EX-10.13 Form of Key Exec Employment Agreement



 





EXHIBIT 10.13




FORM OF

KEY EXECUTIVE EMPLOYMENT PROTECTION AGREEMENT




     THIS AGREEMENT between Landstar System, Inc., a Delaware corporation (the “Company”), and
__________________
(the “Executive”), dated as of this ___ day of __________________, 200___.



W I T N E S S E T H :




     WHEREAS, the Company has employed the Executive in an executive officer position and has
determined that the Executive holds a position of significant importance with the Company;



     WHEREAS, the Company believes that, in the event it is confronted with a situation that could
result in a change in ownership or control of the Company, continuity of management will be
essential to its ability to evaluate and respond to such situation in the best interests of
shareholders;



     WHEREAS, the Company understands that any such situation will present significant concerns for
the Executive with respect to his financial and job security;



     WHEREAS, the Company desires to assure itself of the Executive’s services during the period in
which it is confronting such a situation, and to provide the Executive certain financial assurances
to enable the Executive to perform the responsibilities of his position without undue distraction
and to exercise his judgment without bias due to his personal circumstances;



     WHEREAS, to achieve these objectives, the Company and the Executive desire to enter into an
agreement providing the Company and the Executive with certain rights and obligations upon the
occurrence of a Change of Control (as defined in Section 2);



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



     1. Operation of Agreement. (a) Effective Date. The effective date of this
Agreement shall be the date on which a Change of Control occurs (the “Change of Control Date”),
provided that, except as provided in Section 1(b), if the Executive is not employed by the
Company on the Change of Control Date, this Agreement shall be void and without effect.
Notwithstanding the foregoing, if, prior to the occurrence of a Potential Change of Control (as
defined in Section 2) or, if a Potential Change of Control has not occurred, prior to the
occurrence of a Change of Control, the Executive is demoted, the Board of Directors shall have the
right to declare this Agreement void and without effect.



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     (b) Termination of Employment Following a Potential Change of Control.
Notwithstanding Section 1(a), if (i) the Executive’s employment is terminated by the
Company without Cause (as defined in Section 2) after the occurrence of a Potential Change of
Control and prior to the occurrence of a Change of Control and (ii) a Change of Control
occurs within one year of such termination, the Executive shall be deemed, solely for purposes of
determining his rights under this Agreement, to have remained employed until the date such Change
of Control occurs and to have been terminated by the Company without Cause immediately after this
Agreement becomes effective.



     (c) Termination of Employment Following Death or Disability. This Agreement shall
terminate automatically upon the Executive’s termination of employment as a result of the
executive’s death or due to Disability (as defined in Section 2).



     2. Definitions. (a) Change of Control. For the purposes of this
Agreement, a “Change of Control” shall mean (i) any “person,” including a “group” (as such
terms are used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended
(“the Act”)), but excluding the Company, any of its subsidiaries, or any employee benefit plan of
the Company or any of its subsidiaries, or any employee benefit plan of the Company or any of its
subsidiaries, is or becomes the “beneficial owner” (as defined in Rule 13(d)(3) under the Act),
directly or indirectly, of common stock of the Company representing 35% or more of the combined
voting power of the Company’s then outstanding common stock; (ii) the Shareholders of the Company
approve a definitive agreement (a “Definitive Agreement”) (a) for the merger or other business
combination of the Company with or into another corporation, a majority of the directors of which
were not directors of the Company immediately prior to the merger and in which the shareholders of
the Company immediately prior to the effective date of such merger directly or indirectly own less
than 50% of the voting power in such corporation or (b) for the sale or other disposition of all or
substantially all of the assets of the Company, and the transactions contemplated by such
Definitive Agreement are, in either case, consummated; or (iii) the purchase of common
stock of the Company pursuant to any tender or exchange offer made by any “person,” including a
“group” (as such terms are used in Sections 13(d) and 14(d)(2) of the Act), other than the Company,
any of its subsidiaries, or an employee benefit plan of the Company or any of its subsidiaries for
35% or more of the common stock of the Company.



     (b) Potential Change of Control. For the purposes of this Agreement, a “Potential
Change of Control” shall be deemed to have occurred if (i) any “person” (as such term is
used in Sections 13(d) and 14(d)(2) of the Act) commences a tender or exchange offer for common
stock, which if consummated, would result in such person owning 35% or more of the combined voting
power of the Company’s then outstanding common stock; (ii) the Company enters into an
agreement the consummation of which would constitute a Change of Control; (iii) proxies for
the election of directors of the Company are solicited by anyone other than the Company; or
(iv) any other event occurs which is deemed to be a Potential Change of Control by the
Board of Directors of the Company.



     (c) Cause. For the purposes of this Agreement, “Cause” means (i) the
Executive’s conviction or plea of nolo contendere to a felony; (ii) an act or acts
of extreme dishonesty



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or gross misconduct on the Executive’s part which result or are intended to result in material
damage to the Company’s business or reputation; or (iii) repeated material violations by
the Executive of his position, authority or responsibilities as in effect at the Change of Control
Date, which violations are demonstrably willful and deliberate on the Executive’s part and which
result in material damage to the Company’s business or reputation.



     (d) Good Reason. “Good Reason” means the occurrence of any of the following, without
the express written consent of the Executive, after the occurrence of a Potential Change of Control
or a Change of Control:




     (i) (A) the assignment to the Executive of any duties inconsistent in any
material adverse respect with the Executive’s position, authority or responsibilities as in
effect at the Change of Control Date, or (B) any other material adverse change in
such position, including titles, authority or responsibilities;




     (ii) any failure by the Company, other than an insubstantial or inadvertent failure
remedied by the Company promptly after receipt of notice thereof given by the Executive, to
provide the Executive with (A) an annual base salary, as it may be increased from
time to time (the “Base Salary”), which is at least equal to the Base Salary paid to the
Executive immediately prior to the Change of Control Date, or (B) incentive
compensation opportunities at a level which is at least equal to the level of incentive
compensation opportunities made available, to the Executive immediately prior to the Change
of Control Date;




     (iii) the failure by the Company to permit the Executive (and, to the extent
applicable, his dependents) to participate in or be covered under all pension, retirement,
deferred compensation, savings, medical, dental, health, disability, group life, accidental
death and travel accident insurance plans and programs of the Company and its affiliated
companies at a level that is commensurate with the Executive’s participation in such plans
immediately prior to the Change of Control Date (or, if more favorable to the Executive, at
the level made available to the Executive or other similarly situated officers at any time
thereafter);




     (iv) the Company’s requiring the Executive to be based at any office or location more
than 50 miles from that location at which he performed his services for the Company
immediately prior to the Change of Control, except for travel reasonably required in the
performance of the Executive’s responsibilities; or




     (v) any failure by the Company to obtain the assumption and agreement to perform this
Agreement by a successor as contemplated by Section 5.



     In no event shall the mere occurrence of a Change of Control, absent any further impact on the
Executive, be deemed to constitute Good Reason.



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     (e) Disability. For purposes of this Agreement, “Disability” shall mean the
Executive’s inability to perform the duties of his position, as determined in accordance with the
policies and procedures applicable with respect to the Company’s long-term disability plan, as in
effect immediately prior to the Change of Control Date.



     (f) Notice of Termination. Any termination by the Company for Cause or by the
Executive for Good Reason shall be communicated by Notice of Termination to the other party hereto
given in accordance with Section 6(d). For purposes of this Agreement, a “Notice of Termination”
means a written notice given, in the case of a termination for Cause, within 10 business days of
the Company’s having actual knowledge of the events giving rise to such termination, and in the
case of a termination for Good Reason, within 90 days of the later to occur of (x) the
Change of Control Date or (y) the Executive’s having actual knowledge of the events giving
rise to such termination, and which (i) indicates the specific termination provision in
this Agreement relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive’s employment under the
provision so indicated, and (iii) if the termination date is other than the date of receipt
of such notice, specifies the termination date of this Agreement (which date shall be not more than
30 days after the giving of such notice). The failure by the Executive to set forth in the Notice
of Termination any fact or circumstance which contributes to a showing of Good Reason shall not
waive any right of the Executive hereunder or preclude the Executive from asserting such fact or
circumstance in enforcing his rights hereunder.



     (g) Date of Termination. For the purpose of this Agreement, the term “Date of
Termination” means (i) in the case of a termination for which a Notice of Termination is
required, the date of receipt of such notice of Termination or, if later, the date specified
therein, as the case may be, and (ii) in all other cases, the actual date on which the
Executive’s employment terminates.



     3. Employment Protection Benefits. (a) Basic Benefits. If (x) on or before
the second anniversary of the Change in Control Date (i) the Company terminates the Executive’s
employment for any reason other than for Cause or Disability or (ii) the Executive voluntarily
terminates his employment for Good Reason or (y) the Executive voluntarily terminates his
employment for any reason at any time within the 60-day period beginning on the 181st
day following the Change in Control Date or (z) if the Executive’s employment is terminated by the
Company for any reason other than death, Disability or Cause or by the Executive for Good Reason,
after the execution of a Definitive Agreement but prior to the consummation thereof and the
transaction contemplated by such Definitive Agreement are consummated, then the Company shall pay
to the Executive the following amounts:




     (i) the Executive’s Base Salary earned through the Date of Termination (the “Earned
Salary”);




     (ii) a cash amount (the “Severance Amount”) equal to [one][two][three] times the sum
of



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	 	(A)	 	[one-half (1/2) of] the Executive’s Annual
Base Salary; and
	 
	 	(B)	 	the amount that would have been payable to
the Executive as a bonus for the year in which the Change of Control
occurs, determined by multiplying the Executive’s Annual Base Salary
by his total Participant’s Percentage Participation established for such
year under the Company’s Incentive Compensation Plan (or
any successor plan thereto); and






     (iii) any vested amounts or benefits owing to the Executive under the Company’s
otherwise applicable employee benefit plans and programs, including any compensation
previously deferred by the Executive (together with any accrued earnings thereon) and not
yet paid by the Company and any accrued vacation pay not yet paid by the Company (the
“Accrued Obligations”).



     The Earned Salary and Severance Amount shall be paid in a single lump sum on the tenth
business day following the Executive’s Date of Termination or, if payment is required to be delayed
pursuant to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) because the
Executive is deemed to be a “specified employee” within the meaning of Section 409A, on the first
business day following the six-month anniversary of the Executive’s Date of Termination. Accrued
Obligations shall be paid in accordance with the terms of the applicable plan, program or
arrangement. The Severance Amount is inclusive of, and in lieu of, any amounts under any salary
continuation or cash severance arrangement of the Company and to the extent paid or provided under
any other such arrangement shall be offset from the Severance Amount.



     (b) Continuation of Benefits. If the Executive receives the Severance Amount
described in this Section 3, the Executive (and, to the extent applicable, his dependents) shall be
entitled, after the Date of Termination until the earlier of (x) the first anniversary of
his Date of Termination (the “End Date”) or (y) the date the Executive becomes eligible for
comparable benefits under a similar plan, policy or program of a subsequent employer, to continue
participation in all of the Company’s employee and executive welfare and fringe benefit plans (the
“Benefit Plans”) as were generally provided to the Executive in accordance with the Company’s
policies and practices immediately prior to the Change of Control Date. To the extent any such
benefits cannot be provided under the terms of the applicable plan, policy or program, the Company
shall provide a comparable benefit under another plan or from the Company’s general assets. The
Executive’s participation in the Benefit Plans will be on the same terms and conditions that would
have applied had the Executive continued to be employed by the Company through the End Date.



     (c) Indemnification. The Company shall indemnify the Executive and hold the
Executive harmless from and against any claim, loss or cause of action arising from or



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out of the Executive’s performance as an officer, director or employee of the Company or any
of its subsidiaries or in any other capacity, including any fiduciary capacity, in which the
Executive serves at the request of the Company to the maximum extent permitted by applicable law
and the Company’s Certificate of Incorporation and By-Laws (as each may be amended from time to
time, and as then in effect, the “Governing Documents”), provided that in no event shall
the protection afforded to the Executive hereunder be less than that afforded under the Governing
Documents as in effect immediately prior to the Change of Control Date.



     (d) Certain Further Payments by the Company. In the event that any amounts or
benefits paid or distributed to the Executive pursuant to this Agreement, taken together with any
amounts or benefits otherwise paid or distributed to the Executive by the Company or any affiliated
company (collectively, the “Covered Payments”), are or become subject to the tax (the “Excise Tax”)
imposed under Section 4999 of the Code, or any similar tax that may hereafter be imposed, the
Company shall pay to the Executive at the time specified below an additional amount (the “Tax
Reimbursement Payment”) such that the net amount retained by the Executive with respect to such
Covered Payments, after deduction of any Excise Tax on the Covered Payments and any Federal, state
and local income or employment tax and Excise Tax on the Tax Reimbursement Payment provided for by
this Section 3(d), but before deduction for any Federal, state or local income or employment tax
withholding on such Covered Payments, shall be equal to the amount of the Covered Payments.



     The Tax Reimbursement Payment shall be paid to the Executive not later than 10 business days
following the payment of the Covered Payments; provided, however, that if the
amount of such Tax Reimbursement Payment cannot be finally determined on or before the date on
which payment is due, the Company shall pay to the Executive by such date an amount estimated in
good faith by the Company’s independent certified public accountants appointed prior to the Change
of Control Date or tax counsel selected by such accountants (the “Accountants”) to be the minimum
amount of such Tax Reimbursement Payment and shall pay the remainder of such Tax Reimbursement
Payment (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon
as the amount thereof can be determined, but in no event later than 45 calendar days after payment
of the related Covered Payments. In the event that the amount of the estimated Tax Reimbursement
Payment exceeds the amount subsequently determined to have been due, such excess shall constitute a
loan by the Company to the Executive, payable on the fifth business day after written demand by the
Company for payment (together with interest at the rate provided in Section 1274(b)(2)(B) of the
Code).



     For purposes of determining whether any of the Covered Payments will be subject to the Excise
Tax and the amount of such Excise Tax,




     (i) such Covered Payments will be treated as “parachute payments” within the meaning
of Section 280G of the Code, and all “parachute payments” in excess of the “base amount”
(as defined under Section 280G(b)(3) of the Code) shall be treated as subject to the Excise
Tax, unless, and except to the extent that, in the



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good faith judgment of the Accountants, the Company has a reasonable basis to conclude
that such Covered Payments (in whole or in part) either do not constitute “parachute
payments” or represent reasonable compensation for personal services actually rendered
(within the meaning of Section 280G(b)(4)(B) of the Code) in excess of the base amount, or
such parachute payments are otherwise not subject to such Excise Tax, and




     (ii) the value of any non-cash benefits or any deferred payment or benefit shall be
determined by the Accountants in accordance with the principles of Section 280G of the
Code.



     For purposes of determining the amount of the Tax Reimbursement Payment, the Executive shall
be deemed to pay:




     (A) Federal income taxes at the highest applicable marginal rate of Federal income
taxation for the calendar year in which the Tax Reimbursement Payment is to be made, and




     (B) any applicable state and local income taxes at the highest applicable marginal
rate of taxation for the calendar year in which the Tax Reimbursement Payment is to be
made, net of the maximum reduction in Federal income taxes which could be obtained from the
deduction of such state or local taxes if paid in such year.



     (e) Adjustments to the Tax Reimbursement Payment. In the event that the Excise Tax
is subsequently determined by the Accountants or pursuant to any proceeding or negotiations with
the Internal Revenue Service to be less than the amount taken into account hereunder in calculating
the Tax Reimbursement Payment made, the Executive shall repay to the Company, at the time that the
amount of such reduction in the Excise Tax is finally determined, the portion of such prior Tax
Reimbursement Payment that would not have been paid if such Excise Tax had been applied in
initially calculating such Tax Reimbursement Payment, plus interest on the amount of such repayment
at the rate provided in Section 1274(b)(2)(B) of the Code. Notwithstanding the foregoing, in the
event any portion of the Tax Reimbursement Payment to be refunded to the Company has been paid to
any Federal, state or local tax authority, repayment thereof shall not be required until actual
refund or credit of such portion has been made to the Executive, and interest payable to the
Company shall not exceed interest received or credited to the Executive by such tax authority for
the period it held such portion. The Executive and the Company shall mutually agree upon the
course of action to be pursued (and the method of allocating the expenses thereof) if the
Executive’s good faith claim for refund or credit is denied.



     In the event that the Excise Tax is later determined by the Accountants or pursuant to any
proceeding or negotiations with the Internal Revenue Service to exceed the amount taken into
account hereunder at the time the Tax Reimbursement Payment is made (including, but not limited to,
by reason of any payment the existence or amount of which cannot be determined at the time of the
Tax Reimbursement Payment), the



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Company shall make an additional Tax Reimbursement Payment in respect of such excess (plus any
interest or penalty payable with respect to such excess) at the time that the amount of such excess
is finally determined.



     (f) Discharge of the Company’s Obligations. Except as expressly provided in Section
4, the Severance Amount and the other amounts payable and benefits provided in respect of the
Executive pursuant to this Section 3 following termination of his employment shall be in full and
complete satisfaction of the Executive’s rights under this Agreement and any other claims he may
have in respect of his employment by the Company or any of its subsidiaries. Such amounts shall
constitute liquidated damages with respect to any and all such rights and claims and, upon the
Executive’s receipt of such amounts, the Company shall be released and discharged from any and all
liability to the Executive in connection with this Agreement or otherwise in connection with the
Executive’s employment with the Company and its subsidiaries. Without limiting the generality of
the foregoing, the Company’s obligation to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by any circumstances,
including, without limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Executive or others whether by reason of the subsequent employment
of the Executive or otherwise. Nothing in this Section 3(f), however, shall in any way limit the
Company’s obligations to the Executive pursuant to Section 3(c) hereof.



     4. Legal Fees and Expenses. If the Executive asserts any claim in any contest
(whether initiated by the Executive or by the Company) as to the validity, enforceability or
interpretation of any provision of this Agreement, the Company shall pay the Executive’s legal
expenses (or cause such expenses to be paid) including, without limitation, his reasonable
attorney’s fees, on a quarterly basis, upon presentation of proof of such expenses, provided
that the Executive shall reimburse the Company for such amounts, plus simple interest thereon
at the 90-day United States Treasury Bill rate as in effect from time to time, compounded annually,
if the Executive shall not prevail, in whole or in part, as to any material issue as to the
validity, enforceability or interpretation of any provision of this Agreement.



     5. Successors. This Agreement shall inure to the benefit of and be binding upon the
Company and its successors. The Company shall require any successor to all or substantially all of
the business and/or assets of the Company, whether direct or indirect, by purchase, merger,
consolidation, acquisition of stock, or otherwise, by an agreement in form and substance
satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent as the Company would be required to perform if no such succession had
taken place. This Agreement is personal to the Executive and is not assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Executive’s legal representatives.



     6. Miscellaneous. (a) Applicable Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware, applied without reference to
principles of conflict of laws.



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     (b) Arbitration. Any dispute or controversy arising under or in connection with this
Agreement shall be resolved by binding arbitration. The arbitration shall be held in Jacksonville,
Florida, and except to the extent inconsistent with this Agreement, shall be conducted pursuant to
the terms and conditions of the Arbitration Agreement, dated ___, ___, between the Company
and the Executive.



     (c) Entire Agreement. Upon the Change of Control Date, this Agreement shall
constitute the entire agreement between the parties hereto with respect to the matters referred to
herein
[and expressly supercedes and replaces in all respects any Key Executive Employment Protection Agreement (and any amendments thereto) previously executed between the Company and the Executive]. There are no promises, representations, inducements or statements between the parties
other than those that are expressly contained herein. This Agreement may not be amended or
modified otherwise than by a written agreement executed by the parties hereto or their respective
successors and legal representatives. In the event any provision of this Agreement is invalid or
unenforceable, the validity and enforceability of the remaining provisions hereof shall not be
affected. The Executive acknowledges that he is entering into this Agreement of his own free will
and accord, and with no duress, that he has read this Agreement and that he understands it and its
legal consequences.



     (d) Notices. All notices and other communications hereunder shall be in writing and
shall be given by hand-delivery to the other party or by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:



	 	 	 
	If to the Executive:

	 	at the home address of the Executive as noted in the

corporate records of the Company
	 
	 	 
	If to the Company:

	 	Landstar System, Inc.
	 

	 	13410 Sutton Park Drive South
	 

	 	Jacksonville, Florida 32224
	 

	 	Attn.: General Counsel






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



     (e) Section 409A. It is intended that this Agreement will comply with Section 409A
of the Code (and any regulations and guidelines issued thereunder) to the extent the Agreement is
subject thereto, and the Agreement shall be interpreted on a basis consistent with such intent. If
an amendment to the Agreement is necessary in order for it to comply with Section 409A, the parties
hereto will negotiate in good faith to amend the Agreement in a manner that preserves the original
intent of the parties to the extent reasonably possible.



[signature page to follow]




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     IN WITNESS WHEREOF, the Executive has hereunto set his hand and the Company has caused this
Agreement to be executed in its name on its behalf as of the day and year first above written.



	 	 	 	 	 
	 	LANDSTAR SYSTEM, INC.

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	 	 
	 	
 	 
	 	[Name of Executive] 	 
	 	 	 
	 




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