Charter of the Compensation Committee
Charter of the Compensation Committee
of the Board of Directors of
Landstar System, Inc.
As adopted by the Board of Directors
on August 1, 2007
and Amended and Restated on May 23, 2013
This Charter sets forth, among other things, the purpose, membership and duties and responsibilities of the Compensation Committee (the "Committee") of the Board of Directors (the "Board") of Landstar System, Inc. (the "Corporation").
The primary purposes of the Committee are to (a) discharge the Board's responsibilities relating to the compensation of the Corporation's executive officers and other employees, including evaluation of the Corporation's compensation policies to ensure that the incentives provided are appropriate (including assessment, as and when appropriate, of whether such policies provide an incentive to participants to take undue risks), in each case taking into account, to the extent necessary or appropriate, the Corporation's business plans and objectives and risk management policies; (b) review, approve and oversee the administration of the employee performance-based plans of the Corporation, including without limitation any annual bonus plan and any stock option, stock purchase or other equity-based plan of the Corporation, and to make recommendations for shareholder approval of such plans as applicable; and (c) review and approve any report on executive compensation required by the corporate governance standards of the NASDAQ Stock Market and by the applicable rules and regulations of the U.S. Securities and Exchange Commission for inclusion in the Corporation's annual proxy statements, and to prepare, review and approve the "Report of the Compensation Committee" required by Item 407(e)(5) of Regulation S-K (or any successor provision thereof) of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the "Exchange Act").
The Committee should develop a compensation policy that creates a direct relationship among pay levels, corporate performance and returns to stockholders and vigilantly monitor the results of such policy to assure that the compensation payable to the Corporation's executive officers and other employees provides overall competitive pay levels, creates proper incentives to enhance stockholder value, rewards superior performance and is justified by the returns available to stockholders.
The Committee shall consist of at least three members. The members of the Committee shall be appointed by the action of a majority of the directors of the Board. Members of the Committee shall serve at the pleasure of the majority of such directors of the Board and for such term or terms as such directors may determine.
Each member of the Committee shall satisfy the independence requirements relating to directors and compensation committee members set forth (a) by the NASDAQ Stock Market, (b) pursuant to Section 16 of the Exchange Act and the rules and regulations promulgated thereunder and (c) pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder (the "Code").
3. Structure and Operations
The Board shall designate one member of the Committee as its chair. The affirmative vote of a majority of the members of the Committee is necessary for the adoption of any resolution, provided that the Committee may create one or more subcommittees and may delegate, in its discretion, all or a portion of its duties and responsibilities to such subcommittee (except as provided in the next paragraph), provided that such subcommittees are composed entirely of directors satisfying the independence requirements set forth in the last paragraph of Section 2 of this Charter.
The Committee may delegate to one or more designated members of the Committee the authority to grant equity-based incentive compensation awards in connection with the hiring, promotion or retention of any executive officer (other than the chief executive officer of the Corporation) provided that (a) such grants must be made in a manner consistent with the Corporation's policies regarding the grant of equity-based compensation and (b) any such grants intended to qualify as "performance based compensation" within the meaning of Section 162(m) of the Code and any such grant intended to qualify for an exemption under Rule 16b-3 (as promulgated under the Exchange Act) from the short-swing profit liability provisions of Section 16 of the Exchange Act shall not be effective unless and until such grant is approved in writing by two or more members of the Committee. The full Committee shall be informed of any grant of an equity-based award pursuant to the immediately preceding sentence at the next scheduled meeting. Unless a majority of the members of the Committee hereafter resolve otherwise, without any further action on the part of the Committee, the Committee shall be deemed to have delegated the authority referred to in the first sentence of this paragraph to the chair of the Committee pursuant to this Charter.
The Committee may delegate to one or more designated members of the Committee the authority to grant equity-based incentive compensation awards to employees of the Corporation who are not executive officers of the Corporation in connection with the hiring, promotion or retention of such employees. Such designated member(s) of the Committee or a majority of the members of the Committee may delegate to the chief executive officer of the Corporation the authority to (i) designate the employees to be recipients of such equity-based incentive compensation awards and (ii) determine the number of equity-based incentive compensation awards to be received by such employees, provided that such awards must be made in a manner consistent with the Corporation's policies regarding the grant of equity-based incentive compensation. The full Committee shall be informed of any grant of an equity-based incentive compensation award pursuant to the immediately preceding sentence at the next scheduled meeting. In no event may such delegation to the chief executive officer result in the award, in the aggregate, of more than the number of equity-based incentive compensation awards then available for grant under the Corporation's equity-based incentive compensation plans. Unless a majority of the members of the Committee hereafter resolve otherwise, without any further action on the part of the Committee, the Committee shall be deemed to have delegated the authority referred to in the first sentence of this paragraph to the chair of the Committee pursuant to this Charter.
The Committee shall meet periodically throughout the year at such times and places as shall be determined by the Committee chair to be necessary or appropriate, and may have such additional meetings as the Committee chair or a majority of the Committee's members deem necessary or appropriate. The Committee may request (i) any officer or employee of the Corporation, (ii) the Corporation's outside counsel and/or (iii) such other third party advisor to the Corporation or the Committee as the Committee deems appropriate to attend any meeting (or portions thereof) of the Committee, or to meet with any members of or consultants to the Committee, and to provide such information as the Committee deems necessary or appropriate; provided, however, that the chief executive officer may not be present during voting or deliberations on his or her compensation.
Members of the Committee may participate in a meeting of the Committee by means of conference call or similar communications arrangements by means of which all persons participating in the meeting can hear each other.
4. Duties and Responsibilities
The Committee's duties and responsibilities shall include each of the items enumerated in this Section 4.
- The Committee has overall responsibility with respect to designing, approving and evaluating the executive compensation plans, policies and programs of the Corporation. The Committee shall adopt and make any material amendments to such plans, policies and programs.
- The Committee shall be responsible for determining the Corporation's policy with respect to the application of Section 162(m) of the Code, and when compensation may be paid by the Corporation which is not expected to be deductible for Federal income tax purposes.
- The Committee shall oversee the development and administration of the Corporation's compensation and benefit programs, including equity-based incentive programs and annual bonus plans for executive officers and other employees of the Corporation and the Committee shall fulfill any and all administrative responsibilities assigned to the Committee as administrator under each of the Corporation's executive compensation plans, including, without limitation, the establishment of specific performance targets, if any, in connection therewith.
- The Committee shall review and approve, for each and any executive officer of the Corporation (i) the annual base salary level, (ii) the annual incentive opportunity level, (iii) the long-term incentive opportunity level, (iv) employment agreements, severance arrangements and change in control provisions/agreements, in each case as, when and if appropriate, and (v) any special or supplemental benefits.
- The Committee shall approve long-term incentive program awards and grants, including without limitation, awards of stock options, stock appreciation rights, restricted stock, restricted stock units and performance shares under the applicable plans of the Corporation.
- Without limiting the generality of the forgoing, the Committee shall, with respect to the Corporation's chief executive officer, (i) approve the corporate goals and objectives relevant to the chief executive officer's total compensation; (ii) evaluate the chief executive officer's compensation in light of such goals and objectives; and (iii) recommend approval by the Board of the chief executive officer's total compensation level based on such evaluation.
- The Committee shall authorize the repurchase of any shares of the Corporation's capital stock and/or stock options from terminated or current employees, subject to applicable law.
- The Committee shall review and approve any material changes in any annual bonus plan now in effect or hereafter adopted or the award of any transactional or other special bonus to any executive officer of the Corporation.
- The Committee shall have sole authority to retain, terminate and approve the fees and other retention terms of any compensation consultant retained to assist the Committee in evaluating the chief executive officer's and other executive officers' compensation.
- The Committee shall review and assess whether the compensation of the Corporation's employees (including executive officers) encourages employees to engage in excessive risk.
- The Committee shall review and approve the Corporation's annual Compensation, Discussion and Analysis of executive compensation, and shall review and approve the related "Report of the Compensation Committee" and approve their inclusion in any other document, including in the annual report to stockholders and in the annual proxy statement.
- The Committee shall make regular reports to the Board about the Committee's activities.
- Annually, the Committee shall conduct an evaluation of its performance.
- The Committee shall perform such other functions and have such other powers as may be necessary or convenient in the efficient discharge of the foregoing and as may from time to time be delegated to the Committee by the Board.
With respect to the responsibilities, and to minimize administrative burdens, the Committee shall work with management to define adequate thresholds below which approval for some of these activities and associated transactions can be delegated to management without direct Committee involvement.
5. Authority and Resources
- The Committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser.
- The Committee shall be directly responsible for the appointment, compensation and oversight of the work of any compensation consultant, legal counsel and other adviser retained by the compensation committee.
- The Corporation must provide for appropriate funding, as determined by the Committee, for payment of reasonable compensation to a compensation consultant, legal counsel or any other adviser retained by the compensation committee.
d. The Committee may select, or receive advice from, a compensation consultant, legal counsel or other adviser to the Committee, other than in-house legal counsel, only after taking into consideration the following factors: (i) the provision of other services to the Corporation by the person that employs the compensation consultant, legal counsel or other adviser; (ii) the amount of fees received from the Corporation by the person that employs the compensation consultant, legal counsel or other adviser, as a percentage of the total revenue of the person that employs the compensation consultant, legal counsel or other adviser; (iii) the policies and procedures of the person that employs the compensation consultant, legal counsel or other adviser that are designed to prevent conflicts of interest; (iv) any business or personal relationship of the compensation consultant, legal counsel or other adviser with a member of the Committee; (v) any stock of the Corporation owned by the compensation consultant, legal counsel or other adviser; and (vi) any business or personal relationship of the compensation consultant, legal counsel, other adviser or the person employing the adviser with an executive officer of the Company.
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