,000 0 17,385 13,600 30,663
Logistics 2000 200,000 67,000 2,247 13,000 9,230
---------------
(1) Amounts shown include any salary deferred at the election of the Named
Executive under the Landstar 401(k) Savings Plan and/or the Landstar
Supplemental Executive Retirement Plan.
(2) Amounts shown represent amounts reimbursed during the fiscal year for the
payment of taxes on behalf of the above Named Executives.
(3) Amounts for 2002 include contributions in the amount of $8,000 which were
made by the Company under the Landstar 401(k) Savings Plan on behalf of each
of the Named Executives and contributions made by the Company under the
Landstar Supplemental Executive Retirement Plan on behalf of Mr. Crowe in
the amount of $8,800, Mr. Gerkens in the amount of $4,000, Mr. LaRose in the
amount of $800 and Mr. Hartter in the amount of $800. Amounts for 2002
include the dollar value of term life insurance premiums paid by the Company
on behalf of Messrs. Crowe, Gerkens, LaRose, Hartter and Hertwig in the
amounts of $1,526, $1,717, $479, $1,779 and $1,325, respectively. Amounts
for 2002 include $71,056, $15,826, $12,915 and $7,311, which represents
interest forgiven under loans extended to each Messrs. Crowe, Gerkens,
LaRose and Hertwig, respectively, in connection with the exercise of their
stock options and $25,509, $943, $812 and $5,070, for Messrs. Crowe,
Gerkens, LaRose and Hertwig, respectively, which represents interest
forgiven under loans extended to assist them with the income tax liability
incurred as a result of the exercise of stock options.
There were 396,000 options granted under the Company's 1993 Employee Stock
Option Plan in fiscal year 2002. The following table sets forth the number of
and information about stock options granted in fiscal 2002 to each of the Named
Executives of the Company.
10
NUMBER OF SECURITIES UNDERLYING OPTIONS GRANTED
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
NO. OF SECURITIES % OF OF STOCK PRICE APPRECIATION
UNDERLYING TOTAL FOR OPTION TERM
OPTIONS OPTIONS EXERCISE EXPIRATION ---------------------------
GRANTED(1) GRANTED PRICE DATE 5% 10%
----------------- ------- -------- --------------- ----------- -----------
Jeffrey C. Crowe..... 120,000 30.3% $36.1925 Jan. 02, 2012 $2,731,352 $6,921,783
Henry H. Gerkens..... 90,000 22.7% $36.1925 Jan. 02, 2012 2,048,514 5,191,337
Robert C. LaRose..... 60,000 15.2% $36.1925 Jan. 02, 2012 1,365,676 3,460,891
Gary W. Hartter...... 48,000 12.1% $36.1925 Jan. 02, 2012 1,092,541 2,768,713
James R. Hertwig..... 42,000 10.6% $36.1925 Jan. 02, 2012 955,973 2,422,624
---------------
(1) All the options granted shall become exercisable in three equal installments
on each of the first three anniversaries of the respective dates of grant,
provided the executive is employed by the Company on each such anniversary
date.
The following table sets forth the number and value of all options
exercised by the Named Executives.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
SHARES ACQUIRED VALUE
ON EXERCISE REALIZED(1)
--------------- -----------
Henry H. Gerkens............................................ 10,560 $442,094
Robert C. LaRose............................................ 7,040 260,269
Gary W. Hartter............................................. 18,520 389,729
---------------
(1) The value realized represents the difference between the fair market value
of the shares acquired on the date of exercise and the exercise price of the
option. The fair market value was calculated based upon the average of the
high and low sales price per share of Common Stock as quoted on NASDAQ on
the respective option exercise dates.
FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 28, 2002 DECEMBER 28, 2002(1)
--------------------------- ---------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
Jeffrey C. Crowe............................. 82,760 185,440 $3,132,343 $4,710,979
Henry H. Gerkens............................. 50,360 155,480 1,770,493 3,879,646
Robert C. LaRose............................. 31,280 96,680 1,116,650 2,414,746
Gary W. Hartter.............................. 3,720 81,240 141,987 2,014,783
James R. Hertwig............................. 34,880 69,720 1,319,830 1,801,596
---------------
(1) The value of in-the-money options represents the difference between the fair
market value of the shares as of December 27, 2002 and the exercise price of
the option. The fair market value was calculated based upon the average of
the high and low sales price per share of Common Stock as quoted on the
NASDAQ on the last business day of the Company's fiscal year ended December
28, 2002, which was December 27, 2002.
11
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information as of the end of the Company's
2002 fiscal year with respect to compensation plans under which equity
securities of the Company are authorized for issuance.
(A) (B) (C)
------------------------ ------------------------ ----------------------------
Plan category Number of securities to Weighted-average Number of securities
be issued upon exercise exercise price of remaining available for
of outstanding options, outstanding options, future issuance under equity
warrants and rights warrants and rights compensation plans
(excluding securities
reflected in column (a))
Equity compensation
plans approved by the
Company's stockholders 1,373,520 $28.28 1,798,640
Equity compensation
plans not approved by
the Company's
stockholders -- -- --
---------- ----------
Total 1,373,520 $28.28 1,798,640
---------- ----------
---------- ----------
Indebtedness of Management
In 1998, the Company made loans to Messrs. Crowe, Gerkens and LaRose in the
amounts of $925,000, $277,500 and $92,500, in connection with the exercise of
options to purchase 100,000, 30,000 and 10,000 shares of the Company's Common
Stock at $9.25 per share, respectively. In 1999, the Company made loans to
Messrs. Crowe, Gerkens and LaRose in the amounts of $242,833, $71,249 and
$28,323, respectively, to assist them with the income tax liability incurred as
a result of the exercise of stock options. In 2000, Messrs. Crowe, Gerkens and
LaRose repaid $51,047, $48,782 and $23,000, respectively, of their income tax
liability loans. In 2001, Mr. Gerkens repaid $22,467 of his income tax liability
loan. In 2002, Messrs. Crowe, Gerkens and LaRose repaid $925,000, $277,500 and
$92,500 of their stock option loans and Messrs. Crowe and LaRose repaid $191,786
and $5,323, respectively, of their income tax liability loans, representing
payment in full of all amounts due on all of these loans.
In 1999, the Company made loans to Messrs. Gerkens and LaRose in the
amounts of $127,500 and $76,500, in connection with the exercise of options to
purchase 10,000 and 6,000 shares of the Company's Common Stock, in both cases at
$12.75 per share. In 2002, Messrs. Gerkens and LaRose repaid all of these stock
option loans in full.
In 2000, the Company made loans to Messrs. Crowe, Gerkens, LaRose and two
loans to Mr. Hertwig in the amounts of $1,185,000, $474,000 and $237,000,
$214,875 and $74,063, respectively, in connection with the exercise of options
to purchase 80,000, 32,000 and 16,000, 18,000 and 5,000 shares of the Company's
Common Stock at $14.8125, $14.8125 and $14.8125, $11.9375 and $14.8125 per
share, respectively. In 2001, Mr. Hertwig repaid his $214,875 stock option loan,
representing payment in full of one of the two stock option loans made to him in
2000. In 2000, the Company also made loans to Messrs. Crowe and Gerkens in the
amounts of $332,687 and $76,795, respectively, to assist them with the income
tax liability incurred as a result of the exercise of stock options. In 2002,
Messrs. Crowe, Gerkens, LaRose and Hertwig repaid $1,185,000, $474,000, $237,000
and $74,063 of their stock option loans and Messrs. Crowe and Gerkens repaid
$332,687 and $76,795 of their income tax liability loans, representing payment
in full on all of these loans, including, in the case of Mr. Hertwig, the second
stock option loan made to him in 2000.
In 2001, the Company made a loan to Mr. Hertwig in the amount of $49,250 in
connection with the exercise of options to purchase 4,000 shares of the
Company's Common Stock at $12.3125 per share. In 2001, the Company also made
loans to Mr. LaRose and Mr. Hertwig in the amounts of $18,648 and $52,445,
respectively, to assist them with the income tax liability incurred as a result
of the exercise of stock options. In 2002, Messrs. LaRose and Hertwig repaid
$18,648 and $52,445 of their income tax liability loans, representing payment in
full of all amounts due on all of these income tax liability loans.
As a result of the repayments described above, all of the loans previously
made by the Company, to the Named Executives, in connection with the exercise of
stock
12
options and the related tax liabilities have been paid in full, with the
exception of the $49,250 loan made by the Company to Mr. Hertwig in 2001 in
connection with the exercise of stock options. Accordingly, Messrs. Crowe,
Gerkens, and LaRose have no outstanding loan balance at December 28, 2002. All
of the loans made in connection with the exercise of stock options and the
income tax liability incurred as a result of the exercise of stock options bear
interest at 7%. In accordance with the stock option loan program, interest on
the loans was, and will, in the case of the loan to Mr. Hertwig, continue to be
forgiven annually. On May 1, 2002, the Company ceased making loans under the
employee stock option loan program and terminated the program with respect to
future stock option exercises and any related tax liability.
Key Executive Employment Protection Agreements and Other Arrangements
On January 23, 1998, the Board approved the execution of the Key Executive
Employment Protection Agreements for Messrs. Crowe, Gerkens, LaRose, Hartter and
Hertwig. On August 1, 2002, the Board approved certain amendments to these
agreements. Each agreement, as amended, provides certain severance benefits in
the event of a Change of Control of the Company (as defined in the agreements).
Each agreement, as amended, provides, generally, that if a covered executive's
employment is terminated by the Company without "cause" (as defined in the
agreements) or by the executive for good reason (as so defined), in either such
case, in connection with or within the two-year period following the Change of
Control or if a covered executive terminates his employment for any reason six
months following the Change of Control, such executive will be entitled to
severance benefits consisting of a cash amount equal to three times for Messrs.
Crowe and Gerkens, two times for Mr. LaRose and one time for Messrs. Hartter and
Hertwig of the sum of (A) the executive's annual base salary; and (B) the amount
that would have been payable to the executive as a target bonus for the year in
which the Change of Control occurs. Each agreement also provides for
continuation of medical benefits and for certain tax gross-ups to be made to a
covered executive in the event payments to the executive are subject to the
excise tax on "parachute payments" imposed under Section 4999 of the Internal
Revenue Code of 1986. In addition, in July of 2002, the Compensation Committee
of the Board of Directors exercised its discretionary authority under the
Company's 1993 Stock Option Plan and its 2002 Executive Incentive Compensation
Plan to determine that in the event Mr. Gerkens' employment with the Company is
or is likely to be terminated for any reason in connection with a Change of
Control (as such term is defined in the 1993 Stock Option Plan), (i) each vested
and unexercised option granted to Mr. Gerkens prior to such Change of Control
will be "cashed out" for an amount equal to the excess of the Change of Control
Price (as such term is defined in the 1993 Stock Option Plan) over the price of
such option and (ii) Mr. Gerkens will receive, with respect to any Change of
Control occurring prior to the end of any calendar year, a pro-rated bonus for
such year under the 2002 Executive Incentive Compensation Plan based on the
bonus he would have received under such plan had he remained an employee of the
Company through the end of the year in which such Change of Control occurs.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
Overall Policy
The Company's executive compensation philosophy is designed to attract and
retain the best possible executive talent and to motivate these executives to
develop and implement the Company's business strategy. These objectives are to
be attained by tying a significant portion of each executive's compensation to
the Company's success in meeting specified corporate performance goals and,
through the grant of stock options, to appreciation in the Company's stock
price. Additionally, the Company also recognizes individual contributions as
well as overall business results.
The executive compensation program is reviewed annually by the Compensation
Committee. Periodically, at the Compensation Committee's sole discretion, an
independent review of the executive compensation program may be performed by
outside consultants.
The Compensation Committee is responsible for decisions regarding executive
compensation, including a determination of the compensation awarded to those
individuals whose compensation is detailed in this Proxy Statement, subject to
review by the Board. The key elements of the Company's executive compensation
consist of base salary, annual bonus and stock options. The Compensation
Committee's policies with respect to each of these elements, including the basis
for the compensation awarded to Mr. Crowe, the Company's chief executive
officer, are discussed below.
13
Base Salaries
Base salaries for newly hired executive officers are initially determined
by evaluating the responsibilities of the position held and the experience of
the individual. Salary adjustments are determined by evaluating the performance
of the Company and of each executive officer, and also take into account new
responsibilities. In the case of executive officers with responsibility for an
operating subsidiary, the financial results of such operating subsidiary are
also considered.
Annual Bonus
The Company's executive officers were eligible to receive an annual bonus
under the Company's 2002 Executive Incentive Compensation Plan (the "2002
EICP"). The 2002 EICP provided for bonus payments to be made to eligible
executive officers upon achievement of a consolidated earnings per share target
and to eligible subsidiary presidents upon the achievement of a consolidated
earnings per share target or an operating income target or a combination
thereof. These performance criteria were established at the beginning of 2002 by
the Compensation Committee.
In February 2003, the executive officers and subsidiary presidents received
bonuses pursuant to the 2002 EICP. The Compensation Committee, in awarding these
bonus amounts, considered the overall Company's performance and the criteria
established at the beginning of the year.
Stock Options
Under the Company's 1993 Stock Option Plan and the Company's 2002 Stock
Option Plan, stock options are granted to the Company's executive officers and
certain other key employees. The Compensation Committee determines the number of
stock options to be granted pursuant to guidelines it develops based on an
officer's, or other key employee's, job responsibilities and individual
performance evaluation. Stock options are granted with an exercise price equal
to the fair market value of the Common Stock on the date of grant and generally
vest over three or five years. This approach is designed to encourage the
creation of long-term stockholder value since no benefit can be realized from
such options unless the stock price exceeds the exercise price.
As of March 6, 2003, Mr. Crowe held 80,000 shares of the Company's Common
Stock and held options to purchase an additional 298,200 shares.
The Compensation Committee believes that significant equity interests held
by management helps to align the interests of stockholders and management and
maximizes stockholder returns over the long term.
Policy as to Section 162(m) of the Code
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
denies a publicly traded company a federal income tax deduction for compensation
in excess of $1 million paid to certain of its executive officers unless the
amount of such excess is payable based solely upon the attainment of objective
performance criteria. The Company has undertaken to qualify substantial
components of the incentive compensation it makes available to its executive
officers for the performance exception to nondeductibility. Stock option grants
under the Company's 1993 Employee Stock Option Plan and the Company's 2002
Employee Stock Option Plan currently meet these requirements. At the 2002 Annual
Meeting, the Company received stockholder approval for the 2002 EICP so that any
annual awards payable thereunder would qualify for the performance exception
under Section 162(m). The Compensation Committee believes that tax deductibility
of compensation is an important factor, but not the sole factor, to be
considered in setting executive compensation policy. Accordingly, the
Compensation Committee generally intends to take such
reasonable steps as are required to avoid the loss of a tax deduction due to
Section 162(m), but reserves the right to pay amounts which are not deductible
in appropriate circumstances.
14
Conclusion
Through the programs described above, a very significant portion of the
Company's executive compensation is linked directly to significant thresholds of
corporate performance and stock price appreciation. The Company's results did
achieve the target criteria established in the 2002 EICP. As such, bonuses were
paid under the 2002 EICP. The Committee will continue to review all executive
compensation and benefit matters presented to it and will act based upon the
best information available to it and in the best interests of the Company, its
stockholders and employees.
Compensation Committee of the Board
Ronald W. Drucker, Chairman
David G. Bannister
William S. Elston
Merritt J. Mott
Diana M. Murphy
15
PERFORMANCE COMPARISON
The following graph illustrates the return that would have been realized
(assuming reinvestment of dividends) by an investor who invested $100 in each of
the Company's Common Stock, the Standard & Poor's 500 Stock Index and the Dow
Jones Transportation Stock Index for the period commencing December 29, 1997
through December 28, 2002.
[LINE GRAPH]
LANDSTAR S&P 500 DJ 20 TRANSPORTS
-------- ------- ----------------
12/29/97 100.00 100.00 100.00
3/31/98 121.11 115.57 114.80
6/30/98 131.25 118.93 111.53
9/30/98 105.86 106.68 84.87
12/31/98 153.12 128.94 101.07
3/31/99 124.42 134.93 105.87
6/30/99 135.61 143.99 109.25
9/30/99 130.58 134.55 93.36
12/31/99 160.86 154.11 95.55
3/31/00 205.71 157.19 88.68
6/30/00 223.74 152.58 84.90
9/29/00 167.62 150.68 80.93
12/29/00 208.26 138.49 94.56
3/30/01 254.55 121.71 88.94
6/29/01 255.52 128.43 90.82
9/28/01 240.42 109.19 70.43
12/31/01 272.43 120.43 84.72
3/28/02 348.61 120.35 93.64
6/28/02 401.35 101.60 87.66
9/30/02 368.29 86.79 69.03
12/28/02 430.58 91.82 73.54
16
SECURITY OWNERSHIP BY MANAGEMENT AND OTHERS
The following table sets forth certain information concerning the
beneficial ownership of the Company's Common Stock as of March 3, 2003 by (i)
each person who is known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) each Director, nominee for election as
a Director and Named Executive of the Company, and (iii) all Directors and Named
Executives as a group.
AMOUNT AND
NATURE OF OWNERSHIP
BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER POSITION(S) OWNERSHIP CLASS(1)
------------------------ ----------- ---------- ----------
(i)
FMR Corp.(2)(3)................... 1,802,622 11.5%
T. Rowe Price Associates,
Inc.(2)(4)...................... 1,196,000 7.6%
(ii)
David G. Bannister(5)............. Director 29,920 *
Ronald W. Drucker(6).............. Director and Nominee for Director 32,000 *
Merritt J. Mott(7)................ Director 34,000 *
William S. Elston(8).............. Director 27,600 *
Diana M. Murphy(9)................ Director 30,400 *
Jeffrey C. Crowe(10).............. Director, Chairman of the Board
and Chief Executive Officer 223,640 1.4%
Henry H. Gerkens(11).............. Director and Nominee for Director
President and Chief Operating
Officer 102,020 *
Robert C. LaRose(12).............. Vice President, Chief Financial
Officer and Secretary 73,600 *
Gary W. Hartter(13)............... President of Landstar Ranger,
Landstar Gemini, Landstar Inway
and Landstar Ligon 26,520 *
James R. Hertwig(14).............. President of Landstar Logistics 61,680 *
(iii)
All Directors and Named Executives
as a group (10
persons)(15)(16)................ 641,380 4.0%
---------------
* Less than 1%
(1) The percentages are based upon 15,725,977 shares, which equal the
outstanding shares of the Company as of March 3, 2003. With respect to the
calculation of the percentages for beneficial owners who hold options
exercisable within 60 days of March 3, 2003, the number of shares of Common
Stock on which such percentage is based also includes the number of shares
underlying such options.
17
(2) In accordance with the rules of the Securities and Exchange Commission, the
information set forth is based on the most recent Schedule 13G (and
amendments thereto) filed by this entity.
(3) According to an amendment to its Schedule 13G filed jointly by FMR Corp.
with Edward C. Johnson 3d, Abigail P. Johnson and Fidelity Management &
Research Company on February 13, 2003, FMR Corp. is the beneficial owner of
1,802,622 shares of Common Stock. Certain of these shares are beneficially
owned by FMR Corp. subsidiaries and related entities. The Schedule 13G
discloses that FMR Corp. has sole voting power as to 323,258 shares of
Common Stock, shares power to vote no shares of Common Stock and has sole
power to dispose of 1,802,622 shares of Common Stock. The 13G also
discloses that Mr. Johnson (Chairman of FMR Corp.) and Ms. Johnson (a
Director of FMR Corp.) do not have sole or shared voting power with respect
to any shares of Common Stock, but both Mr. and Ms. Johnson have sole power
to dispose of 1,802,622 shares of Common Stock. The Schedule 13G states
that Mr. and Ms. Johnson and various family members, through their
ownership of FMR Corp. voting stock and the execution of a shareholders'
voting agreement, may be deemed to form a controlling group with respect to
FMR Corp. Fidelity Management & Research Company ("Fidelity"), a
wholly-owned subsidiary of FMR Corp. and an investment adviser registered
under Section 203 of the Investment Advisers Act of
1940, is the beneficial owner of
1,479,364 shares, or 9.368% of the Common Stock outstanding, as a result of
acting as investment adviser to various investment companies (the "Funds")
registered under Section 8 of the Investment Company Act of 1940. Such
shares are voted by Fidelity in accordance with written guidelines
established by the Funds' boards of trustees. Mr. Johnson, FMR Corp. and
the Funds each has sole power to dispose of the 1,479,364 shares owned by
the Funds. Fidelity International Limited ("FIL"), Pembroke Hall, 42
Crowlane, Hamilton, Bermuda, and various foreign-based subsidiaries provide
investment advisory and management services to non-U.S. investment
companies (the "International Funds") and certain institutional investors.
FIL is the beneficial owner of 56,800 shares or 0.360% of the Common Stock
outstanding. As a result of shares owned by a partnership controlled by Mr.
Johnson (Chairman of FIL) and members of his family, FMR Corp. and FIL may
be deemed to have formed a "group" for purposes of Section 13(d) under the
Securities Exchange Act of 1934 (the "34 Act") and may be required to
attribute to each other the beneficial ownership of securities beneficially
owned by the other corporation within the meaning of Rule 13d-3 promulgated
under the 34 Act. As such, FMR Corp.'s beneficial ownership may include
shares beneficially owned by FIL. FMR Corp. and FIL each expressly disclaim
beneficial ownership of Common Stock beneficially owned by the other. With
the exception of FIL, the business address of each of the foregoing is 82
Devonshire Street, Boston, Massachusetts 02109.
(4) According to an amendment to its Schedule 13G filed on February 3, 2003, T.
Rowe Price Associates, Inc. ("Price Associates") is an investment adviser
registered under Section 203 of the Investment Advisers Act of 1940 and is
deemed to be the beneficial owner of 1,196,000 shares of Common Stock.
Price Associates, however, expressly disclaims that it is, in fact, the
beneficial owner of such shares. Price Associates has sole voting power
with respect to 355,800 of such shares, no shared voting power with respect
to such shares, and the sole dispositive power with respect to all
1,196,000 shares. The business address of Price Associates is 100 E. Pratt
Street, Baltimore, Maryland 21202.
(5) Includes 18,000 shares that may be acquired upon the exercise of options.
(6) Includes 10,000 shares held in trust for which Mr. Drucker has sole voting
and investment power, 10,000 shares held in trust for which Mr. Drucker has
shared voting and investment power with SunTrust Bank-Trust Department of
SunTrust Bank-North Florida, N.A. and 12,000 shares that may be acquired
upon the exercise of options.
(7) Includes 200 shares held in trust for Mr. Mott's son, 200 shares held in
trust for Mr. Mott's daughter, and 30,000 shares that may be acquired upon
the exercise of options.
(8) Includes 20,000 shares that may be acquired upon the exercise of options.
(9) Includes 30,000 shares that may be acquired upon the exercise of options.
(10) Includes 143,640 shares that may be acquired upon the exercise of options.
(11) Includes 86,022 shares that may be acquired upon the exercise of options.
(12) Includes 48,817 shares that may be acquired upon the exercise of options.
18
(13) Includes 26,520 shares that may be acquired upon the exercise of options.
(14) Includes 57,680 shares that may be acquired upon the exercise of options.
(15) Represents amount of shares deemed to be beneficially owned either directly
or indirectly by all Directors and current executive officers as a group.
(16) Includes 472,679 shares that may be acquired upon the exercise of options.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers and Directors, and persons who own more than
ten percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission ("SEC"). Executive officers, Directors and greater than ten percent
stockholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.
There was an inadvertent failure to file Form 4, Statement of Changes in
Beneficial Ownership, on a timely basis with the SEC on behalf of Ms. Diana
Murphy, a Director, with respect to a sale of 100 shares of
Common Stock in July 2002. This transaction was reported on Form 4 in February
2003 as soon as the oversight was discovered. Other than as set forth in this
paragraph, based solely on review of the copies of such forms furnished to the
Company, or written representations that no Form 5 was required, the Company
believes that during the fiscal year ended December 28, 2002, all Section 16(a)
filing requirements which are applicable to its executive officers, Directors
and greater than ten percent beneficial owners were accomplished.
PROPOSAL NUMBER TWO --
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The firm of KPMG LLP served as independent auditors for the Company for the
fiscal year ended December 28, 2002. In addition to retaining KPMG LLP to audit
the consolidated financial statements of the Company and its subsidiaries, KPMG
LLP rendered certain tax and employee benefit audit services to the Company in
fiscal year 2002 and expects to continue to do so in 2003. The aggregate fees
billed for professional services by KPMG LLP in fiscal year 2002 for services
consisted of the following:
AUDIT FEES: Fees for the audit of financial statements and quarterly
reviews, $487,000.
ALL OTHER FEES: Fees for assistance with tax compliance and tax
audits, $138,400, and fees for the audit of employee benefit plans,
$16,000.
The Audit Committee has appointed that firm to continue in that capacity
for fiscal year 2003, and has recommended to the Board that a resolution be
presented to stockholders at the 2003 Annual Meeting to ratify that appointment.
A representative of KPMG LLP will be present at the 2003 Annual Meeting and will
have an opportunity to make a statement and respond to appropriate questions
from stockholders.
THE BOARD RECOMMENDS A VOTE FOR THIS PROPOSAL
PROPOSAL NUMBER THREE -- PROPOSAL TO APPROVE THE 2003
DIRECTORS STOCK COMPENSATION PLAN
The Board has adopted, subject to stockholder approval, the 2003 Directors
Stock Compensation Plan, to replace the previously existing 1994 Directors Stock
Option Plan. The Board believes that a change to the method of compensating the
outside Board members will continue to attract, retain and motivate the best
qualified directors and further enhance the long-term mutuality of interest
between the Company's stockholders and the Directors of the Company. The
material terms of the Directors Stock Compensation Plan are summarized below.
Subject to stockholder approval of the Directors Stock Compensation Plan,
the maximum number of shares that may be issued under the Directors Stock
Compensation Plan may not exceed 50,000 in the aggregate. If there is a stock
split, stock dividend, recapitalization, or other relevant change affecting the
Company's shares of Common Stock, appropriate adjustments will be made by the
Board in the number of shares that may be issued in the future.
19
The Directors Stock Compensation Plan is administered by the Board. Each
person who is a Director of the Company, and is not an officer or employee of
the Company or any of its subsidiaries is eligible to participate in the
Directors Stock Compensation Plan (an "Eligible Director"). Each of the
provisions is described more fully below and in the full text of the Directors
Stock Compensation Plan set forth in Appendix A.
Share Awards
Each Eligible Director shall be entitled to compensation for his or her
participation on the Board. Compensation pursuant to the Directors Stock
Compensation Plan shall be fixed at 1,500 shares of Common Stock, representing
one award. The Board has the authority to adjust the amount of compensation from
time to time. One share award is to be issued on the first business day after
each Annual Meeting of Stockholders (the "Meeting") to an Eligible Director who
was, at the most recent Meeting, elected or re-elected to the Board.
Restrictions on Disposition
For the three-year period following the award of shares to an Eligible
Director, neither such Eligible Director nor any of such Eligible Director's
heirs or representatives has the right to sell, assign, transfer, pledge or
otherwise directly or indirectly dispose of any such shares. These restrictions
on transfer shall lapse upon the termination of an Eligible Director's services
to the Company for any reason.
Other Information
The Board may terminate or suspend the Directors Stock Compensation Plan,
and from time to time may amend or modify the Directors Stock Compensation Plan
provided that without the requisite approval of the Company's stockholders, no
amendment or modification may (i) materially increase the benefits accruing to
Eligible Directors under the Directors Stock Compensation Plan, (ii) except as
necessary to give effect to certain adjustments to the Company's capitalization
structure, such as a stock split, materially increase the number of shares of
Common Stock subject to the Plan, (iii) materially modify the requirements for
participation in the Directors Stock Compensation Plan or (iv) make any other
amendment or modification that would require the approval of the stockholders of
the Company.
Approval
Approval of the proposal to implement the Directors Stock Compensation Plan
requires the affirmative vote of a majority of all shares of Common Stock
present in person or represented by proxy and entitled to vote at the 2003
Annual Meeting. Abstentions from voting on the proposal will have the same
effect as voting against the proposal. Broker non-votes will have no effect on
the outcome of the proposal.
THE BOARD RECOMMENDS A VOTE FOR THIS PROPOSAL
20
PROPOSAL NUMBER FOUR -- PROPOSAL TO AMEND COMPANY'S
CERTIFICATE OF INCORPORATION TO INCREASE
AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors recommends that Article IV, Section 1 of the
Certificate of Incorporation be amended so as to increase the authorized number
of shares of Common Stock, par value $.01 per share, from 20,000,000 to
50,000,000. Separately, as described in proposal number five (see below), the
Board of Directors has recommended that the Certificate of Incorporation be
amended so as to increase the authorized number of shares of Preferred Stock
(the "Preferred Stock"), par value $1.00 per share, from 2,000,000 to 5,000,000.
The proposals to increase such authorized number of shares of Common Stock, on
the one hand, and Preferred Stock, on the other, are being submitted to the
Company's stockholders separately, as described further in proposal number five
below.
The main text of the proposed amendment (giving effect to both this
proposal and proposal number five) would read as follows:
"The aggregate number of shares of all classes of stock which the Company
shall have authority to issue is 55,000,000, consisting of 50,000,000 shares of
Common Stock, par value $0.01 per share, and 5,000,000 shares of Preferred
Stock, par value $1.00 per share."
In the event that the Company's stockholders approve proposal numbers four
and five, the aggregate number of shares of capital stock which the Company
would have the authority to issue would increase to 55,000,000. However, in the
event that the Company's stockholders approve this proposal but do not approve
proposal number five, the authorized number of shares of Common Stock would
increase to 50,000,000 but the authorized number of shares of Preferred Stock
would remain at 2,000,000. On the other hand, if the Company's stockholders do
not approve this proposal but do approve proposal number five, the authorized
number of shares of Common Stock would remain at 20,000,000 but the authorized
number of shares of Preferred Stock would increase to 5,000,000.
* * * *
The Company presently has authority to issue a total number of 22,000,000
shares, consisting of (a) 20,000,000 shares of Common Stock and (b) 2,000,000
shares of Preferred Stock.
As of the close of business on December 28, 2002, of the 20,000,000 shares
of Common Stock presently authorized by the Certificate of Incorporation,
15,782,627 shares were issued and outstanding, 3,172,160 shares were reserved
for issuance under the Company's employee stock option plans and 554,879 shares
were held by the Company as treasury shares. Thus, assuming the Company were to
use the treasury shares in connection with option exercises under the Company's
employee stock option plans, the Company would have only 490,334 shares of
Common Stock as of December 28, 2002 which were both unissued and not reserved
for other purposes. The small number of unissued and unreserved shares of Common
Stock reflects in part the impact of the Company's two-for-one stock split,
effected in the form of a 100% stock dividend distributed on August 12, 2002.
Adoption of this proposal would increase the number of authorized and unissued
shares of Common Stock by 30,000,000.
The Board of Directors believes that the Company does not have a sufficient
number of authorized and unissued shares of Common Stock to give it the ability
to react quickly and in the best interests of its stockholders to the various
corporate opportunities and other circumstances which might merit the issuance
of additional shares of Common Stock in the future. For instance, the additional
shares of Common Stock under this proposal would provide the Company with the
ability, if it wished to do so, to effect a stock split or a stock dividend,
such as the stock split referred to above. The additional shares would also
facilitate the Company's ability to, among other things, structure financing
transactions, mergers and acquisitions, employee stock plans and other corporate
transactions in a timely fashion and without the expense and delay associated
with calling a special stockholders' meeting to increase the authorized capital
of the Company. In this regard, the Company notes that no further action or
authorization by the Company's stockholders would be necessary prior to issuance
of the additional shares of Common Stock contemplated by this proposal number
four except as may be required by applicable law and the rules of the NASDAQ or
any stock exchange on which the Company's securities may be listed in the
future.
The Company has no current plans for the issuance of any shares of Common
Stock, except with respect to issuances under the Company's stock option plans.
However, since the Company has a sufficient number of existing authorized
21
and unissued shares of Common Stock and treasury shares for purposes of the
Company's stock option plans, approval of proposal number four is not necessary
to effect this use.
The terms of the additional shares of Common Stock will be identical to
those of the currently outstanding shares of Common Stock. This amendment will
not alter the current number of issued shares. The relative rights and
limitations of the shares of Common Stock would remain unchanged under this
proposal.
The Company is not proposing to increase its authorized shares of Common
Stock in order to impede a change of control of the Company and the Company is
not aware of any current efforts to acquire control of the Company. However,
under certain circumstances, the additional shares of Common Stock could be
issued by the Company to defend against, or otherwise respond to, a hostile
takeover bid. For instance, the Company could issue shares of Common Stock to
dilute the stock ownership of a person or entity seeking to obtain control of
the Company under a "poison pill" or other similar arrangement, although since
the Company's Shareholders Rights Plan expired on February 10, 2003, the Company
does not currently have any such "poison pill" in place. The Company could also
respond to an unsolicited takeover bid by issuing, in a private placement or
otherwise, a significant portion of its securities with purchasers who might
align with the Board of Directors in response to a specific change of control
transaction affecting the Company. Moreover, the issuance of shares of Common
Stock to persons friendly to the Board could make it more difficult to remove
incumbent managers and directors from office even if such change could be
considered favorable to stockholders generally. The Company also notes that
certain provisions of its Certificate of Incorporation and Bylaws, including
(i) its ability to issue "blank check" preferred stock, as described more fully
in proposal number five below, (ii) its staggered board of directors and (iii)
provisions in its Bylaws limiting the ability of its stockholders to call
special meetings and to propose business for consideration at annual meetings,
could also under certain circumstances have the effect of discouraging attempts,
or making it more difficult to gain control of the Company.
Nevertheless, while the issuance of shares of Common Stock may have
anti-takeover ramifications, the Board believes that the financial flexibility
offered by this proposed amendment to the Certificate of Incorporation outweighs
any disadvantages. To the extent that the amendment may have anti-takeover
effects, the amendment may encourage persons seeking to acquire the Company to
negotiate directly with the Board enabling the Board to consider the proposed
transaction in a manner that best serves the stockholders' interests.
The issuance of the additional shares of Common Stock contemplated by this
proposal number four also could have the effect in certain circumstances of,
among other things, diluting earnings per share, book value per share or voting
power of the currently outstanding shares of Common Stock.
The affirmative vote of holders of a majority of the outstanding shares of
Common Stock is required for approval of this proposal. Consequently, any shares
not voted (whether by abstention, broker non-vote or otherwise) will have the
same effect as votes against the proposed amendment to the Company's
Certificate. If the amendment is approved by the stockholders, it will become
effective upon the filing of a Certificate of Amendment in accordance with the
General Corporation Law of Delaware.
THE BOARD RECOMMENDS A VOTE FOR THIS PROPOSAL
22
PROPOSAL NUMBER FIVE -- PROPOSAL TO AMEND COMPANY'S
CERTIFICATE OF INCORPORATION TO INCREASE
AUTHORIZED SHARES OF PREFERRED STOCK
The Board of Directors recommends that Article IV, Section 1 of the
Certificate of Incorporation be amended so as to increase the authorized number
of shares of Preferred Stock, par value $1.00 per share, from 2,000,000 to
5,000,000. Separately, as described in proposal number four (see above), the
Board of Directors has recommended that the Certificate of Incorporation be
amended so as to increase the authorized number of shares of Common Stock (the
"Common Stock"), par value $.01 per share, from 20,000,000 to 50,000,000. The
proposals to increase such authorized number of shares of Preferred Stock, on
the one hand, and Common Stock, on the other, are being submitted to the
Company's stockholders separately, as described further in proposal number four
above.
The main text of the proposed amendment (giving effect to both this
proposal and proposal number four) would read as follows:
"The aggregate number of shares of all classes of stock which the Company
shall have authority to issue is 55,000,000, consisting of 50,000,000 shares of
Common Stock, par value $0.01 per share, and 5,000,000 shares of Preferred
Stock, par value $1.00 per share."
In the event that the Company's stockholders approve proposal numbers four
and five, the aggregate number of shares of capital stock which the Company
would have the authority to issue would increase to 55,000,000. However, in the
event that the Company's stockholders approve this proposal but do not approve
proposal number four, the authorized number of shares of Preferred Stock would
increase to 5,000,000 but the authorized number of shares of Common Stock would
remain at 20,000,000. On the other hand, if the Company's stockholders do not
approve this proposal but do approve proposal number four, the authorized number
of shares of Preferred Stock would remain at 2,000,000 but the authorized number
of shares of Common Stock would increase to 50,000,000.
* * * *
The Company presently has authority to issue a total number of 22,000,000
shares, consisting of (a) 20,000,000 shares of Common Stock and (b) 2,000,000
shares of Preferred Stock.
As of the close of business on December 28, 2002, none of the Company's
authorized shares of Preferred Stock were issued or outstanding. Thus, as of the
close of business on December 28, 2002, there were authorized and unissued and
unreserved 2,000,000 shares of Preferred Stock. Adoption of this proposal would
increase the number of authorized, unissued and unreserved shares of Preferred
Stock by 3,000,000.
The Board of Directors believes that the Company does not have a sufficient
number of authorized and unissued shares of Preferred Stock in order to serve
the best interests of the Company and its stockholders with respect to the
various opportunities and other circumstances which might merit the issuance of
shares of Preferred Stock in the future. For instance, the additional shares of
Preferred Stock under this proposal would provide the Company with increased
financial flexibility to use shares of Preferred Stock for issuance from time to
time and with such features as determined by the Board, to structure financing
transactions, mergers and acquisitions and other corporate transactions in a
timely fashion and without the expense and delay associated with calling a
special stockholders' meeting to increase the authorized capital of the
Company. In the event the Board elects at any time to adopt a Shareholder
Rights Plan to replace the Shareholder Rights Plan of the Company which
expired on February 10, 2003, the Board could also use shares of Preferred
Stock in connection with the implementation thereof.
The Board may authorize and issue Preferred Stock from time to time and in
one or more series on such terms and conditions as the Board deems to be in the
best interests of the Company and its stockholders and without any action or
authorization by the Company's stockholders, except as may be required by
applicable law and the rules of the NASDAQ or any stock exchange on which the
Company's securities may be listed in the future. The numbers, designations,
rights, preferences, privileges and limitations of the Preferred Stock will be
determined upon issuance by the Board. However, the Company has no current plans
for the issuance of any shares of Preferred Stock.
23
It is not possible to state the effects of the proposed increase in the
number of shares of Preferred Stock upon the rights of holders of the Common
Stock until the Board determines the respective rights of the holders of one or
more series of the Preferred Stock. Nevertheless, the issuance of shares of
Preferred Stock pursuant to the Board's authority described above may adversely
affect the rights of the holders of the Common Stock. Specifically, the effects
of an issuance of Preferred Stock could include: (i) a reduction in the amount
of cash otherwise available for payment of dividends on the Common Stock, if
any, (ii) restrictions on dividends on the Common Stock, (iii) dilution of the
earnings per share, book value per share or voting power of the Common Stock,
and (iv) restrictions on the rights of holders of Common Stock to share in the
Company's assets upon satisfaction of any liquidation preference granted to the
holders of Preferred Stock. In addition, shares of Preferred Stock may be
convertible into shares of Common Stock.
The Company is not proposing to increase its authorized shares of Preferred
Stock in order to impede a change of control of the Company and the Company is
not aware of any current efforts to acquire control of the Company. However,
under certain circumstances, the additional shares of Preferred Stock could be
issued by the Company to defend against, or otherwise respond to, a hostile
takeover bid. For instance, the Company could issue shares of Preferred Stock to
dilute the stock ownership of a person or entity seeking to obtain control of
the Company under a "poison pill" or other similar arrangement, although since
the Company's Shareholders Rights Plan expired on February 10, 2003, the Company
does not currently have any such "poison pill" in place. The Company could also
respond to an unwanted takeover bid by issuing, in a private placement or
otherwise, securities representing a significant portion of its voting power to
purchasers who might align with the Board of Directors in response to a specific
change of control transaction affecting the Company. Moreover, the issuance of
shares of Preferred Stock to persons friendly to the Board could make it more
difficult to remove incumbent managers and directors from office even if such
change could be considered favorable to stockholders generally.
In addition, the Company notes that, as described in proposal number four
above, certain provisions of the Certificate of Incorporation and Bylaws may
have the effect under certain circumstances of discouraging or making it
difficult to gain control of the Company.
Nevertheless, while the issuance of shares of Preferred Stock may have
anti-takeover ramifications, the Board believes that the financial flexibility
offered by this proposed amendment to the Certificate of Incorporation outweighs
any disadvantages. To the extent that the amendment may have anti-takeover
effects, the amendment may encourage persons seeking to acquire the Company to
negotiate directly with the Board enabling the Board to consider the proposed
transaction in a manner that best serves the stockholders' interests.
The affirmative vote of holders of a majority of the outstanding shares of
Common Stock is required for approval of this proposal. Consequently, any shares
not voted (whether by abstention, broker non-vote or otherwise) will have the
same effect as votes against the proposed amendment to the Company's
Certificate. If the amendment is approved by the stockholders, it will become
effective upon the filing of a Certificate of Amendment in accordance with the
General Corporation Law of Delaware.
THE BOARD RECOMMENDS A VOTE FOR THIS PROPOSAL
24
STOCKHOLDER PROPOSALS
In accordance with regulations issued by the SEC, stockholder proposals
intended for presentation at the 2004 Annual Meeting of Stockholders must be
received by the Secretary of the Company no later than November 26, 2003, if
such proposals are to be considered for inclusion in the Company's Proxy
Statement. In accordance with the Company's Bylaws, stockholder proposals
intended for presentation at the 2004 Annual Meeting of Stockholders that are
not intended to be considered for inclusion in the Company's Proxy Statement
must be received by the Secretary of the Company not later than 35 days prior to
the 2004 Annual Meeting of Stockholders. For any proposal that is not submitted
for inclusion in the next year's Proxy Statement, but is instead sought to be
presented directly at the 2004 Annual Meeting, Securities and Exchange
Commission rules permit management to vote proxies in its discretion if the
Company: (1) receives notice of the proposal before the close of business on
February 9, 2004 and advises stockholders in the 2004 Proxy Statement about the
nature of the matter and how management intends to vote on such matter; or (2)
does not receive notice of the proposal prior to the close of business on
February 9, 2004.
In addition, in accordance with the Company's Bylaws, stockholder proposals
intended for presentation at the 2003 Annual Meeting of Stockholders that are
not intended for inclusion in the Company's Proxy Statement must be received by
the Company not later than April 10, 2003. For any proposal that is not
submitted for inclusion in this year's Proxy Statement, but is instead sought
to be presented directly at the 2003 Annual Meeting, Securities and Exchange
Commission rules permit management to vote proxies in its discretion if the
Company: (1) receives notice of the proposal before the close of business on
February 5, 2003, and advises stockholders in this year's Proxy Statement about
the nature of the matter and how management intends to vote on such matter, or
(2) does not receive notice of the proposal prior to the close of business on
February 5, 2003.
All proposals should be mailed via certified mail and addressed to Robert
C. LaRose, Secretary, Landstar System, Inc., 13410 Sutton Park Drive South,
Jacksonville, Florida 32224.
DELIVERY OF DOCUMENTS TO SECURITY HOLDERS SHARING AN ADDRESS
The Company and its intermediaries shall provide one copy of a proxy
statement or annual report to two or more security holders who share an address
in accordance with Rule 14a-3(e)(1) of the Securities Exchange Act of 1934, as
amended, where consent of such security holders has been properly obtained and
where neither the Company nor the intermediary has received contrary
instructions from one or more of such security holders. The Company undertakes
to deliver promptly upon written or oral request a separate copy of a proxy
statement or annual report, as applicable, to any security holder at a shared
address to which a single copy of the documents was delivered. A security holder
can notify the Company that the security holder wishes to receive a separate
copy of a proxy statement or annual report by contacting the Company at the
following phone number and/or mailing address:
Landstar System, Inc.
Investor Relations
13410 Sutton Park Drive South
Jacksonville, FL 32224
Phone: 904-398-9400
Security holders sharing an address can also request delivery of a single
copy of a proxy statement or an annual report if they are receiving multiple
copies of proxy statements or annual reports by contacting the Company at the
preceding phone number and/or mailing address.
25
APPENDIX A
LANDSTAR SYSTEM, INC.
DIRECTORS STOCK COMPENSATION PLAN
ARTICLE I
PURPOSE
The purposes of the Plan are to enable the Company to attract, retain and
motivate the best-qualified directors and to enhance a long-term mutuality of
interest between the directors and stockholders of the Company by providing
Eligible Directors with compensation in the form of shares of Common Stock.
ARTICLE II
DEFINITIONS
2.1 Definitions. Whenever used herein, the following terms shall have the
respective meanings set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Common Stock" means the common stock, par value $0.01 per share,
of the Company.
(c) "Company" means Landstar System, Inc., a Delaware corporation, and
any successor thereto.
(d) "Eligible Director" means a director of the Company who is neither
an officer nor an employee of the Company or any of its subsidiaries.
(e) "Plan" means this Landstar System, Inc. Directors Stock
Compensation Plan, as the same may be amended from time to time.
(f) "Share" means one share of Common Stock.
(g) "Share Award" means an award of 1,500 Shares.
2.2 Gender and Number. Except when otherwise indicated by the context,
words in the masculine gender shall include the feminine gender, the singular
shall include the plural, and the plural shall include the singular.
ARTICLE III
ADMINISTRATION
3.1 Rules, Interpretation and Determination. The Plan shall be
administered by the Board. The Board shall have full authority to interpret and
administer the Plan, to establish, amend and rescind rules for carrying out the
Plan, and to take all other actions that it deems necessary or advisable for
administering the Plan. Any authority exercised by the Board under the Plan and
any determination or interpretation made by the Board in respect of the Plan
shall be exercised or made by it in its sole discretion, and all determinations,
interpretations or other actions made or taken by the Board pursuant to the
provisions of the Plan shall be final, binding and conclusive for all purposes
and upon all persons.
3.2 Delegation by the Board. All the powers, duties and responsibilities
of the Board specified in the Plan may, to the full extent permitted by
applicable law, be exercised and performed by a committee of the Board to the
extent authorized by the Board to exercise and perform such powers, duties and
responsibilities. Any authority duly exercised by such committee and any
determination or interpretation made by such committee in the exercise of such
authority shall be exercised or made in its discretion and shall be final,
binding and conclusive for all purposes and upon all persons.
26
3.3 Agents and Indemnification. The Board or any committee thereof may
employ such legal counsel, consultants and agents as it may deem desirable for
the administration of the Plan, and may rely upon any opinion received from any
such counsel or consultant and any computation received from any such consultant
or agent. No member or former member of the Board or any committee thereof shall
be liable for any action
or determination made in good faith with respect to the Plan. To the maximum
extent permitted by applicable law and the Company's Certificate of
Incorporation and Bylaws, each member or former member of the Board or any
committee thereof shall be indemnified and held harmless by the Company against
any cost or expense (including counsel fees) or liability (including any sum
paid in settlement of a claim with the approval of the Company) arising out of
any act or omission to act in connection with the Plan, unless arising out of
such person's own fraud or bad faith. Such indemnification shall be in addition
to any rights of indemnification the person may have as a director, officer or
employee or under the Certificate of Incorporation of the Company or the Bylaws
of the Company.
ARTICLE IV
COMPENSATION
4.1 Compensation. Each Eligible Director shall be entitled to
compensation for his or her participation on the Board. Compensation pursuant to
the Plan shall be fixed at one Share Award. Subject to Article VII, the Board
may adjust the time of payment and amount of any compensation from time to time.
4.2 Commencement of Service Between Annual Meetings. In the event that an
Eligible Director commences service to the Board on a date during the term of
the Plan that is between annual meetings of the stockholders of the Company
(each, an "Annual Meeting"), such Eligible Director shall be entitled to receive
a pro rata portion of one Share Award, based on the number of days until the
expiration of his term as a director of the Company. The Eligible Director shall
receive this pro rata payment as soon as reasonably practicable following his
commencement of services.
ARTICLE V
SHARE AWARDS
5.1 Share Awards. Subject to Article IV, on the first business day after
each Annual Meeting occurring during the term of the Plan in which an Eligible
Director is elected or re-elected to the Board, such Eligible Director shall
automatically be granted one Share Award.
5.2 Restrictions on Disposition of Shares. For the three-year period
following the award of Shares to an Eligible Director, neither such Eligible
Director nor any of such Eligible Director's heirs or representatives shall
sell, assign, transfer, pledge or otherwise directly or indirectly dispose of or
encumber any such Shares to or with any other person, firm or corporation
(including, without limitation, transfers to any other holder of the Company's
capital stock, dispositions by gift, by will, by a corporation as a distribution
in liquidation and by operation of law, other than a transfer of such Shares by
operation of law to the estate of the Eligible Director upon the death of the
Eligible Director, provided that such estate shall be bound by all provisions of
the Plan). Notwithstanding the foregoing, the restrictions on the transfer of
such Shares under this Section 5.2 shall automatically lapse (and the legend
referred to in Section 5.3 shall be removed) upon the termination of such
Eligible Director's service as a director of the Company.
5.3 Issuance of Stock Certificates; Legends. Upon the issuance of Shares
pursuant to this Plan, a certificate or certificates for the Shares shall be
issued by the Company in the name of the person or persons receiving such Shares
and be delivered to or upon the order of such person or persons. Certificates
for Shares issued hereunder shall bear such legend or legends as the Board, in
its discretion, determines to be necessary or appropriate to prevent a violation
of, or to perfect an exemption from, the registration requirements of the
Securities Act of 1933, as amended, or to implement the provisions of the Plan
or any agreements between the Company and the Eligible Director with respect to
such Shares including, without limitation, a legend reflecting the restrictions
on the transfer of such Shares under Section 5.2, which will include, without
limitation, the following language:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS (INCLUDING TRANSFER RESTRICTIONS) CONTAINED IN THE LANDSTAR
SYSTEM, INC. DIRECTORS STOCK COMPENSATION PLAN AND NEITHER THIS CERTIFICATE
NOR THE SHARES REPRESENTED BY IT ARE ASSIGNABLE OR
OTHERWISE TRANSFERABLE EXCEPT IN ACCORDANCE WITH SUCH PLAN, A COPY OF WHICH
IS ON FILE WITH THE SECRETARY OF THE COMPANY."
27
5.4 Securities Law Matters. The Board, in its discretion, may require an
Eligible Director to make such representations and furnish such information, as
it may consider appropriate in connection with the issuance of Common Stock in
compliance with applicable laws, rules, and regulations.
ARTICLE VI
SHARES SUBJECT TO PLAN
6.1 Shares Available. Subject to the provisions of Section 6.2, the
maximum number of Shares that may be issued under this Plan may not exceed
50,000 in the aggregate.
6.2 Adjustment in Capitalization. The number of Shares that are eligible
for grant or available for issuance under this Plan may be adjusted by the Board
if it shall deem such an adjustment to be necessary or appropriate to reflect
any stock dividend, stock split or share combination, or any recapitalization
(including, without limitation, the payment of an extraordinary dividend),
merger, consolidation, combination, spin-off, distribution of assets to
stockholders, exchange of shares, or other similar corporate change.
6.3 Delivery of Shares. Any Shares to be delivered under this Plan may
consist, in whole or in part, of treasury shares or authorized but unissued
shares not reserved for any other purpose.
ARTICLE VII
TERMINATION, MODIFICATION AND AMENDMENT
The Board at any time may terminate or suspend the Plan, and from time to
time may amend or modify the Plan; provided that without the approval by a
majority of the votes cast at a meeting of stockholders at which a quorum
representing a majority of the Shares is present in person or by proxy, no
amendment or modification may (i) materially increase the benefits accruing to
Eligible Directors under the Plan, (ii) except as expressly provided in Section
6.2, materially increase the number of Shares subject to the Plan, (iii)
materially modify the requirements for participation in the Plan, or (iv) make
any other amendment or modification that would require the approval of the
stockholders of the Company under applicable laws, rules or regulations.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Requirements of Law. The Plan, the obligations of the Company
hereunder and the compensation of Eligible Directors shall be subject to all
applicable laws, rules and regulations, and to such approvals by any
governmental agencies or national or foreign securities exchanges as may be
appropriate or required, as determined by the Board. Notwithstanding any other
provision of this Plan, no Shares shall be issued if the Board determines that
such payment or issuance would result in a violation of applicable law, rule or
regulation, including the federal securities laws and any applicable state or
foreign securities laws. The Company shall not be obligated by virtue of any
provision of the Plan to issue Common Stock in violation of any such laws,
rules, or regulations, and neither the Company nor its directors or officers
shall have any obligation or liability to any person because of such
non-issuance.
8.2 Listing of Shares. If at any time the Board shall determine in its
discretion that the listing, registration or qualification of the Shares covered
by this Plan upon any national securities exchange or under any United States or
non-United States federal, state or other law, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or in
connection with, the issuance of Shares under this Plan, no Shares will be
issued unless and until such listing, registration, qualification, consent or
approval shall have been effected or obtained, or otherwise provided for, free
of any conditions not acceptable to the Board.
8.3 No Right to Remain as a Director. This Plan shall not impose any
obligations on the Company to retain any Eligible Director as a director of the
Company nor shall it impose any obligation on the part of any Eligible Director
to remain in service to the Company.
8.4 No Rights as a Stockholder. Except as provided in the Plan, neither
an Eligible Director nor any person or persons to whom such Eligible Director's
Shares shall have passed by will or by the laws of descent and distribution, as
the case may be, shall have any voting, dividend or other rights or privileges
as a stockholder of the Company with respect to any Shares unless and until a
certificate for Shares is issued in respect thereof.
28
8.5 Tax Withholding. The Company shall have the power to withhold, or
require an Eligible Director to remit to the Company promptly upon notification
of the amount due, an amount determined by the Company to be sufficient to
satisfy all federal, state, local and foreign withholding tax requirements (if
any) in respect of the issuance of Shares and the Company may defer the issuance
of Shares until such requirements are satisfied. The Board may permit or require
an Eligible Director to satisfy his tax withholding obligation hereunder in such
other manner subject to such conditions, as the Board shall determine.
8.6 Beneficiary Designation. Each Eligible Director under this Plan may
from time to time name any beneficiary or beneficiaries (who may be named
contingently or successively) to whom any benefit under the Plan is to be paid
or by whom any right under the Plan is to be exercised in case of his death.
Each designation will revoke all prior designations by the same Eligible
Director, shall be in a form prescribed by the Company, and will be effective
only when filed by the Eligible Director in writing with the Company during his
lifetime. In the absence of any such designation, benefits remaining unpaid at
the Eligible Director's death shall be paid to or exercised by the Eligible
Director's surviving spouse, if any, or otherwise to or by his estate.
8.7 Controlling Law. This Plan shall be construed and enforced according
to the laws of the State of Delaware without regard to its conflicts of laws
principles.
8.8 Freedom of Action. Subject to Article VII, nothing in the Plan shall
be construed as limiting or preventing the Company or any of its subsidiaries
from taking any action with respect to the operation or conduct of its business
that it deems appropriate or in its best interest.
8.9 Non-Exclusivity. Subject to applicable laws, rules and regulations,
neither the adoption of the Plan by the Board nor the submission of the Plan to
the stockholders of the Company shall be construed as creating any limitations
on the power of the Board to adopt such other compensatory arrangements for
directors of the Company as it may deem desirable.
8.10 Effective Date. The Plan shall be effective upon its adoption by the
Board and approval by a majority of the votes cast at a meeting of stockholders
at which a quorum representing a majority of the Shares is present in person or
by proxy. The Plan shall continue in effect, unless sooner terminated pursuant
to Article VII, until the tenth anniversary of the date on which it is adopted
by the Board.
8.11 Headings and Captions. The headings and captions herein are provided
for reference and convenience only, shall not be considered part of this Plan,
and shall not be employed for construction of the Plan.
8.12 Severability. In the event that one or more provisions of this Plan
shall become invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not be affected thereby.
8.13 Savings Clause. If any provision of the Plan does not comply with
Section 16(b) of the Securities Exchange Act of 1934 and the rules and
regulations thereunder, such provision shall be deemed deleted from the Plan and
the remaining provisions of the Plan shall not be affected thereby.
8.14 Notices. All notices and other communications required or permitted
to be given by an Eligible Director to the Company in connection with this Plan
shall be in writing and shall be deemed to have been given if delivered
personally or sent by certified or express mail, return receipt requested,
postage prepaid, by Federal Express, or by any recognized international
equivalent of such delivery, to Robert C. LaRose, Vice
President, Chief Financial Officer and Secretary, at 13410 Sutton Park Drive
South, Jacksonville, FL, 32224, or to such other person or address as the Board
may designate from time to time. All such notices and communications shall be
deemed to have been received on the date of delivery if delivered personally or
on the third business day after the mailing thereof.
OTHER MATTERS
Management knows of no matters that are to be presented for action at the
meeting other than those set forth above. If any other matters properly come
before the meeting, the persons named in the enclosed form of proxy will vote
the shares represented by proxies in accordance with their best judgment on such
matters.
29
PLEASE COMPLETE, SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD PROMPTLY
By Order of the Board of Directors
/s/ Robert C. LaRose
Robert C. LaRose
Vice President,
Chief Financial Officer
& Secretary
13410 Sutton Park Drive South
Jacksonville, FL 32224
THE COMPANY WILL FURNISH, WITHOUT CHARGE, TO ANY STOCKHOLDER OF THE COMPANY
WHO SO REQUESTS, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 28, 2002, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
ANY SUCH REQUEST SHOULD BE DIRECTED TO LANDSTAR SYSTEM, INC., ATTENTION: HENRY
H. GERKENS, INVESTOR RELATIONS, 13410 SUTTON PARK DRIVE SOUTH, JACKSONVILLE,
FLORIDA 32224.
30
LANDSTAR SYSTEM, INC.
13410 SUTTON PLACE DRIVE SOUTH
JACKSONVILLE, FL 32224
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Robert C. LaRose and Dennis P. Owen,
jointly and severally, as Proxies, each with the power to appoint his
substitute, and hereby authorizes each or both of them to represent and to vote,
as designated on the reverse side, all of the shares of Common Stock of Landstar
System, Inc. held of record by the undersigned on March 18, 2003, at the Annual
Meeting of Shareholders to be held on May 15, 2003 or any adjournment thereof.
None of the matters to be acted upon, each of which has been proposed by
Landstar System, Inc. (the "Company"), is related to or conditioned on the
approval of other matters.
**CONTINUED AND TO BE SIGNED ON REVERSE SIDE**
Change of Address
_________________________________________________ LANDSTAR SYSTEM, INC..
P.O. BOX 11113
_________________________________________________ NEW YORK, N.Y. 10203-0113
_________________________________________________
_________________________________________________
(If you have written in the above space, please
mark the corresponding box on the reverse side
of this card.)
- DETACH PROXY CARD HERE -
--------------------------------------------------------------------------------
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3, 4 AND 5.
[ ] PLEASE MARK, SIGN, DATE, AND [X]
RETURN THE PROXY CARD PROMPTLY VOTES MUST BE INDICATED
USING THE ENCLOSED ENVELOPE (X) IN BLACK OR BLUE INK
1. ELECTION OF DIRECTORS:
FOR ALL nominees WITHHOLD AUTHORITY
(except as marked to vote for all
to the contrary) [ ] nominees listed [ ]
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
THROUGH THE NOMINEE'S NAME BELOW.)
RONALD W. DRUCKER HENRY H. GERKENS
FOR AGAINST ABSTAIN
2. RATIFICATION OF THE
APPOINTMENT OF KPMG LLP AS [ ] [ ] [ ]
INDEPENDENT AUDITORS OF THE
COMPANY FOR FISCAL YEAR 2003
3. TO CONSIDER APPROVAL OF THE
COMPANY'S 2003 DIRECTOR STOCK [ ] [ ] [ ]
COMPENSATION PLAN
4. TO CONSIDER APPROVAL OF AN AMENDMENT
TO ARTICLE IV OF THE COMPANY'S RESTATED [ ] [ ] [ ]
CERTIFICATE OF INCORPORATION TO INCREASE
THE AUTHORIZED SHARES OF COMMON STOCK
OF THE COMPANY
5. TO CONSIDER APPROVAL OF A SEPARATE
AMENDMENT TO ARTICLE IV OF THE COMPANY'S [ ] [ ] [ ]
RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE THE AUTHORIZED SHARES OF
PREFERRED STOCK OF THE COMPANY
6. IN THEIR DISCRETION, EACH OF THE PROXIES IS AUTHORIZED TO VOTE UPON
SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENT THEREOF.
To change your address, please mark this box. [ ]
---------------------------------------------------------------
S C A N L I N E
---------------------------------------------------------------
Please sign exactly as your name appears below. When shares are held by joint
tenants, both should sign. When signed as attorney, as executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Date Share Owner sign here Co-Owner sign here
_________________ ___________________________ ___________________________