<PAGE>
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
</TABLE>
LANDSTAR SYSTEM, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
<PAGE>
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
<PAGE>
LOGO(R)
LANDSTAR SYSTEM, INC.
4160 WOODCOCK DRIVE
JACKSONVILLE, FLORIDA 32207
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 20, 1998
Notice is hereby given that the 1998 Annual Meeting of Shareholders of
Landstar System, Inc., a Delaware corporation (the "Company"), will be held
at the Ponte Vedra Inn, Ponte Vedra Beach, Florida 32082, on Wednesday,
May 20, 1998, at 10:00 a.m., local time, for the following purposes:
(1) To elect three Class II Directors for terms to expire at the 2001
Annual Meeting of Shareholders;
(2) To ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for fiscal year 1998;
(3) To consider approval of an increase in the number of shares available
for distribution from the Company's 1993 Employee Stock Option Plan;
and
(4) To transact such other business as may properly come before the meeting
or any adjournment thereof.
Only shareholders of record at the close of business on March 20, 1998 will
be entitled to notice of and to vote at the meeting. A list of shareholders
eligible to vote at the meeting will be available for inspection at the meeting
at the Ponte Vedra Inn at the address set forth above and during business hours
from May 10, 1998 to the date of the meeting at the Company's corporate
headquarters at the address set forth above.
All shareholders 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
LOGO
MICHAEL L. HARVEY
Vice President,
General Counsel,
and Secretary
Jacksonville, Florida
March 25, 1998
IT IS IMPORTANT THAT THE ENCLOSED PROXY CARD BE COMPLETED
AND RETURNED PROMPTLY
<PAGE>
LANDSTAR SYSTEM, INC.
PROXY STATEMENT
March 25, 1998
INTRODUCTION
This Proxy Statement is furnished to the shareholders 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 Shareholders to be held on Wednesday, May 20, 1998 (the "1998 Annual
Meeting"). The 1997 Annual Report to Shareholders (which does not form a part of
the proxy solicitation material), including the financial statements of the
Company for fiscal year 1997, is enclosed herewith. The mailing address of the
principal executive offices of the Company is 4160 Woodcock Drive, Jacksonville,
Florida 32207. This Proxy Statement, accompanying form of proxy, Notice of
Meeting and 1997 Annual Report are being mailed to the shareholders of the
Company on or about March 25, 1998.
RECORD DATE
The Board has fixed the close of business on March 20, 1998 as the record
date for the 1998 Annual Meeting. Only shareholders 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
shareholder does not return a signed proxy card, his or her shares cannot be
voted by proxy. Shareholders 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" the
election of the named nominees, ratification of KPMG Peat Marwick LLP as
independent auditors for the Company, and approval of an increase in the number
of shares available for distribution from the Company's 1993 Employee Stock
Option Plan, as set forth in the Notice of 1998 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 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 1998 Annual
Meeting.
The Board has selected ChaseMellon Shareholder Services, L.L.C. as
Inspectors of Election pursuant to the Company's Bylaws, as amended. The
Inspectors shall ascertain the number of shares outstanding, determine the
number of shares represented at the 1998 Annual Meeting by proxy or in person
and count all votes and ballots. Each shareholder 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.
<PAGE>
VOTING SECURITIES
The Company has only one class of voting securities, its common stock, par
value $.01 per share (the "Common Stock") outstanding. On March 20, 1998,
11,433,533 shares of Common Stock were outstanding. At the 1998 Annual Meeting,
each shareholder of record at the close of business on March 20, 1998 will be
entitled to one vote for each share of Common Stock owned on that date as to
each matter properly presented to the 1998 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 1998 Annual Meeting.
ELECTION OF DIRECTORS
The Board is divided into three classes, with Directors in each class
serving staggered three-year terms. At each annual meeting of shareholders, the
terms of Directors in one of the three classes expire. At that annual meeting of
shareholders, Directors are elected in a class to succeed the Directors whose
terms expire, with the terms of the Directors so elected to expire at the third
annual meeting of shareholders 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 shareholders 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.
Pursuant to the Bylaws of the Company, the Board acting by resolution at its
meeting on February 11, 1998 increased the number of Directors from six to
seven; three class II Directors to be elected at the 1998 Annual Meeting of
Shareholders (whose members' terms will expire at the 2001 Annual Meeting of
Shareholders), two in the class whose members' terms will expire at the 1999
Annual Meeting of Shareholders, and two in the class whose members' terms will
expire at the 2000 Annual Meeting of Shareholders.
It is intended that the shares represented by the accompanying form of
proxy will be voted at the 1998 Annual Meeting for the election of nominees
William S. Elston, Merritt J. Mott, and Diana M. Murphy as the Directors
comprising Class II whose members' terms will expire at the 2001 Annual Meeting
of Shareholders, unless the proxy specifies otherwise. Each nominee has
indicated his or her willingness to serve as a member of the Board, if elected.
If, for any reason not presently known, William S. Elston, Diana M. Murphy,
or Merritt J. Mott are not available for election at the time of the 1998 Annual
Meeting, the shares represented by the accompanying form of proxy may be voted
for the election in his/her or their stead of substitute nominee(s) designated
by the Board or a committee thereof, unless the proxy withholds authority to
vote for all 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 1998 Annual Meeting. Abstentions from voting and
broker non-votes will have no effect on the outcome of this proposal.
Arthur J. Fritz, Jr., has elected not to stand for re-election as a
Director at the 1998 Annual Meeting of Shareholders.
THE BOARD RECOMMENDS A VOTE FOR THIS PROPOSAL
<PAGE>
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 1998 Annual
Meeting.
<TABLE>
<CAPTION>
NAME AGE BUSINESS EXPERIENCE
---- --- -------------------
<S> <C> <C>
CLASS II -- NOMINEES FOR ELECTION TO SERVE AS DIRECTORS UNTIL 2001 ANNUAL MEETING
Merritt J. Mott................ 52 Mr. Mott has been a Director of the Company and Landstar
System Holdings, Inc. (a wholly-owned subsidiary of the
Company) ("LSHI") since August 1994. He has also served as
President and Treasurer of Rockford Sanitary Systems, Inc.
since April 1986 and as President and Co-Founder of T & M
Fabricating, Inc. since 1993. From February 1983 to July
1996, he served as Executive Vice President and a Director
of Mott Bros. Company. Mr. Mott has been a Director of
Rockford Health Plans since April 1994 and has been a
trustee of the William Howard Trust since 1984.
William S. Elston.............. 57 Mr. Elston has been Managing Director/Executive Vice
President of DHR International, Inc., Chicago, Illinois, an
executive recruiting firm, since February 1995 and is
currently operating on an independent contractor status
recruiting middle to senior level executives for large and
small firms. He was Executive Vice President, Operations, of
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. He has been a member of
the Board of Directors of Southern Petroleum Systems since
January 1998.
Diana M. Murphy................ 41 Ms. Murphy has been a Partner in the investment 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 Marketing and Advertising for The
Baltimore Sun, a division of Times Mirror Corporation from
1992 to 1995. Ms. Murphy is also a member of the Board of
Strategic Media Research, Inc.
</TABLE>
<PAGE>
DIRECTORS OF THE COMPANY (continued)
<TABLE>
<CAPTION>
NAME AGE BUSINESS EXPERIENCE
---- --- -------------------
<S> <C> <C>
CLASS I -- DIRECTORS WHOSE TERMS EXPIRE AT 2000 ANNUAL MEETING
John B. Bowron................. 63 Mr. Bowron has been a Director of the Company since April
1991 and served as Senior Vice President of the Company from
January 1993 until December 1997 at which time he became
Vice President. He also has been a Director of LSHI since
October 1988. He was Chairman of the Board of Landstar
Gemini, Inc. (an indirectly held subsidiary of LSHI)
("Landstar Gemini") from October 1990 to April 1997. He has
also served as a Director of Montgomery Tank Lines, Inc.
("MTL") since May 1995, and serves on the MTL Compensation
Committee. Mr. Bowron was Chairman of the Board of Landstar
Ranger, Inc. (a wholly-owned subsidiary of LSHI) ("Landstar
Ranger") from April 1990 to November 1994.
Ronald W. Drucker.............. 56 Mr. Drucker has been a Director of the Company and LSHI
since April 1994. From 1987 to 1993, he was the Chairman of
the National Defense Transportation Association ("NDTA") and
currently serves as the Chairman of the NDTA Business
Practices Committee. He has also 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
predecessor companies in various capacities. He is a member
of the American Railway Engineering Association and the
American Society of Civil Engineers and serves as a member
of the Boards of Directors of SunTrust Bank-North Florida,
N.A., Jacksonville University and The New World Symphony.
CLASS III -- DIRECTORS WHOSE TERMS EXPIRE AT 1999 ANNUAL MEETING
David G. Bannister............. 42 Mr. Bannister has been a Director of the Company since April
1991, and a Director of LSHI since October 1988. Mr.
Bannister is a Managing Director at BT Alex. Brown
Incorporated and has been employed by that firm in various
capacities since 1983. He has been a Director of Allied
Holdings, Inc. since December 1993.
</TABLE>
<PAGE>
DIRECTORS OF THE COMPANY (continued)
<TABLE>
<CAPTION>
NAME AGE BUSINESS EXPERIENCE
---- --- -------------------
<S> <C> <C>
Jeffrey C. Crowe............... 51 Mr. Crowe has been Chairman of the Board, President and
Chief Executive Officer of the Company since April 1991. He
has been President and 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 Insurance
Company (a wholly-owned subsidiary of LSHI) ("Signature")
since February 1997. Mr. Crowe serves in a number of
capacities at the American Trucking Association, Inc.
("ATA") including Secretary and a member of the ATA
Executive Committee and has served as a Director of the ATA
Foundation since November 1989. He has also served as
Chairman of the NDTA since October 1993. From May 1990 to
September 1993, he served as Chairman of the Surface
Transportation Committee of the NDTA and also served as
Chairman of the Board of Deliver, U.S.A., an affiliate of
ATA, from 1990 to 1996 as well as a Vice President at large
of the ATA from November 1989 to 1996. He has served as a
Director of Silgan Holdings Inc. since May 1997, a Director
of National Chamber Foundation since November 1997, and a
Director of U.S. Chamber of Commerce since February 1998.
</TABLE>
<PAGE>
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 1997 fiscal year, the Board held four regularly scheduled
meetings, one special meeting, and acted by unanimous written consent 18 times.
During such fiscal year, all Directors except Arthur J. Fritz, Jr., 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. Mr. Fritz attended one board meeting during the 1997 fiscal year.
COMMITTEES OF THE BOARD
The Board has established Audit and Compensation Committees to devote
attention to specific subjects and to assist in the discharge of its
responsibilities. The functions of those committees, their current members and
the number of meetings held during 1997 are described below. The Board does not
have an Executive Committee.
AUDIT COMMITTEE
Members: David G. Bannister, Ronald W. Drucker and Merritt J. Mott
The Audit Committee recommends to the Board the appointment of 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 evaluates 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 reviews the independent
auditors' fees for services rendered to the Company. The Audit Committee held
two meetings during 1997 and did not act by written consent in 1997.
COMPENSATION COMMITTEE
Members: David G. Bannister, Ronald W. Drucker, Arthur J. Fritz, Jr. and
Merritt J. Mott
The Compensation Committee functions include (i) reviewing and making
determinations subject to review by the Board 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. The Compensation Committee held four regularly scheduled meetings and
did not act by written consent during 1997.
<PAGE>
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 the Common Stock by the
executive officers of the Company, see "Security Ownership by Management and
Others." There are no family relationships among Directors and executive
officers of the Company or its subsidiaries.
<TABLE>
<CAPTION>
NAME AGE BUSINESS EXPERIENCE
---- --- -------------------
<S> <C> <C>
John B. Bowron............................ 63 See previous description under "Directors of the
Company."
Jeffrey C. Crowe.......................... 51 See previous description under "Directors of the
Company."
Henry H. Gerkens.......................... 47 Mr. Gerkens has been Executive Vice President and
Chief Financial Officer of the Company and LSHI
since November 1994. 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 also an officer of each of the
subsidiaries (the "Subsidiaries") of LSHI: namely,
Landstar Gemini, Landstar Inway, Inc. (a
wholly-owned subsidiary of LSHI) ("Landstar
Inway"), Landstar Ligon, Inc. (a wholly-owned
subsidiary of LSHI) ("Landstar Ligon"), Landstar
Contractor Financing, Inc. (a wholly-owned
subsidiary of LSHI) ("LCFI"), Risk Management Claim
Services, Inc., (a wholly-owned subsidiary of LSHI)
("RMCS"), Landstar Ranger, Landstar Poole, Inc. (a
wholly-owned subsidiary of LSHI) ("Landstar
Poole"), Landstar Corporate Services, Inc. (an
indirectly held subsidiary of LSHI) ("LCSI"),
Landstar T.L.C., Inc. (an indirectly held
subsidiary of LSHI) ("Landstar T.L.C."), Landstar
Express America, Inc. (a wholly-owned subsidiary of
LSHI) ("Landstar Express America"), and Landstar
Logistics, Inc. (a wholly-owned subsidiary of LSHI)
("Landstar Logistics"). He has also been Vice
President of Signature since February 1997. Mr.
Gerkens was Treasurer of the Company from April
1991 to January 1993.
</TABLE>
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY (continued)
<TABLE>
<CAPTION>
NAME AGE BUSINESS EXPERIENCE
---- --- -------------------
<S> <C> <C>
Michael L. Harvey......................... 53 Mr. Harvey has been Vice President and General
Counsel of the Company since January 1993. He has
been Secretary of the Company, and Vice President,
General Counsel and Secretary of LSHI since August
1992. Mr. Harvey is also an officer of each of the
Subsidiaries, except Signature.
James R. Hertwig.......................... 46 Mr. Hertwig has been Executive Vice President of
the Company and LSHI and President of Landstar
Logistics since October 1995. He also has been
President of Landstar Gemini since January 1997.
Mr. Hertwig served as President of Carolina Freight
Carriers from October 1994 to September 1995 and as
Vice President of Carolina Freight Corp. from
January 1994 to October 1994. From October 1994 to
September 1995, he served as Chairman of the Board
of Red Arrow Freight Lines; and from February 1989
to October 1993, he was President of Con-Way
Intermodal.
Brian C. Kinsey........................... 46 Mr. Kinsey has been Vice President - Operations and
Safety of the Company since January 1993 and has
held the same position at LSHI since March 1989.
Mr. Kinsey was Chairman of the Independent
Contractor Division of the Interstate Truckload
Carriers Conference ("ITCC") from March 1991 to
March 1992. He has been a Director of the ITCC
since April 1990.
Robert C. LaRose.......................... 43 Mr. LaRose has been Vice President - Finance and
Treasurer of the Company and LSHI since October
1995. 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. He is also an officer of each of the
Subsidiaries. Mr. LaRose was Assistant Treasurer of
the Company from May 1991 to January 1993.
</TABLE>
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY (continued)
<TABLE>
<CAPTION>
NAME AGE BUSINESS EXPERIENCE
---- --- -------------------
<S> <C> <C>
Robert C. Luminati........................ 57 Mr. Luminati has been Vice President Chief
Information Officer of the Company since January
1997. He served as Vice President Management
Information Systems from January 1993 to 1997. He
has held the same position at LSHI from August 1989
to January 1993.
Joseph P. Fitzgerald...................... 50 Mr. Fitzgerald has been President of Landstar Ligon
and a Vice President of LSHI since November 1994.
He served as Executive Vice President of Landstar
Ligon from July 1994 to November 1994 and as a Vice
President of Landstar Ligon from July 1991 to July
1994.
Gary L. Hartter........................... 56 Mr. Hartter has been President of Landstar Ranger
since January 1998. He is also a Vice President of
LSHI effective January 1998. Mr. Hartter was Vice
President of LSI effective September 1997 but
resigned in January 1998 to become President of
Landstar Ranger. From September 1991 to November
1996 Mr. Hartter was President of Trism Special-
ized, Inc.
James R. Martin........................... 58 Mr. Martin has been President of Landstar Poole
since March 1997. He has been a Vice President of
LSHI since October 1995, and was President of LCSI
from January 1994 until March 1997, and Assistant
Treasurer and Secretary of Landstar Ranger from
August 1995 through March 1997. He was Vice
President and Treasurer of Landstar Gemini from
February 1991 through March 1997. Mr. Martin
previously served in various capacities at Landstar
Ranger from October 1990 to August 1995. Mr. Martin
was a Vice President of LCSI from December 1993 to
January 1994.
Jeffrey L. Pundt.......................... 47 Mr. Pundt has been President of Landstar Inway and
a Vice President of LSHI since June 1996. He has
been President of Landstar T.L.C. since January
1997. Mr. Pundt served as Executive Vice President
of Landstar Inway from September 1994 to June 1996
and as a Vice President of Landstar Inway from
September 1986 to September 1994.
Ronald G. Stanley......................... 46 Mr. Stanley has been President of Landstar Express
America and a Vice President of LSHI since February
1996. He was Vice President - Marketing and Sales
at Roadway Global Air from June 1992 to January
1996.
</TABLE>
<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION OF DIRECTORS. During 1997, 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. 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 12,000
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 shareholders of the Company, each Eligible Director who
is elected or re-elected as a Director at such annual meeting receives an award
of options to purchase an additional 12,000 shares of the Company's Common
Stock. 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.
COMPENSATION OF EXECUTIVE OFFICERS. The following table summarizes the
compensation paid to the Chief Executive Officer and each of the Company's four
most highly compensated other executive officers for services rendered to the
Company and its subsidiaries during the 1997, 1996 and 1995 fiscal years
(collectively, the "Named Executives").
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
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)
--------------------------- ---- --------- ----- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey C. Crowe............... 1997 $350,000 $176,400 $320,105 0 $441,925
Chairman of the Board, 1996 350,000 0 13,290 0 11,925
President & Chief 1995 300,000 0 12,646 40,000 10,425
Executive Officer
Henry H. Gerkens............... 1997 220,000 92,400 133,282 0 175,830
Executive Vice President & 1996 175,000 0 9,537 0 6,858
Chief Financial Officer 1995 175,000 0 10,077 16,000 6,858
Eddie R. Brown(4).............. 1997 175,000 74,375 5,781 0 16,080
Executive Vice President & 1996 175,000 0 3,935 0 17,313
President of 1995 175,000 0 12,884 10,000 45,000
Landstar Ranger
James R. Hertwig............... 1997 170,000 57,800 3,241 0 1,234
Executive Vice President & 1996 170,000 0 10,889 2,500 12,429
President of Landstar 1995(5) 31,603 0 0 17,500 0
Logistics & Landstar Gemini
Robert C. LaRose............... 1997 162,629 43,218 104,119 0 135,798
Vice President Finance & 1996 147,000 0 7,740 0 4,838
Treasurer 1995 133,350 0 7,365 8,000 4,429
</TABLE>
- ---------------
(1) Amounts shown include any salary deferred at the election of the Named
Executive Officer 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.
<PAGE>
(3) Amounts for 1997 include contributions in the amount of $4,750 which were
made by the Company under the Landstar 401(k) Savings Plan on behalf of
Messrs. Crowe, Gerkens, Brown and LaRose, and contributions made by the
Company under the Landstar Supplemental Retirement Plan on behalf of
Mr. Crowe in the amount of $5,750, Mr. Gerkens in the amount of $1,850 and
Mr. LaRose in the amount $120. Amounts for 1997 also include the dollar
value of term life insurance premiums paid by the Company on behalf of
Messrs. Crowe, Gerkens, Brown, Hertwig and LaRose in the amounts of $1,425,
$1,608, $696, $1,234 and $428, respectively. Amounts for 1997 include
special relocation incentives in the amounts of $375,000, $140,122 and
$108,500 for Messrs. Crowe, Gerkens and LaRose, respectively, and $55,000,
$27,500, and $22,000 which represents principal and interest forgiven under
loans extended to each of Messrs. Crowe, Gerkens and LaRose, respectively,
in connection with their relocation. In addition, the amount indicated for
Mr. Brown for 1997 includes $10,634 which represents forgiveness of
principal and interest under a loan extended to him by the Company in
connection with his relocation.
(4) Mr. Brown resigned from his position with the Company on December 31, 1997.
(5) All compensation amounts reflect amounts earned by Mr. Hertwig from October
25, 1995 (Mr. Hertwig's date of employment) through the end of fiscal year
1995.
There were 11,500 options granted under the Company's 1993 Employee Stock
Option Plan in fiscal year 1997. None were granted to the Named Executives
during fiscal year 1997.
The following table sets forth the number and value at December 27, 1997 of
all exercisable and unexercisable options held by each of the Named Executives.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 27, 1997 AT DECEMBER 27, 1997(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Jeffrey C. Crowe........................... 56,000 34,000 $301,000 $82,750
Henry H. Gerkens........................... 21,400 14,600 89,625 22,875
Eddie R. Brown(2).......................... 18,500 11,500 75,438 19,563
James R. Hertwig........................... 7,500(3) 12,500 12,625(3) 20,500
Robert C. LaRose........................... 9,000 7,000 30,175 7,825
</TABLE>
- ---------------
<PAGE>
(1) The value of in-the-money options represents the difference between the fair
market value of the underlying securities as of December 26, 1997 and the
exercise price of the options. The fair market value of the underlying
securities was calculated based upon the last reported sale price per share
of Common Stock as quoted through the National Association of Securities
Dealers, Inc. National Market System ("NASDAQ") in the Company's fiscal year
ended December 27, 1997, which was on December 26, 1997.
(2) Mr. Brown resigned from the Company on December 31, 1997 and exercised
10,000 options at an exercise price of $18.50 per share. The value of the
exercised in-the-money options at December 31, 1997 was $78,750. His
remaining exercisable options have expired and were canceled along with his
unexercisable options.
(3) Mr. Hertwig exercised 6,000 and 500 options at exercise prices of $23.875
and $24.625 per share, respectively, on February 17, 1998. The value of the
exercised in-the-money options at February 17, 1998 was $38,625.
Indebtedness of Management
In connection with the relocation of the Company's corporate headquarters
from Shelton, Connecticut to Jacksonville, Florida, the Company made loans to
Messrs. Crowe, Gerkens, and LaRose, in 1997, and to Messrs. Luminati and Kinsey
in 1998, in the amounts of $200,000, $100,000, $80,000, $80,000 and $80,000,
respectively, to assist them in their individual relocation to the Jacksonville
area. Each loan bears interest at a rate of 7.5% and is repayable annually over
a five-year period. On each anniversary date of such loan, the principal and
interest amounts then due will be forgiven provided the executive is still
employed by the Company.
Key Executive Employment Protection Agreements
On January 23, 1998, the Board approved the execution of the Key Executive
Employment Protection Agreements for Messrs. Crowe, Gerkens, Hertwig, LaRose and
eight other executives of the Company. Each agreement provides certain severance
benefits to Messrs. Crowe, Gerkens, Hertwig, LaRose and such eight other
executives in the event of a change of control of the Company (as defined in the
agreements). Each agreement 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 in
control or if a covered executive terminates his employment for any reason six
months following the change in control, such executive will be entitled to
severance benefits consisting of a cash amount equal to three times for Mr.
Crowe, two times for Mr. Gerkens and one time for Messrs. Hertwig and LaRose and
the eight other executives 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.
<PAGE>
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.
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.
Mr. Crowe's last salary increase was January 1, 1996. In determining Mr.
Crowe's salary, the Compensation Committee took into account the Company's
overall performance.
Annual Bonus
The Company's executive officers were eligible to receive an annual cash
bonus under the Company's 1997 Management Incentive Compensation Plan (the "1997
MICP"). The 1997 MICP provided for bonus payments to be made to eligible
operating subsidiary employees upon the achievement of a consolidated earnings
per share target and operating income targets of the individual operating
subsidiary. Bonus payments with respect to eligible corporate employees under
the 1997 MICP were dependent upon achievement of the consolidated earnings per
share target. These performance criteria were established at the beginning of
1997 by the Compensation Committee.
<PAGE>
In 1997, all executive officers, including the Named Executives, received
bonuses pursuant to the 1997 MICP. 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, stock options are granted to
the Company's executive officers. The Compensation Committee determines the
number of stock options to be granted pursuant to guidelines it develops based
on an officer'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 five years.
This approach is designed to encourage the creation of long-term shareholder
value since no benefit can be realized from such options unless the stock price
exceeds the exercise price.
As of March 5, 1998, Mr. Crowe owned 120,176 shares of the Company's Common
Stock and holds options to purchase an additional 99,700 shares. The
Compensation Committee believes that significant equity interests in the Company
held by the Company's management helps to align the interests of shareholders
and management and maximize shareholder 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 currently meet these
requirements. In 1995, the Company received shareholder approval for the
Management Incentive Compensation Plan so that 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.
<PAGE>
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 1997 results
achieved the target criteria established in the 1997 MICP. As such, bonuses were
paid under the 1997 MICP. 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
shareholders and employees.
Compensation Committee of the Board
David G. Bannister
Ronald W. Drucker
Arthur J. Fritz, Jr.
Merritt J. Mott
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 March 5, 1993 (the
date of the Company's initial public offering) through December 27, 1997.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) DJ 20 Trans S&P 500 Landstar
<S> <C> <C> <C>
Mar 5 1993 100 100 100
Mar 31 1993 102.06 101.24 103.85
Jun 30 1993 100.75 100.99 107.69
Sep 30 1993 105.83 102.87 116.35
Dec 31 1993 114.55 104.55 170.19
Mar 31 1994 106.29 99.92 173.08
Jun 30 1994 103.72 99.59 226.92
Sep 30 1994 96.95 103.71 265.38
Dec 31 1994 94.58 102.95 251.92
Mar 31 1995 106.33 112.24 242.31
Jun 30 1995 113.67 122.11 198.08
Sep 30 1995 127.03 131 185.58
Dec 31 1995 128.77 138.06 205.77
Mar 31 1996 139.89 144.69 192.31
Jun 30 1996 141.82 150.32 223.08
Sep 30 1996 135.14 154.06 205.77
Dec 31 1996 146.62 166.04 178.85
Mar 31 1997 153.29 169.71 182.69
Jun 30 1997 176.39 198.4 216.35
Sep 30 1997 206.69 212.34 205.77
Dec 31 1997 211.68 217.53 202.88
</TABLE>
<PAGE>
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 5, 1998, 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
current executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF OWNERSHIP
BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER POSITION(S) OWNERSHIP CLASS(1)
------------------------ ----------- ---------- ----------
<S> <C> <C> <C>
(i)
Capital Guardian Trust Company
and The Capital Group
Companies, Inc.(2)(3).......... 1,619,200 14.1%
FMR Corp.(2)(4).................. 1,103,600 9.6%
Franklin Resources, Inc.(2)(5)... 743,500 6.5%
The Crabbe Huson Group,
Inc.(2)(6)(17)................. 1,721,900 15%
(ii)
David G. Bannister(7)............ Director 25,960 *
Ronald W. Drucker(8)............. Director 21,000 *
Arthur J. Fritz, Jr.............. Director 0 *
Merritt J. Mott(9)............... Director 14,000 *
John B. Bowron................... Director 10,500 *
William S. Elston................ Director Nominee 300 *
Diana M. Murphy.................. Director Nominee 0 *
Jeffrey C. Crowe(10)............. Director and Chairman, President
and Chief Executive Officer 176,176 1.5%
Henry H. Gerkens(11)............. Executive Vice President and
Chief Financial Officer 61,400 *
James R. Hertwig(12)............. Executive Vice President and
President of Landstar Logistics
and Landstar Gemini 1,000 *
Robert C. LaRose(13)............. Vice President, Finance and
Treasurer 50,000 *
Eddie R. Brown(14)............... Executive Vice President 3,750 *
(iii)
All Directors and current
executive officers as a group
(17 persons)(15)(16)........... 472,610 4.1%
</TABLE>
- ---------------
* Less than 1%
<PAGE>
(1) The percentages are based upon 11,446,533 shares, which equal the
outstanding shares of the Company as of March 5, 1998. With respect to the
calculation of the percentages for beneficial owners who hold options
exercisable within 60 days of March 5, 1998, the number of shares of Common
Stock on which the percentage is based also includes the number of shares
underlying such options.
(2) In accordance with the rules of the Securities and Exchange Commission, the
information set forth is based on the most recent Schedule 13G filed by
this entity. In the case of the Crabbe Huson Group, Inc. ("Crabbe Huson")
such information also reflects information provided orally to the Company
by Crabbe Huson.
(3) Capital Guardian Trust Company and The Capital Group Companies, Inc. filed
their Schedule 13G on February 12, 1997, and amended their Schedule 13G on
November 7, 1997, and again on February 10, 1998. The Capital Group
Companies, Inc. is the parent holding company of a group of investment
management companies that hold investment power and, in some cases, voting
power over shares of the Company. The investment management companies,
which include a "bank" as defined in Section 3(a)6 of the Securities
Exchange Act of 1934 (the "Act") and several investment advisers registered
under Section 203 of the Investment Advisers Act of 1940, provide
investment advisory and management services for their respective clients
which include registered investment companies and institutional accounts.
The Capital Group Companies, Inc., disclaims any investment power or voting
power over any of the 1,619,200 shares of Common Stock reported herein;
however, The Capital Group Companies, Inc. may be deemed to "beneficially
own" such securities by virtue of Rule 13d-3 under the Act. Capital
Guardian Trust Company ("Capital Guardian"), a bank as defined in Section
3(a)6 of the Act and a wholly-owned subsidiary of The Capital Group
Companies, Inc., is the beneficial owner of 1,529,700 of such shares, or
13.4% of the Common Stock outstanding, as a result of its serving as the
investment manager of various institutional accounts. Capital Guardian has
sole dispositive power over such 1,529,700 shares with sole voting power
over 1,389,700 of such shares. The remaining 89,500 shares reported as
beneficially owned by The Capital Group Companies, Inc. are beneficially
owned by other subsidiaries of The Capital Group Companies, Inc., none of
which by itself owns 5% or more of the Common Stock outstanding. The
business address of each of the foregoing is 333 South Hope Street, Los
Angeles, California 90071.
(4) According to an amendment, filed February 14, 1998, to its Schedule 13G
(the "FMR Schedule 13G"), FMR Corp. is the beneficial owner of 1,103,600
shares of Common Stock. Fidelity Management and Research Company
("Fidelity"), a wholly-owned subsidiary of FMR Corp. and an investment
adviser registered under the Investment Advisers Act of 1940, is also the
beneficial owner of 954,300 of such shares, or 8.3% of the Common Stock
outstanding, as a result of acting as investment adviser to several
Fidelity investment companies (the "Funds") registered under the Investment
Company Act of 1940. Such shares are voted by Fidelity in accordance with
written guidelines established by the Funds' boards of trustees. One of
these Funds, Fidelity Magellan, also beneficially owns 901,200 of such
shares, or 7.9% of the Common Stock outstanding. Edward C. Johnson 3d
<PAGE>
(Chairman of FMR Corp.), FMR Corp. and the Funds each have sole power to
dispose of the 954,300 shares owned by the Funds. Fidelity Management Trust
Company ("Fidelity Management"), a wholly-owned subsidiary of FMR Corp.,
beneficially owns 149,300 shares, or 1.3% of the Common Stock outstanding,
as a result of serving as investment manager for certain institutional
accounts. Edward C. Johnson 3d and FMR Corp., through its control of
Fidelity Management, each has sole voting and dispositive power over said
shares. Edward C. Johnson 3d, various members of his family and trusts for
their benefit own FMR Corp. voting stock. These Johnson family members,
through their ownership of voting stock and the execution of a family
shareholders' voting agreement, form a controlling group with respect to
FMR Corp. The business address of each of the foregoing is 82 Devonshire
Street, Boston, Massachusetts 02109.
(5) Franklin Resources, Inc. ("FRI") filed its Schedule 13G on February 12,
1997, and filed an amendment to its Schedule 13G on January 30, 1998. The
securities reported on such Schedule 13G are beneficially owned by one or
more open or closed-end investment companies or other managed accounts
which are advised by direct and indirect investment advisory subsidiaries
(the "Adviser Subsidiaries") of FRI. Such advisory contracts grant to the
Adviser Subsidiaries all voting and investment power over the securities
owned by such advisory clients. Therefore, the Adviser Subsidiaries may be
deemed to be, for purposes of Rule 13d-3 under the Securities Exchange Act
of 1934, the beneficial owner of such securities. Charles B. Johnson and
Rupert H. Johnson, Jr. (the "Principal Shareholders") each own in excess of
10% of the outstanding common stock of FRI and are the principal
shareholders of FRI. FRI, the Principal Shareholders and each of the
Adviser Subsidiaries disclaim any economic interest or beneficial ownership
in any of the 743,500 shares reported as beneficially owned. Of the 743,500
shares, Franklin Mutual Advisers, Inc., has sole dispositive power and sole
voting power over 632,800 shares or 5.5% of the Common Stock outstanding;
Templeton Global Advisors Limited, has sole dispositive power and sole
voting power over 68,300 shares or .6% of the Common Stock outstanding; and
Templeton Investment Council, Inc., has sole dispositive power and sole
voting power over 42,400 shares or .4% of the Common Stock outstanding. The
business address for each of the foregoing is 777 Mariners Island
Boulevard, San Mateo, CA 94404, except that the business address of
Franklin Mutual Advisors, Inc., is 512 John F. Kennedy Parkway, Short
Hills, NJ 07078.
(6) As of March 5, 1998 the Company believes Crabbe Huson owns 1,721,900 shares
of Common Stock. According to Amendment No. 3 to Crabbe Huson's Schedule
13G filing dated February 2, 1998 Crabbe Huson beneficially owned 1,752,600
and does not directly own any such shares. Instead, it shares voting and
dispositive power with respect to such shares with approximately 55 of its
clients. Crabbe Huson disclaims beneficial ownership of all such shares
owned by each of its clients and also disclaims that a "group" within the
meaning of Rule 13d 5(b) under the Securities Exchange Act of 1934 has been
or will be formed.
(7) Includes 20,000 shares that may be acquired upon the exercise of options.
<PAGE>
(8) Includes 5,000 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 16,000 shares that may be acquired upon the
exercise of options.
(9) Includes 100 shares held in trust for Mr. Mott's son; 100 shares held in
trust for Mr. Mott's daughter; and 12,000 shares that may be acquired upon
the exercise of options.
(10) Includes 56,000 shares that may be acquired upon the exercise of options.
(11) Includes 21,400 shares that may be acquired upon the exercise of options.
(12) Includes 1,000 shares that may be acquired upon the exercise of options.
(13) Includes 9,000 shares that may be acquired upon the exercise of options.
(14) Mr. Brown resigned from his position with the Company on December 31, 1997.
(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 170,900 shares that may be acquired upon the exercise of options.
(17) Crabbe Huson's beneficial ownership of 15% of the Company's Common Stock
reflect in part the impact of the Company's previously announced Common
Stock buy-back program, which has been continuing. The Company has informed
Crabbe Huson that Crabbe Huson cannot acquire any additional shares of
Common Stock without becoming an "Acquiring Person" for purposes of such
Rights Agreement.
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 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"). Officers, Directors and greater than ten percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
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 year ended December 27, 1997, all Section 16(a) filing
requirements which are applicable to its officers, Directors and greater than
ten-percent beneficial owners were accomplished, except that a Form 5 for David
G. Bannister was not filed in 1997 to reflect the issuance of 12,000 stock
options pursuant to the 1994 Directors Stock Option Plan. Mr. Bannister's Form 5
was filed on March 12, 1998.
<PAGE>
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The firm of KPMG Peat Marwick LLP served as independent auditors for the
Company for the fiscal year ended December 27, 1997. Pursuant to the
recommendation of the Audit Committee, the Board has appointed that firm to
continue in that capacity for fiscal year 1998, and recommends that a resolution
be presented to shareholders at the 1998 Annual Meeting to ratify that
appointment. A representative of KPMG
Peat Marwick LLP will be present at the 1998 Annual Meeting and will have an
opportunity to make a statement and respond to appropriate questions from
shareholders.
THE BOARD RECOMMENDS A VOTE FOR THIS PROPOSAL
PROPOSAL TO APPROVE AMENDMENT
TO THE LANDSTAR SYSTEM, INC.
1993 EMPLOYEE STOCK OPTION PLAN
The Board of Directors (the "Board") of Landstar System, Inc. (the
"Company") has adopted, subject to shareholder approval, an amendment (the
"Amendment") to the Landstar System, Inc. 1993 Employee Stock Option Plan (the
"Option Plan") in order to increase the maximum number of shares of Common Stock
of the Company, par value $.01 per share (the "Common Stock") subject to options
that may be outstanding at any time under the Option Plan from 615,000 to
1,115,000. The Board believes that an increase in performance-related incentives
will further attract, retain and motivate the best qualified officers and
further enhance the long-term mutuality of interest between the Company's
shareholders and its officers and key employees. The Amendment does not
otherwise modify any of the material terms of the Option Plan. The material
terms are summarized below.
The Compensation Committee of the Board (the "Committee"), which is
responsible for administering the Option Plan, from time to time grants stock
options to officers and other key employees of the Company and its subsidiaries
("Employees").
Subject to shareholder approval of the Amendment, the maximum number of
shares of Common Stock subject to options that may be outstanding at any time
under the Option Plan is 1,115,000. The shares may be unissued shares or
treasury shares. 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 Committee in the number of shares
that may be issued in the future and in the number of shares and price under all
outstanding options granted before the event. If shares subject to a canceled,
terminated or otherwise settled option are not issued, those shares will again
be available for inclusion in future option grants. Payment of cash in lieu of
shares subject to an option will not be considered to be the issuance of a
corresponding number of shares of Common Stock.
<PAGE>
OPTION GRANTS
Awards. The Committee from time to time grants such number of
non-qualified options and options qualifying as "incentive stock options" under
the Internal Revenue Code of 1986, as amended (the "Code") to such Employees, as
determined by the Committee. The Committee determines the number of shares of
Common Stock with respect to such awards and the terms of such awards including
applicable vesting periods.
Exercise Price. All options granted under the Option Plan have an exercise
price per share which is not less than the Fair Market Value (as defined in the
Option Plan) of a share of Common Stock on the date the option is granted. To
exercise an option, an Employee may pay the option price in cash, or if
permitted by the Committee, by delivering other shares of Common Stock already
owned by the Employee valued at their Fair Market Value on the date the option
is exercised.
EXERCISABILITY
Each option granted under the Option Plan is exercisable at such time and
is subject to such restrictions and conditions as determined by the Committee,
including the performance of a minimum period of service or the satisfaction of
performance goals. Options may be made exercisable in installments and the
exercisability of options may be accelerated by the Committee.
OPTION TERM
The term of each option will be fixed by the Committee but may not exceed
ten years from the date of the grant.
TERMINATION OF EMPLOYMENT
Termination due to Retirement, Death or Disability. Unless otherwise
determined by the Committee at the time of grant, in the event of an Employee's
termination of employment by reason of retirement (on or after the date such
Employee attains age 62), Disability (as defined in the Option Plan) or death,
any then outstanding option granted to such Employee under the Option Plan
(whether or not exercisable prior to the date of such termination) may be
exercised by such Employee or, if applicable, his or her designated beneficiary
or estate, at any time prior to the expiration date of the term of the option or
within one year (or such other period as the Committee may determine at the time
of grant) following such Employee's termination of employment, whichever period
is shorter.
Termination for Cause. Unless otherwise determined by the Committee at the
time of grant, in the event of an Employee's termination of employment for Cause
(as defined in the Option Plan), any then outstanding option granted to such
Employee under the Option Plan (whether or not exercisable prior to the date of
such termination) will be forfeited.
<PAGE>
Termination for Any Other Reason. Unless otherwise determined by the
Committee at or after the time of grant, in the event of an Employee's
termination of employment for any reason other than retirement, Disability,
death or for Cause, any then outstanding option granted to such Employee under
the Option Plan, to the extent it was exercisable at such date of termination,
may be exercised within thirty days following the Employee's termination of
employment or prior to the expiration of the term of the option, whichever
period is shorter.
CHANGE IN CONTROL PROVISIONS
In the event of a Change in Control (as defined in the Option Plan), each
option granted to an Employee will be canceled in exchange for cash in an amount
equal to the excess of the highest price per share offered for Common Stock (in
conjunction with a Change in Control) over the exercise price for such option,
provided that if the Committee determines that an option will be honored or
assumed, or new rights substituted therefor in a manner which preserves the
value of such option and eliminates the risk that its value will be forfeited
due to involuntary termination, no cash settlement will occur as a result of a
Change in Control.
OTHER INFORMATION
Options granted under the Option Plan are not transferable except by will
or by the laws of descent and distribution, and may be exercised only by the
grantee during his or her lifetime.
The Board may terminate, suspend, amend or modify the Option Plan but such
termination, amendment or modification may not adversely affect any option then
outstanding under the Option Plan, without the consent of the Employee holding
the option affected thereby. Unless earlier terminated by action of the Board,
the Option Plan will continue in effect until February 9, 2003, but options
granted prior to such date will continue in effect until they expire in
accordance with their terms. The Committee may amend the term of any option
therefore granted under the Option Plan retroactively or prospectively, but no
such amendment may adversely affect any such option without the holder's
consent.
A total of 56,200 options were granted on February 11, 1998 at an exercise
price of $28.110. The following table illustrates the awards that were granted
under the Option Plan in February, 1998.
<PAGE>
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
NAME AND POSITION VALUE OF IN-THE-MONEY OPTIONS(1) UNDERLYING OPTIONS GRANTED
----------------- -------------------------------- --------------------------
<S> <C> <C>
Jeffrey C. Crowe.......................... $ 22,582 9,700
Chairman of the Board, President &
Chief Executive Officer
Henry G. Gerkens.......................... 15,365 6,600
Executive Vice President &
Chief Financial Officer
James R. Hertwig.......................... 9,545 4,100
Executive Vice President &
President of Landstar Logistics &
Landstar Gemini
Robert C. LaRose.......................... 10,243 4,400
Vice President Finance & Treasurer
Executive Group........................... 107,088 46,000
(13 Employees)
Non-Executive Officer Employee Group...... 23,746 10,200
(6 Employees)
</TABLE>
- ---------------
(1) The value of in-the-money options represents the difference between the fair
market value of the underlying securities as of March 5, 1998 and the
exercise price of the options. The fair value of the underlying securities
was calculated based upon the last reported sales price per share of Common
Stock as quoted through NASDAQ on March 5, 1998.
Under the Company's 1993 Employee Stock Option Plan, stock options are
granted to the Company's executive officers in February of each year or as
otherwise determined to be appropriate and necessary by the Compensation
Committee and the Board of Directors. Prior to 1998, the Compensation Committee
determined the number of stock options to be granted pursuant to guidelines it
developed based on an officer's job responsibilities and individual performance
evaluation. Effective with the 1998 grant, 75% of an officer's annual award of
stock options is based on the Company's achievement of its earnings per share
goal during the prior year and 25% of the award is based on the officer's
achievement of individual performance goals during the prior year. The
individual performance goals for all executive officers, other than Mr. Crowe,
will be established by the Chairman of the Board and approved by the
Compensation Committee. Mr. Crowe's performance goals will be established by the
Compensation Committee.
<PAGE>
Although the Committee expects to award options under the Option Plan in
1999, those plans are not finalized and therefore it is not possible to project
exactly the recipients for the number of options to be awarded in successive
years in which the option plan remains in effect. Directors of the Company are
not eligible to participate in the Option Plan.
FEDERAL INCOME TAX ASPECTS
The following is a brief summary of the federal income tax consequences of
awards made under the Option Plan based on the federal income tax laws in effect
on the date hereof. This summary is not intended to be exhaustive, and does not
describe state, local or foreign tax consequences.
Non-qualified Options. There will be no federal income tax consequences to
either the Employee or the Company upon the grant of a non-qualified option.
Generally, upon the exercise of a non-qualified option, the Employee will
realize ordinary income in an amount equal to the excess of the fair market
value of the shares of Common Stock received on the date of exercise over the
option price of the shares. The Company will generally be entitled to a federal
income tax deduction in the same amount.
Any ordinary income realized by an Employee upon exercise of a
non-qualified option will increase his or her tax basis in the Common Stock
thereby acquired. Upon the sale of Common Stock acquired by exercise of a
non-qualified option, an Employee will realize long term or short term capital
gain or loss, depending on the
length of time that the Employee has held the shares of Common Stock. The
holding period for capital gains purposes begins on the date of the exercise
pursuant to which such shares were acquired.
If the Company delivers cash to buy back an Employee's non-qualified
option, the Employee will recognize ordinary income in an amount equal to the
cash paid. An amount equal to the ordinary income recognized by the Employee
will be deductible by the Company.
An Employee who surrenders shares of Common Stock in payment of the
exercise price of a non-qualified option will not recognize gain or loss on his
or her surrender of such shares. Of the shares received in such an exchange,
that number of shares equal to the number of shares surrendered will have the
same tax basis and holding period as the shares surrendered. The Employee will
recognize ordinary income equal to the fair market value of the balance of the
shares received and such shares will then have a tax basis equal to their fair
market value on the exercise date, and the holding period will begin on the
exercise date.
Incentive Stock Options. An employee will not realize taxable income by
reason of the grant or the exercise of an incentive stock option. If an Employee
exercises an incentive stock option and does not dispose of the shares
transferred until the later of two years from the date the option was granted
and one year from the date the shares were transferred to the Employee, the
entire gain, if any, realized upon disposition of such shares will be taxable to
the Employee as long-term capital gain, and the Company will not be entitled to
any deduction. Any loss will be a long-term capital loss. If an Employee
<PAGE>
disposes of the shares within such one-year or two-year period in a manner so as
to violate the holding period requirements (a "disqualifying disposition"), the
Employee generally will realize ordinary income in the year of disposition, and
the Company will receive a corresponding deduction, in an amount equal to the
excess, if any, of (1) the lesser of (a) the amount, if any, realized on the
disposition and (b) the fair market value of the shares on the date the option
was exercised over (2) the option price. Any additional gain realized on the
sale or exchange will be long-term or short-term capital gain and any loss will
be long-term or short-term capital loss. Generally, the Employee will be
considered to have disposed of a share if he or she sells, exchanges, makes a
gift of or transfers legal title to the share (except by pledge or by transfer
on death). If the disposition is by gift and violates the holding period
requirements, the amount of the Employee's ordinary income (and the Company's
deduction) is equal to the fair market value of the shares on the date of
exercise less the option price. If the disposition is a sale or exchange, the
Employee's tax basis will equal the amount paid for the shares plus any ordinary
income realized as a result of the disqualifying disposition. The exercise of
any incentive stock option may subject the Employee to the alternative minimum
tax.
If the Company delivers cash to buy back an Employee's incentive stock
option, the Employee will recognize ordinary income in an amount equal to the
cash paid. An amount equal to any such ordinary income will be deductible by the
Company.
An Employee who surrenders shares of Common Stock as payment of the
exercise price of his or her incentive stock option generally will not recognize
gain or loss on his or her surrender of such shares. The surrender of shares
previously acquired upon exercise of an incentive stock option in payment of the
exercise price of another incentive stock option is, however, a "disposition" of
such stock. If the incentive stock option holding period requirements described
above have not been satisfied with respect to such stock, such disposition will
be a disqualifying disposition that may cause the Employee to recognize ordinary
income as discussed above.
All of the shares received by an Employee upon such exercise of an
incentive stock option by surrendering shares of Common Stock will be subject to
the incentive stock option holding period requirements. Of these shares, a
number of shares (the "Exchange Shares") equal to the number of shares of Common
Stock surrendered by the Employee will have the same tax basis for capital gains
purposes (increased by any ordinary income recognized as a result of any
disqualifying disposition of the surrendered shares if they were incentive stock
option shares) and the same capital gains holding period of the shares
surrendered. For purposes of determining ordinary income upon a subsequent
disqualifying disposition of the Exchange Shares, the amount paid for such
shares will be deemed to be the fair market value of the shares surrendered. The
balance of the shares received by the Employee will have a tax basis (and a
deemed purchase price) of zero and a capital gains holding period beginning on
the date of exercise. The incentive
stock option holding period for all shares will be the same as if the option had
been exercised for cash. An early disposition of any Exchange Shares will be
deemed to be a disposition of the shares with the lowest basis first and highest
basis last.
<PAGE>
An incentive stock option that is exercised by a former Employee or his or
her representative more than three months after the termination of his or her
employment (including retirement) will be treated as a non-qualified option for
federal income tax purposes. This three-month period is extended to one year if
employment ceased due to permanent and total disability.
Section 162(m) of the Code. Section 162(m) of the Code generally denies a
publicly traded company a federal income tax deduction for compensations 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. Option grants under the Option Plan currently meet these
requirements. The 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 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.
APPROVAL
Approval of the Amendment to the Option 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 1998 Annual Meeting. Abstention 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.
THE BOARD RECOMMENDS A VOTE FOR THIS PROPOSAL
SHAREHOLDER PROPOSALS
In accordance with regulations issued by the SEC, shareholder proposals
intended for presentation at the 1999 Annual Meeting of Shareholders must be
received by the Secretary of the Company no later than November 20, 1998, if
such proposals are to be considered for inclusion in the Company's Proxy
Statement. In accordance with the Company's Bylaws, shareholder proposals
intended for presentation at the 1999 Annual Meeting of Shareholders 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 1999 Annual Meeting of Shareholders. Proposals should be mailed via
certified mail and addressed to Michael L. Harvey, Secretary, Landstar System,
Inc., 4160 Woodcock Drive, Jacksonville, Florida 32207.
<PAGE>
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.
Proxies will be solicited by mail and may also be solicited in person or by
telephone by some regular employees of the Company. All expenses in connection
with the preparation of proxy material and the solicitation of proxies will be
borne by the Company.
PLEASE COMPLETE, SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD PROMPTLY
By Order of the Board of Directors
LOGO
Michael L. Harvey
Vice President,
General Counsel,
and Secretary
4160 Woodcock Drive
Jacksonville, FL 32207
THE COMPANY WILL FURNISH, WITHOUT CHARGE, TO ANY SHAREHOLDER OF THE COMPANY
WHO SO REQUESTS, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 27, 1997, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
ANY SUCH REQUEST SHOULD BE DIRECTED TO LANDSTAR SYSTEM, INC., ATTENTION: HENRY
H. GERKENS, INVESTOR RELATIONS, 4160 WOODCOCK DRIVE, JACKSONVILLE, FLORIDA
32207.
<PAGE>
LOGO(R)
LANDSTAR SYSTEM, INC.
4160 WOODCOCK DRIVE
JACKSONVILLE, FL 32207
March 25, 1998
To the Shareholders of Landstar System, Inc.:
You are cordially invited to attend the Annual Meeting of Shareholders of
Landstar System, Inc. on Wednesday, May 20, 1998, at 10:00 a.m., local time, at
the Ponte Vedra Inn, Ponte Vedra Beach, Florida, 32082. A notice of the meeting,
a proxy card, the 1997 Annual Report and a proxy statement containing
information about the matters to be acted upon are enclosed. It is important
that your shares be represented at the meeting. Accordingly, we urge you to sign
and date the enclosed proxy card and promptly return it in the enclosed
pre-addressed, postage-paid envelope even if you are planning to attend the
meeting.
We look forward to the Annual Meeting of Shareholders, and we hope you will
attend the meeting or be represented by proxy.
LOGO
Jeffrey C. Crowe
Chairman of the Board,
President and
Chief Executive Officer
LANDSTAR SYSTEM, INC.
4160 WOODCOCK DRIVE, JACKSONVILLE, FL 32207
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Henry H. Garkens and Michael L. Harvey,
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 the shares of Common Stock of
Landstar System, Inc. held of record by the undersigned on March 20, 1998, at
the Annual Meeting of Shareholders to be held on May 20, 1998 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**
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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 and 3.
1. ELECTION OF DIRECTORS
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike
a line through the nominee's name below)
FOR all nominees listed to the right WILLIAM S. ELSTON
(except as marked to the contrary) / / MERRITT J. MOTT
DIANA MURPHY
WITHHOLD AUTHORITY to vote for all
nominees listed to the right / /
2. RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP as independent
auditors of the Company for fiscal year 1998.
FOR / / AGAINST / / ABSTAIN / /
3. APPROVAL OF AMENDMENT TO THE 1993 STOCK OPTION PLAN TO INCREASE SHARES
DISTRIBUTION FROM 615,000 TO 1,115,000.
FOR / / AGAINST / / ABSTAIN / /
4. 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.
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.
DATED:___________________________
_________________________________
Signature
_________________________________
Signature if held jointly
**PLEASE MARK, SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE**
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