29
EXHIBIT 10.9
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 January 30, 1998.
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 Change of Control or a Potential
Change of Control (as defined in Section 2), the Executive is demoted, the
Board of Directors shall have the right to declare this Agreement void and
without effect.
(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
30
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 death or
termination 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 the greater of 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) 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; 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 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 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.
31
(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.
(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
32
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 of 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 at any time on or before the second anniversary of the Change
of Control Date or (y) if the Executive voluntarily terminates his employment,
with or without Good Reason, at any time within the 60 day period beginning on
the 181st day following the Change of Control Date, then the Company shall pay
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)
or (three) times 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; 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 as
soon as practicable, but in no event more than ten business days (or at such
earlier date required by law) following the Executive's Date of Termination.
Accrued Obligations shall be paid in accordance with the terms of the
applicable plan, program or arrangement.
33
(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 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 (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 Internal Revenue Code of
1986, as amended (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
34
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 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
35
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 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 Xxxx 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
36
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.
(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 in accordance with the
Expedited Employment Arbitration Rules of the American Arbitration Association
then in effect at the time of the arbitration, and otherwise in accordance with
principles which would be applied by a court of law or equity. The arbitrator
shall be acceptable to both the Company and the Executive. If the parties
cannot agree on an acceptable arbitrator, the dispute shall be heard by a panel
of three arbitrators, one appointed by each of the parties and the third
appointed by the other two arbitrators.
(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. 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 noted on the records
of the Company
If to the Company: Landstar Systems, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Attn.: General Counsel
37
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.
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,
and its corporate seal to be hereunto affixed and attested by its Secretary,
all as of the day and year first above written.
LANDSTAR SYSTEM, INC.
By:______________________
Title:
WITNESSED:
____________________
______________________
WITNESSED:
____________________
