Edgar Filing: LANDSTAR SYSTEM INC

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

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Landstar System, Inc.
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[LANDSTAR LOGO]

LANDSTAR SYSTEM, INC.
13410 SUTTON PARK DRIVE SOUTH
JACKSONVILLE, FLORIDA 32224

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD MAY 15, 2002

Notice is hereby given that the 2002 Annual Meeting of Shareholders of
Landstar System, Inc., a Delaware corporation (the "Company"), will be held in
the First Floor Conference Room of the principal offices of Landstar System,
Inc., at the above address, on Wednesday, May 15, 2002, at 10:00 a.m., local
time, for the following purposes:

(1) To elect two Class III Directors for terms to expire at the 2005 Annual
Meeting of Shareholders;

(2) To ratify the appointment of KPMG LLP as the Company's independent
auditors for fiscal year 2002;

(3) To consider approval of the Company's 2002 Employee Stock Option Plan;

(4) To consider approval of the Company's Executive Incentive Compensation
Plan, which is being submitted for approval by the shareholders to
assure the deductibility by the Company for federal income tax purposes
of certain compensation payable thereunder; and

(5) 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 18, 2002 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 address set forth above and during business hours from May 3, 2002 to the
date of the meeting at the Company's corporate headquarters as 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

/s/ Robert C. Larose
ROBERT C. LAROSE
Vice President,
Chief Financial Officer
and Secretary

Jacksonville, Florida
March 22, 2002

IT IS IMPORTANT THAT THE ENCLOSED PROXY CARD BE COMPLETED
AND RETURNED PROMPTLY

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[LANDSTAR LOGO]

LANDSTAR SYSTEM, INC.
13410 SUTTON PARK DRIVE SOUTH
JACKSONVILLE, FLORIDA 32224

March 22, 2002

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 15, 2002, at 10:00 a.m., local time, to
be held in the first floor conference room of the principal offices of Landstar
System, Inc., at 13410 Sutton Park Drive South, Jacksonville, Florida 32224. A
notice of meeting, a proxy card, the 2001 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, I 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.

I look forward to the Annual Meeting of Shareholders, and I hope you will attend
the meeting or be represented by proxy.

/s/ Jeffrey C. Crowe

Jeffrey C. Crowe
Chairman of the Board
and Chief Executive Officer

LANDSTAR SYSTEM, INC.

PROXY STATEMENT

March 22, 2002

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 15, 2002 at 10:00 a.m.,
local time (the "2002 Annual Meeting"). The 2001 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 2001, is enclosed herewith.
The mailing address of the principal executive offices of the Company is 13410
Sutton Park Drive South, Jacksonville, Florida 32224. This Proxy Statement,
accompanying form of proxy, Notice of Meeting and 2001 Annual Report are being
mailed to the shareholders of the Company on or about March 22, 2002.

RECORD DATE

The Board has fixed the close of business on March 18, 2002 as the record
date for the 2002 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, the ratification of KPMG LLP as independent
auditors for the Company, and the proposals to approve the Company's 2002
Employee Stock Option Plan and the Company's Executive Incentive Compensation
Plan as set forth in this Notice of 2002 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 2002 Annual
Meeting.

Any proxy delivered pursuant to this solicitation is revocable at the
option of the person(s) executing the same (i) upon receipt by the Company
before the proxy is voted of a duly executed proxy bearing a later date, (ii) by
written notice of revocation to the Secretary of the Company received before the
proxy is voted, or (iii) by such person(s) voting in person at the 2002 Annual
Meeting.

The Board has selected The Bank of New York as Inspectors of Election (the
"Inspectors") 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 2002 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.

PROXY SOLICITATION

The cost of the preparation of proxy materials and the solicitation of
proxies will be paid by the Company. The Company has engaged Georgeson
Shareholder Communications, Inc. as the proxy solicitor for the 2002 Annual
Meeting for a fee of approximately $6,000 plus reasonable expenses. In addition
to the use of the mails, certain directors, officers or employees of the Company
may solicit proxies by telephone or personal contact. Upon request, the Company
will reimburse brokers, dealers, banks and trustees, or their nominees, for
reasonable expenses incurred by them in forwarding proxy materials to beneficial
owners of shares.

VOTING SECURITIES

The Company has only one class of voting securities, its common stock, par
value $.01 per share (the "Common Stock") outstanding. On March 18, 2002,
8,105,753 shares of Common Stock were outstanding. At the 2002 Annual Meeting,
each shareholder of record at the close of business on March 18, 2002 will be
entitled to one vote for each share of Common Stock owned on that date as to
each matter properly presented to the 2002 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 2002 Annual Meeting.

PROPOSAL NUMBER ONE -- 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.
There are seven members of the Board of Directors; two Class III Directors to be
elected at the 2002 Annual Meeting of Shareholders (whose members' terms will
expire at the 2005 Annual Meeting of Shareholders), two Class I Directors whose
terms will expire at the 2003 Annual Meeting of Shareholders, and three Class II
Directors whose terms will expire at the 2004 Annual Meeting of Shareholders.

It is intended that the shares represented by the accompanying form of
proxy will be voted at the 2002 Annual Meeting for the election of nominees
David G. Bannister and Jeffrey C. Crowe as the Directors comprising Class III
whose members' terms will expire at the 2005 Annual Meeting of Shareholders,
unless the proxy specifies otherwise. Each nominee has indicated his willingness
to serve as a member of the Board, if elected.

If, for any reason not presently known, David G. Bannister or Jeffrey C.
Crowe are not available for election at the time of the 2002 Annual Meeting, the
shares represented by the accompanying form of proxy may be voted for the
election in his/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 2002 Annual Meeting. Abstentions from voting and
broker non-votes will have no effect on the outcome of this proposal.

THE BOARD RECOMMENDS A VOTE FOR THIS PROPOSAL

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 2002 Annual
Meeting.

NAME AGE BUSINESS EXPERIENCE
---- --- -------------------

CLASS III -- NOMINEES TO SERVE AS DIRECTORS UNTIL THE 2005 ANNUAL MEETING

David G. Bannister............. 46 Mr. Bannister has been a Director of the Company since April
1991 and a Director of Landstar System Holdings, Inc. (a
wholly-owned subsidiary of the Company) ("LSHI") since
October 1988. Mr. Bannister is a General Partner of Grotech
Capital Group, a private equity and venture capital firm.
Prior to joining Grotech in May 1998, Mr. Bannister was a
Managing Director at BT Alex. Brown Incorporated. Mr.
Bannister also serves on the Board of Directors of Allied
Holdings, Inc., Nationtax Online, Inc., SimonDelivers.com,
Inc. and iFleet, Inc.

Jeffrey C. Crowe............... 55 Mr. Crowe has been Chairman of the Board and Chief Executive
Officer of the Company since April 1991. Mr. Crowe was
President of the Company from April 1991 to June 2001. He
has been Chief Executive Officer of LSHI since June 1989 and
Chairman of the Board of LSHI since March 1991. Mr. Crowe
has been President of Signature Insurance Company
("Signature") (a wholly-owned subsidiary of LSHI) since
February 1997. Mr. Crowe served in a number of capacities at
the American Trucking Association, Inc. ("ATA") including
Secretary and a member of the ATA Executive Committee and
served as a Director of the ATA Foundation since November
1989 until his resignation from the ATA in 1998. He has also
served as Chairman of the National Defense Transportation
Association ("NDTA") commencing October 1993. 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. He has been a Director of SunTrust Bank-North Florida
since January 1999. Mr. Crowe commenced serving as a member
of the Board of Advisors for the U.S. Merchant Marine
Academy Global Maritime and Transportation School on April
25, 2001 and he commenced serving as a Director for the ENO
Transportation Foundation, Inc. on October 19, 2001.

CLASS I -- DIRECTORS WHOSE TERMS EXPIRE AT THE 2003 ANNUAL MEETING

Ronald W. Drucker.............. 60 Mr. Drucker has been a Director of the Company and LSHI
since April 1994. Mr. Drucker is a consultant and he serves
as the Chairman of the NDTA Business Practices Committee. He
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 and Maintenance-of-Way Association and the
American Society of Civil Engineers and serves as a member
of the Board of Directors of SunTrust Bank-North Florida,
Railworks, Inc., The Cooper Union for the Advancement of
Science and Art, and The New World Symphony.

DIRECTORS OF THE COMPANY (continued)

NAME AGE BUSINESS EXPERIENCE
---- --- -------------------

Henry H. Gerkens............... 51 Mr. Gerkens has been a Director of the Company and LSHI
since May 2000. Mr. Gerkens has been President and Chief
Operating Officer of the Company and LSHI since December
2001. He was President and Chief Financial Officer of the
Company and LSHI from July 2001 to December 2001. He served
as Executive Vice President and Chief Financial Officer of
the Company and LSHI from November 1994 to July 2001. He
served as Vice President and Chief Financial Officer of the
Company from January 1993 to November 1994 and held the same
positions at LSHI from August 1988 to November 1994. He is a
member of the Board of Directors of each of the subsidiaries
(the "Subsidiaries") of LSHI: namely, Landstar Gemini, Inc.
(a wholly-owned subsidiary of LSHI) ("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"), Landstar Carrier Services, Inc. (a wholly-owned
subsidiary of LSHI) ("LCS"), Risk Management Claim Services,
Inc., (a wholly-owned subsidiary of LSHI) ("RMCS"), Landstar
Ranger, Inc. (a wholly-owned subsidiary of LSHI) ("Landstar
Ranger"), Signature Technology Services, Inc. (a
wholly-owned subsidiary of LSHI) ("STSI"), Landstar
Corporate Services, Inc. (an indirect wholly-owned
subsidiary of LSHI) ("LCSI"), Landstar Express America, Inc.
(a wholly-owned subsidiary of LSHI) ("Landstar Express
America"), Landstar Logistics, Inc. (a wholly-owned
subsidiary of LSHI) ("Landstar Logistics") and Signature. He
is also an officer of LCFI, LCS, RMCS, STSI, LCSI and
Signature.

CLASS II -- DIRECTORS WHOSE TERMS EXPIRE AT THE 2004 ANNUAL MEETING

Merritt J. Mott................ 56 Mr. Mott has been a Director of the Company and LSHI since
August 1994. He is the Owner and Chief Executive Officer of
Rockford Sanitary Systems, Inc. From 1980 through 1996 he
served in various capacities at Mott Bros. Company including
Executive Vice President and Chief Financial Officer. Mr.
Mott was a Director of Rockford Health Plans from 1994
through 1997. He serves as a Director of Blackhawk Bancorp,
Inc. and as a trustee of the William Howard Trust since
1984.

William S. Elston.............. 61 Mr. Elston has been a Director of the Company and LSHI since
February 1998 and an Executive Recruiting Consultant since
December 1999. He was President and Chief Executive Officer
of Clean Shower, L.P. from November 1998 to December 1999.
He served as Managing Director/Executive Vice President of
DHR, International, an executive recruiting firm, from
February 1995 to November 1998. He was Executive Vice
President of Operations 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.

DIRECTORS OF THE COMPANY (continued)

NAME AGE BUSINESS EXPERIENCE
---- --- -------------------

Diana M. Murphy................ 45 Ms. Murphy has been a Director of the Company and LSHI since
February 1998 and has been a Managing Director in the
private equity firm of Chartwell Capital Management Company
since 1997. Ms. Murphy was an associate with Chartwell
Capital and served as interim President for one of
Chartwell's portfolio companies, Strategic Media Research,
Inc. in 1996. She was Senior Vice President for The
Baltimore Sun, a division of The Tribune Corporation from
1992 to 1995. Ms. Murphy also serves on the Board of
Directors of Raymedica, Inc., eMotion and Enterworks, Inc.

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 2001 fiscal year, the Board held four regularly scheduled
meetings, one special telephonic meeting and acted by unanimous written consent
eleven times. During such fiscal year, all Directors attended 75% or more of the
combined total meetings of the Board and its respective committees during the
period in which they served as Directors or committee members.

COMMITTEES OF THE BOARD

The Board has established an Audit Committee, a Compensation Committee, a
Nominating Committee, a Safety Committee and a Strategic Planning Committee to
devote attention to specific subjects and to assist in the discharge of its
responsibilities. The functions of those committees, their current members and
the number of meetings held during 2001 are described below. The Board does not
have an Executive Committee.

AUDIT COMMITTEE

Members: Ronald W. Drucker, Merritt J. Mott and Diana M. Murphy

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 2001, three telephonic meetings and did not act by written
consent in 2001.

COMPENSATION COMMITTEE

Members: David G. Bannister, William S. Elston 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 three regularly scheduled meetings,
one special telephonic meeting and acted by written consent one time during
2001.

NOMINATING COMMITTEE

Members: David G. Bannister, Ronald W. Drucker, Merritt J. Mott and Diana
M. Murphy

The Nominating Committee functions include identifying persons for future
nomination for election to the Board of Directors. The Nominating Committee held
one meeting during 2001 and did not act by written consent. Stockholders who
wish to submit names to the Nominating Committee for consideration should do so
in writing addressed to the Nominating Committee, c/o Corporate Secretary,
Landstar System, Inc., 13410 Sutton Park Drive South, Jacksonville, Florida
32224.

SAFETY COMMITTEE

Members: Jeffrey C. Crowe, David G. Bannister, Ronald W. Drucker, Henry H.
Gerkens and Diana M. Murphy

The Safety Committee functions include the development and implementation
of safety goals and strategies to be implemented by the Company. The Safety
Committee held two meetings during 2001 and did not act by written consent.

STRATEGIC PLANNING COMMITTEE

Members: Ronald W. Drucker, William S. Elston, Henry H. Gerkens and Diana
M. Murphy

The Strategic Planning Committee functions include the development of
strategic objectives and policies and procedures to achieve the strategic
objectives of the Company. The Strategic Planning Committee solicits the views
of the Board of Directors and Senior Management and recommends strategic
directions to the Board for implementation. The Strategic Planning Committee
held two meetings during 2001 and did not act by written consent.

REPORT OF THE AUDIT COMMITTEE

The Audit Committee of the Board is responsible for providing independent,
objective oversight of the Company's accounting functions and internal controls.
The Audit Committee is composed of three directors, each of whom is independent
as defined by the National Association of Securities Dealers' listing standards.
The Audit Committee operates under a written charter approved by the Board of
Directors.

Management is responsible for the Company's internal controls and financial
reporting process. The independent accountants are responsible for performing an
independent audit of the Company's consolidated financial statements in
accordance with generally accepted auditing standards accepted in the United
States of America and to issue a report thereon. The Audit Committee's
responsibility is to monitor and oversee these processes.

In connection with these responsibilities, the Audit Committee met with
management and the independent accountants to review and discuss the December
29, 2001 financial statements. The Audit Committee also discussed with the
independent accountants the matters required by Statement on Auditing Standards
No. 61 (Communication with Audit Committees). The Audit Committee also received
written disclosures from the independent accountants required by Independence
Standards Board Standard No. 1 (Independence Discussions with Audit Committees),
and the Audit Committee discussed with the independent accountants that firm's
independence. The Audit Committee has considered whether the non-audit services
rendered to the Company by the independent accountants (which services are
disclosed elsewhere in this Proxy Statement) are compatible with maintaining the
independence of these accountants. The Audit Committee also reviewed and
discussed the December 29, 2001 financial statements with management.

Based upon the Audit Committee's discussions with management and the
independent accountants, and the Audit Committee's review of the representations
of management and the independent accountants, the Audit Committee recommended
that the Board of Directors include the audited consolidated financial
statements in the Company's Annual Report on Form 10-K for the year ended
December 29, 2001, to be filed with the Securities and Exchange Commission.

THE AUDIT COMMITTEE

Merritt J. Mott, Chairman
Ronald W. Drucker
Diana M. Murphy

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 any of the Directors and
executive officers of the Company or the Subsidiaries.

NAME AGE BUSINESS EXPERIENCE
---- --- -------------------

Jeffrey C. Crowe.......................... 55 See previous description under "Directors of the
Company."

Henry H. Gerkens.......................... 51 See previous description under "Directors of the
Company."

Robert C. LaRose.......................... 47 Mr. LaRose has been Vice President, Chief Financial
Officer and Secretary of the Company and LSHI since
December 2001. He served as Vice President of
Finance, Treasurer and Assistant Secretary of the
Company and LSHI from September 2001 to December
2001. He served as Vice President of Finance and
Treasurer of the Company and LSHI from October 1995
to September 2001. He served as Vice President and
Controller of the Company from January 1993 to
October 1995 and held the same positions at LSHI
from March 1989 to October 1995. He was Assistant
Treasurer of the Company from May 1991 to January
1993. Mr. LaRose is also an officer of each of the
Subsidiaries.

COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

COMPENSATION OF DIRECTORS. During 2001, 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
was elected or re-elected as a Director at such annual meeting received an award
of options (a "Term Award") to purchase an additional 12,000 shares of the
Company's Common Stock.

At a regularly scheduled meeting of the Board of Directors on December 9,
1998, the Board acted to approve a recommendation of the Compensation Committee
to reduce the number of shares available for a Term Award on an annual basis
from 12,000 options to 9,000 options to purchase shares of the Company's Common
Stock. The 1994 Directors Stock Option Plan has been amended to reflect this
reduction. Accordingly, Mr. Bannister, a Director Nominee eligible for
re-election at the annual meeting of shareholders, May 15, 2002, will receive
9,000 shares pursuant to the 1994 Directors Stock Option Plan as amended. 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 two
other executive officers for services rendered to the Company and its
subsidiaries during the 2001, 2000 and 1999 fiscal years (collectively, the
"Executives"). Pursuant to the Regulation 402(a)(3)(iii) of Regulation S-K under
the Securities Act of 1933, as amended, the following table also includes such
information with respect to Messrs. Hartter and Hertwig (collectively, with the
Executive Officers, the "Named Executives") even though such individuals ceased
to be executive

officers of the Company during 2001. (Messrs. Hartter and Hertwig are still
employees of the Company, with the respective positions listed in the following
table).

SUMMARY COMPENSATION TABLE

LONG-TERM
COMPENSATION
------------
NO. OF
ANNUAL COMPENSATION SECURITIES
---------------------------------------- UNDERLYING
ANNUAL OTHER ANNUAL OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS COMPENSATION(2) GRANTED COMPENSATION(3)
--------------------------- ---- --------- ----- --------------- ---------- ---------------

Jeffrey C. Crowe............. 2001 $420,000 $ 0 $163,893 15,300 $246,522
Chairman of the Board & 2000 420,000 765,000 114,718 16,400 145,963
Chief Executive Officer 1999 350,000 1,220,000 91,111 10,800 129,175

Henry H. Gerkens............. 2001 287,500 0 68,223 23,400 104,131
Director, President & 2000 275,000 440,000 56,918 11,400 68,929
Chief Operating Officer 1999 220,000 670,000 44,759 7,500 54,333

Robert C. LaRose............. 2001 200,000 0 36,644 11,500 54,830
Vice President, Chief
Financial 2000 200,000 225,000 34,435 7,400 40,659
Officer & Secretary 1999 170,000 325,000 26,443 4,900 33,303

Gary W. Hartter.............. 2001 212,500 0 3,046 11,800 10,279
President of Landstar
Ranger, 2000 205,000 165,000 19,232 6,200 9,846
Landstar Gemini, Landstar 1999 175,000 225,935 2,931 4,000 8,694
Inway & Landstar Ligon

James R. Hertwig............. 2001 200,000 0 17,385 6,800 30,663
President of Landstar 2000 200,000 67,000 2,247 6,500 9,230
Logistics 1999 180,000 235,000 13,653 4,600 8,434

---------------
(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.

(3) Amounts for 2001 include contributions in the amount of $6,800 which were
made by the Company under the Landstar 401(k) Savings Plan on behalf of each
of the Named Executives and contributions made by the Company under the
Landstar Supplemental Executive Retirement Plan on behalf of Mr. Crowe in
the amount of $10,000, Mr. Gerkens in the amount of $4,700, Mr. LaRose in
the amount of $1,200, Mr. Hartter in the amount of $1,700 and Mr. Hertwig in
the amount of $1,200. Amounts for 2001 include the dollar value of term life
insurance premiums paid by the Company on behalf of Messrs. Crowe, Gerkens,
LaRose, Hartter and Hertwig in the amounts of $1,526, $1,717, $479, $1,779
and $1,235, respectively. Amounts for 2001 include $43,000, $21,500 and
$17,200, which represents principal and interest forgiven under loans
extended to each of Messrs. Crowe, Gerkens and LaRose, respectively, in
connection with their relocation in 1997. Amounts for 2001 also include
$147,700, $61,530, $28,420 and $21,338, which represents interest forgiven
under loans extended to each Messrs. Crowe, Gerkens, LaRose and Hertwig,
respectively, in connection with the exercise of their stock options and
$37,496, $7,884 and $728, for Messrs. Crowe, Gerkens and LaRose,
respectively, which represents interest forgiven under loans extended to
assist them with the income tax liability incurred as a result of the
exercise of stock options.

There were 171,100 options granted under the Company's 1993 Employee Stock
Option Plan in fiscal year 2001. The following table sets forth the number of
and information about stock options granted in fiscal year 2001 to each of the
Named Executives of the Company.

NUMBER OF SECURITIES UNDERLYING OPTIONS GRANTED

POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
NO. OF SECURITIES % OF OF STOCK PRICE APPRECIATION
UNDERLYING TOTAL FOR OPTION TERM
OPTIONS OPTIONS EXERCISE EXPIRATION ---------------------------
GRANTED(1) GRANTED PRICE DATE 5% 10%
----------------- ------- -------- --------------- ---------- ------------

Jeffrey C. Crowe...... 15,300 8.9% $64.938 Feb. 07, 2011 $624,839 $1,583,465
Henry H. Gerkens...... 11,400 6.7% 64.938 Feb. 07, 2011 465,566 1,179,837
12,000 7.0% 68.448 Jun. 29, 2011 516,559 1,309,062
Robert C. LaRose...... 6,500 3.8% 64.938 Feb. 07, 2011 265,455 672,714
5,000 2.9% 68.448 Jun. 29, 2011 215,233 545,442
Gary W. Hartter....... 6,800 4.0% 64.938 Feb. 07, 2011 277,706 703,762
5,000 2.9% 68.448 Jun. 29, 2011 215,233 545,442
James R. Hertwig...... 6,800 4.0% 64.938 Feb. 07, 2011 277,706 703,762

---------------
(1) All the options granted shall become exercisable in five equal installments
on each of the first five anniversaries of the respective dates of grant,
provided the executive is employed by the Company on each such anniversary
date.

The following table sets forth the number and value of all options
exercised in fiscal year 2001 by the Named Executives.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR

SHARES ACQUIRED VALUE
ON EXERCISE REALIZED
--------------- --------

Gary W. Hartter............................................. 11,060 $361,297(1)
James R. Hertwig............................................ 2,000 106,850(2)

---------------
(1) The value realized represents the difference between the fair market value
of the shares acquired on exercise as of May 4, 2001 (the exercise date) and
the exercise price of the option. The fair market value was calculated based
upon the last reported sales price per share of Common Stock as quoted on
NASDAQ on May 4, 2001.

(2) The value realized represents the difference between the fair market value
of the shares acquired on exercise as of August 22, 2001 (the exercise date)
and the exercise price of the option. The fair market value was calculated
based upon the last reported sales price per share of Common Stock as quoted
on NASDAQ on August 22, 2001.

FISCAL YEAR-END OPTION VALUES

NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 29, 2001 AT DECEMBER 29, 2001(1)
---------------------------- ----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------

Jeffrey C. Crowe........................... 26,560 47,540 $943,365 $1,158,624
Henry H. Gerkens........................... 17,820 45,380 633,232 845,325
Robert C. LaRose........................... 11,660 25,840 414,951 533,418
Gary W. Hartter............................ 3,360 24,380 130,112 480,580
James R. Hertwig........................... 11,180 20,120 397,913 484,746

---------------
(1) The value of in-the-money options represents the difference between the fair
market value of the shares as of December 28, 2001 and the exercise price of
the option. The fair market value was calculated based upon the last
reported sales price per share of Common Stock as quoted on NASDAQ in the
Company's fiscal year ended December 29, 2001, which was December 28, 2001.

EQUITY COMPENSATION PLAN INFORMATION

The following table sets forth information as of the end of the Company's
2001 fiscal year with respect to compensation plans under which equity
securities of the Company are authorized for issuance. The table does not
include securities that may be issuable under the proposed 2002 Employee Stock
Option Plan or the proposed Executive Incentive Compensation Plan.

(A) (B) (C)
------------------------ ------------------------ ----------------------------

Plan category Number of securities to Weighted-average Number of securities
be issued upon exercise exercise price of remaining available for
of outstanding options, outstanding options, future issuance under equity
warrants and rights warrants and rights compensation plans
(excluding securities
reflected in column (a))
Equity compensation
plans approved by the
Company's stockholders 561,520 $46.56 306,320
Equity compensation
plans not approved by
the Company's
stockholders 0 N/A 0
-------- --------
Total 561,520 $46.56 306,320
-------- --------
-------- --------

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 1996, in the amounts of $200,000, $100,000
and $80,000, respectively, to assist them in their individual relocations to the
Jacksonville area. On each anniversary date of such loan, the principal and
interest amounts then due was forgiven by the Company. In accordance with the
loan agreement, these loans were completely forgiven as of December 29, 2001.

In 1998, the Company made loans to Messrs. Crowe, Gerkens and LaRose in the
amounts of $925,000, $277,500 and $92,500, in connection with the exercise of
options to purchase 50,000, 15,000 and 5,000 shares of the Company's Common
Stock at $18.50 per share, respectively. In 1999, the Company made loans to
Messrs. Crowe, Gerkens and LaRose in the amounts of $242,833, $71,249 and
$28,323, respectively, to assist them with the income tax liability incurred as
a result of the exercise of stock options. In 2000, Messrs. Crowe, Gerkens and
LaRose repaid $51,047, $48,782 and $23,000 of their income tax liability loans.
In 2001, Mr. Gerkens repaid the remaining $22,467 of his income tax liability
loan. During the first quarter of 2002, Messrs. Crowe, Gerkens and LaRose repaid
$925,000, $277,500 and $92,500, respectively, of their stock option loans. Also,
during the first quarter of 2002, Messrs. Crowe and LaRose repaid the remaining
$191,786 and $5,323, respectively, of their income tax liability loans.

In 1999, the Company made loans to Messrs. Gerkens and LaRose in the
amounts of $127,500 and $76,500, in connection with the exercise of options to
purchase 5,000 and 3,000 shares of the Company's Common Stock at $25.50 and
$25.50 per share, respectively.

In 2000, the Company made loans to Messrs. Crowe, Gerkens, LaRose and two
loans to Mr. Hertwig in the amounts of $1,185,000, $474,000, $237,000, $214,875
and $74,062, in connection with the exercise of options to purchase 40,000,
16,000, 8,000, 9,000 and 2,500 shares of the Company's Common Stock at $29.625,
$29.625, $29.625, $23.875 and $29.625 per share, respectively. In 2001, Mr.
Hertwig repaid his $214,875 stock option loan. In 2000, the Company also made
loans to Messrs. Crowe and Gerkens in the amounts of $332,687 and $76,795,
respectively, to assist them with the income tax liability incurred as a result
of the exercise of stock options. In 2001, the Company also made loans to Mr.
LaRose and Mr. Hertwig in the amounts of $18,648 and $52,445, respectively, to
assist them with the income tax liability incurred as a result of the exercise
of stock options. During the first quarter of 2002, Mr. Gerkens repaid his
$474,000 stock option

loan. Also, during the first quarter of 2002, Messrs. Gerkens and LaRose repaid
$76,795 and $18,648, respectively, of their income tax liability loans.

In 2001, the Company made a loan to Mr. Hertwig in the amount of $49,250 in
connection with the exercise of options to purchase 2,000 shares of the
Company's Common Stock at $24.625 per share.

All of the loans made in connection with the exercise of stock options or
the income tax liability incurred as a result of the exercise of stock options
bear interest at 7%. Interest on the loans will be forgiven annually if the
executives are still employed by the Company. Principal is repayable in a single
lump sum on the fifth anniversary of the loan, or sooner under certain
circumstances.

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, LaRose, Hartter and
Hertwig. Each agreement provides certain severance benefits 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. LaRose, Hartter and Hertwig of the sum of
(A) the executive's annual base salary; and (B) the amount that would have been
payable to the executive as a target bonus for the year in which the change of
control occurs. Each agreement also provides for continuation of medical
benefits and for certain tax gross-ups to be made to a covered executive in the
event payments to the executive are subject to the excise tax on "parachute
payments" imposed under Section 4999 of the Internal Revenue Code of 1986.

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.

Annual Bonus

The Company's executive officers were eligible to receive an annual bonus
under the Company's 2001 Incentive Compensation Plan (the "2001 ICP"). The 2001
ICP provided for bonus payments to be made to eligible executive officers upon
achievement of a consolidated earnings per share target and to eligible
corporate and operating subsidiary employees upon the achievement of a
consolidated earnings per share target or an operating income target or a
combination thereof. These performance criteria were established at the
beginning of 2001 by the Compensation Committee.

The Company did not achieve the targets established under the 2001 ICP and,
as a result, no executive officer or any Named Executive received bonuses
pursuant to the 2001 ICP.

Stock Options

Under the Company's 1993 Stock Option Plan, stock options are granted to
the Company's executive officers and certain other key employees. The
Compensation Committee determines the number of stock options to be granted
pursuant to guidelines it develops based on an officer's, or other key
employee's, job responsibilities and individual performance evaluation. Stock
options are granted with an exercise price equal to the fair market value of the
Common Stock on the date of grant and vest over three to 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 1, 2002, Mr. Crowe held 40,000 shares of the Company's Common
Stock and held options to purchase an additional 134,100 shares, including
60,000 options granted January 2, 2002. 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. At the 2002 Annual Meeting, the Company will seek shareholder
approval for the Executive Incentive Compensation Plan (described below) so that
any annual awards payable thereunder would qualify for the performance exception
under Section 162(m). The Compensation Committee believes that tax deductibility
of compensation is an important factor, but not the sole factor, to be
considered in setting executive compensation policy. Accordingly, the
Compensation Committee generally intends to take such reasonable steps as are
required to avoid the loss of a tax deduction due to Section 162(m) but reserves
the right to pay amounts which are not deductible in appropriate circumstances.

Conclusion

Through the programs described above, a very significant portion of the
Company's executive compensation is linked directly to significant thresholds of
corporate performance and stock price appreciation. The Company's results did
not achieve the target criteria established in the 2001 ICP. As such, bonuses
were not paid under the 2001 ICP. 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, Chairman
William S. Elston
Merritt J. Mott
14

PERFORMANCE COMPARISON

The following graph illustrates the return that would have been realized
(assuming reinvestment of dividends) by an investor who invested $100 in each of
the Company's Common Stock, the Standard & Poor's 500 Stock Index and the Dow
Jones Transportation Stock Index for the period commencing December 30, 1996
through December 29, 2001.

[LINE GRAPH]

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 1, 2002 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.

AMOUNT AND
NATURE OF OWNERSHIP
BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER POSITION(S) OWNERSHIP CLASS(1)
------------------------ ----------- ---------- ----------

(i)
FMR Corp.(2)(3)................... 766,602 9.5%
T. Rowe Price Associates,
Inc.(2)(4)...................... 495,250 6.1%
David G. Bannister(5)............. Director and Nominee for Director 11,960 *
Ronald W. Drucker(6).............. Director 32,000 *
Merritt J. Mott(7)................ Director 22,000 *
William S. Elston(8).............. Director 12,300 *
Diana M. Murphy(9)................ Director 12,300 *
Jeffrey C. Crowe(10).............. Director and Nominee for Director
Chairman of the Board and Chief
Executive Officer 77,000 *
Henry H. Gerkens(11).............. Director, President and Chief
Operating Officer 30,200 *
Robert C. LaRose(12).............. Vice President, Chief Financial
Officer and Secretary 27,300 *
(iii)
All Directors and current
executive officers as a group (8
persons)(13)(14)................ 225,060 2.7%

---------------

* Less than 1%

(1) The percentages are based upon 8,105,753 shares, which equal the
outstanding shares of the Company as of March 1, 2002. With respect to the
calculation of the percentages for beneficial owners who hold options
exercisable within 60 days of March 1, 2002, 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 (and
amendments thereto) filed by this entity.

(3) According to an amendment filed February 14, 2002 to its Schedule 13G, FMR
Corp. is the beneficial owner of 766,602 shares of Common Stock. Fidelity
Management & Research Company ("Fidelity"), a wholly-owned subsidiary of
FMR Corp. and an investment adviser registered under Section 203 of the
Investment Advisers Act of 1940, is also the beneficial owner of 391,057
shares, or 4.836% of the Common Stock outstanding, as a result of acting as
investment adviser to various companies (the "Funds") registered under
Section 8 of the Investment Company Act of 1940. Such shares are voted by
Fidelity in accordance with written guidelines established by the Funds'
boards of trustees. Edward C. Johnson 3d (Chairman of FMR Corp.), FMR Corp.
and the Funds each has sole power to dispose of the 375,545 shares owned by
the Funds. Fidelity Management Trust Company ("Fidelity Management"), a
wholly-owned subsidiary of FMR Corp. beneficially owns 332,345 shares, or
4.110% of the Common Stock outstanding, as a result of its serving as
investment manager of the institutional account(s). Edward C. Johnson 3d
and FMR Corp., through its control of Fidelity Management, each has sole
dispositive power and voting power over 332,345 shares, and no power to
vote or direct the voting of 43,200 shares, beneficially owned by Fidelity
International Limited. Strategic Advisers, Inc., a wholly-owned subsidiary
of FMR Corp. and an investment adviser registered under Section 203 of the

Investment Advisers Act provides investment advisory services to
individuals. It does not have sole power to vote or direct the voting of
shares of certain securities held for clients and has sole dispositive
power over such securities. As such, FMR Corp.'s beneficial ownership may
include shares beneficially owned through Strategic Advisers, Inc., Edward
C. Johnson 3d and various members of his family own FMR Corp. voting stock.
These Johnson family members, through their ownership of voting stock and
the execution of a shareholders' voting agreement, may be deemed to form a
controlling group with respect to FMR Corp. The business address of each of
the foregoing is 82 Devonshire Street, Boston, Massachusetts 02109.

(4) According to a Schedule 13G filed on February 6, 2002, T. Rowe Price
Associates, Inc. ("Price Associates") is an investment advisor registered
under Section 203 of the Investment Advisors Act of 1940 and is deemed to
be the beneficial owner of 495,250 shares of Common Stock. Price
Associates, however, expressly disclaims that it is, in fact, the
beneficial owner of such shares. Price Associates has sole voting power
with respect to 131,500 of such shares, no shared voting power with respect
to such shares, and the sole dispositive power with respect to all 495,250
shares. The business address of Price Associates is 100 E. Pratt Street,
Baltimore, Maryland 21202.

(5) Includes 6,000 shares that may be acquired upon the exercise of options.

(6) 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 and 27,000 shares that may be acquired upon the exercise
of options.

(7) 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.

(8) Includes 12,000 shares that may be acquired upon the exercise of options.

(9) Includes 12,000 shares that may be acquired upon the exercise of options.

(10) Includes 37,000 shares that may be acquired upon the exercise of options.

(11) Includes 25,200 shares that may be acquired upon the exercise of options.

(12) Includes 16,300 shares that may be acquired upon the exercise of options.

(13) Represents amount of shares deemed to be beneficially owned either directly
or indirectly by all Directors and current executive officers as a group.

(14) Includes 147,500 shares that may be acquired upon the exercise of options.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers and Directors, and persons who own more than
ten percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission ("SEC"). Executive officers, Directors and greater than ten percent
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 fiscal year ended December 29, 2001, all Section 16(a)
filing requirements which are applicable to its executive officers, Directors
and greater than ten percent beneficial owners were accomplished.

PROPOSAL NUMBER TWO --
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

The firm of KPMG LLP served as independent auditors for the Company for the
fiscal year ended December 29, 2001. In addition to retaining KPMG LLP to audit
the consolidated financial statements of the Company and its subsidiaries, KPMG
LLP rendered other services to the Company in fiscal year 2001 and

with the exception of tax consulting may continue to do so in the future. The
aggregate fees billed for professional services by KPMG LLP in fiscal year 2001
for services consisted of the following:

AUDIT FEES: Fees for the audit of financial statements and quarterly
reviews, $482,000.

ALL OTHER FEES: Fees for assistance with tax compliance and tax audits
$155,815, fees for tax consulting $126,734 and fees for the audit of
employee benefit plans $15,000.

Pursuant to the recommendation of the Audit Committee, the Board has
appointed that firm to continue in its capacity as independent auditors of the
Company for fiscal year 2002, and has recommended that a resolution be presented
to shareholders at the 2002 Annual Meeting to ratify that appointment. A
representative of KPMG LLP will be present at the 2002 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 NUMBER THREE -- PROPOSAL TO APPROVE
THE LANDSTAR SYSTEM, INC. 2002 EMPLOYEE STOCK OPTION PLAN

To further its policy of encouraging the creation of long-term shareholder
value, the Board has adopted the Landstar System, Inc. 2002 Employee Stock
Option Plan (the "2002 Employee Stock Option Plan"), subject to stockholder
approval. The 2002 Employee Stock Option Plan will replace the Company's 1993
Employee Stock Option Plan which, by its terms, expires on January 18, 2003.

At the annual meeting, the shareholders are being asked to approve the 2002
Employee Stock Option Plan and the reservation of shares for issuance thereunder
for the purpose of qualifying such shares for special tax treatment under
Section 421 of the Internal Revenue Code of 1986, as amended (the "Code").

The proposed 2002 Employee Stock Option Plan is set forth in Exhibit A. A
summary of the 2002 Employee Stock Option Plan is set forth below and is
qualified in its entirety by reference to the full text of the 2002 Employee
Stock Option Plan.

SUMMARY OF THE 2002 EMPLOYEE STOCK OPTION PLAN

GENERAL. The purpose of the 2002 Employee Stock Option Plan is to foster
and promote the long-term financial success of the Company and to materially
increase shareholder value. Options to purchase shares of Common Stock may be
granted under the 2002 Employee Stock Option Plan, which may be either
"incentive stock options" within the meaning of Section 422 of the Code or
"nonstatutory stock options." The grant of options to a participant are
evidenced by a stock option agreement between the Company and the participant.

ADMINISTRATION. The 2002 Employee Stock Option Plan will be administered
by the Compensation Committee, which shall be comprised of two or more "outside
directors" within the meaning of Section 1.162-27(e) of the Treasury Regulations
issued pursuant to Section 162(m) of the Code.

ELIGIBILITY. Options may be granted under the 2002 Employee Stock Option
Plan to any officer or other key executive and management employee of the
Company or any of its subsidiaries. The Compensation Committee, in its
discretion, selects the officers or key executive or management employees to
whom options may be granted, the time or times at which such options are granted
and the number of shares subject to, and terms and conditions of, each grant. No
officer or key executive or management employee may receive grants under the
2002 Employee Stock Option Plan during any fiscal year of the Company which,
singly or in the aggregate, cover more than 50,000 shares of Common Stock.

SHARES SUBJECT TO THE 2002 EMPLOYEE STOCK OPTION PLAN. The number of
shares of Common Stock that may be issued under the 2002 Employee Stock Option
Plan may not exceed 800,000 shares, which may include authorized but unissued
shares or treasury shares. If there is a stock split, stock dividend,
recapitalization, or other relevant change affecting the Company's shares,
appropriate adjustments will be made 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 an option are cancelled,
terminated or otherwise settled without the issuance of shares, those shares
will again be available for inclusion in future option grants.

EXERCISE PRICE. All options granted under the 2002 Employee Stock Option
Plan will have an exercise price per share equal to the Fair Market Value (as
defined in the 2002 Employee Stock Option Plan) of one share of Common Stock on
the date of grant.

EXERCISABILITY; FORM OF CONSIDERATION. Options awarded to a participant
under the 2002 Employee Stock Option Plan will become exercisable at such times
and shall be subject to such restrictions and conditions including the
performance of a minimum period of service or the satisfaction of performance
goals, as the Compensation Committee may impose either at or after the time of
grant of such options, subject to the Compensation Committee's right to
accelerate the exercisability of such option in its discretion. The Compensation
Committee will establish procedures governing the exercise of options, which
will require that written notice of exercise be given and that the exercise
price be paid in full in cash or cash equivalents, including by personal check,
at the time of exercise. The Compensation Committee may, in its discretion,
permit a participant to make payment in shares of Common Stock already owned by
him or her, valued at its Fair Market Value on the date of exercise, as partial
or full payment of the exercise price.

OPTION TERM. If not previously exercised, each option will expire on the
tenth anniversary of the date of the grant thereof or, upon the earlier
termination of the participant's employment with the Company as described below.

NONTRANSFERABILITY OF OPTIONS. No options granted under the 2002 Employee
Stock Option Plan may be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated, other than by will or by the laws of descent and
distribution.

TERMINATION OF EMPLOYMENT. Unless otherwise determined by the Compensation
Committee at or after the time of grant, in the event a participant's employment
with the Company is terminated for any reason (other than due to the
participant's death, Disability, Retirement or by the Company for Cause (as each
such term is defined in the 2002 Employee Stock Option Plan) as described
below), any options granted to such participant that are exercisable at the date
of the participant's termination of employment shall be exercisable at any time
prior to the expiration of the term of such options or the thirtieth day
following the participant's termination of employment, whichever period is
shorter. Unless otherwise determined by the Compensation Committee at the time
of grant, in the event a participant's employment terminates by reason of death,
Disability or Retirement, any options granted to such participant which are then
outstanding (whether or not exercisable prior to the date of such termination)
may be exercised by the participant (or the participant's designated beneficiary
in the event of his or her death) at any time prior to the expiration of the
term of the options or within one (1) year (or such other period as the
Compensation Committee shall determine at the time of grant) following the
participant's termination of employment, whichever period is shorter. Unless
otherwise determined by the Compensation Committee at the time of grant, in the
event a participant's employment is terminated for Cause (as defined in the 2002
Employee Stock Option Plan), any options granted to such participant which are
then outstanding (whether or not exercisable prior to the date of such
termination) shall be forfeited.

CHANGE IN CONTROL PROVISIONS. In the event of a Change in Control (as
defined in the 2002 Employee Stock Option Plan), each option shall be, at the
discretion of the Compensation Committee, either cancelled in exchange for a
payment in cash of an amount equal to the excess of the Change in Control Price
(as defined in the 2002 Employee Stock Option Plan) over the exercise price for
such option, or fully exercisable regardless of the exercise schedule otherwise
applicable to such option.

However, no cancellation, acceleration of exercisability or vesting or cash
settlement or other payment shall occur with respect to any option if the
Compensation Committee reasonably determines in good faith prior to the
occurrence of a Change in Control that such option shall be honored or assumed,
or new rights substituted therefore (such honored, assumed or substituted award
hereinafter called an "Alternative Award"), by a participant's employer (or the
parent or a subsidiary of such employer) immediately following the Change in
Control, provided that any such Alternative Award must: (i) be based on stock
which is traded on an established securities market, or which will be so traded
within 60 days of the Change in Control; (ii) provide such participant (or each
participant in a class of participants) with rights and entitlements
substantially equivalent to or better than the rights, terms and conditions
applicable under such award, including, but not limited to, an identical or
better exercise or vesting schedule and identical or better timing
19

and methods of payment; (iii) have substantially equivalent economic value to
such award (determined at the time of the Change in Control); and (iv) have
terms and conditions which provide that in the event that the participant's
employment is involuntarily terminated or constructively terminated (as defined
in the 2002 Employee Stock Option Plan), any conditions on a participant's
rights under, or any restrictions on transfer or exercisability applicable to,
each such Alternative Award shall be waived or shall lapse, as the case may be.

AMENDMENT, MODIFICATION AND TERMINATION OF THE 2002 EMPLOYEE STOCK OPTION
PLAN. The Board may terminate or suspend the 2002 Employee Stock Option Plan at
any time, and from time to time may amend or modify the 2002 Employee Stock
Option Plan, provided that without the approval by a majority of the votes cast
at a meeting of shareholders at which a quorum representing a majority of the
shares of Common Stock is present in person or by proxy, no amendment or
modification to the 2002 Employee Stock Option Plan may (i) materially increase
the benefits accruing to participants under the 2002 Employee Stock Option Plan,
(ii) except as otherwise expressly provided in the "Adjustment in
Capitalization" provisions of the 2002 Employee Stock Option Plan, materially
increase the number of shares of Common Stock subject to options under the 2002
Employee Stock Option Plan or the number of options that may be granted to a
participant in a single calendar year under the 2002 Employee Stock Option Plan,
or (iii) materially modify the requirements for participation in the 2002
Employee Stock Option Plan. No amendment, modification, or termination of the
2002 Employee Stock Option Plan shall in any manner adversely affect any option
previously granted under the 2002 Employee Stock Option Plan, without the
consent of the participant. The 2002 Employee Stock Option Plan shall continue
in effect, unless sooner terminated by the Board, until the tenth anniversary of
the date on which it is adopted by the Board.

FEDERAL INCOME TAX ASPECTS

The following is a brief summary of the Federal income tax consequences of
options granted under the 2002 Employee Stock Option Plan based upon 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.

The grant of an incentive stock option or a nonqualified stock option would
not result in income for the participant or in a deduction for the Company.
Generally, upon exercise of an incentive stock option, the participant would not
recognize income if the participant (i) does not dispose of the shares within
two years after the date of grant or one year after the transfer of shares upon
exercise, and (ii) is an employee of the Company or a subsidiary thereof from
the date of grant and through and until three months before the exercise date.
If these requirements were satisfied, the basis of the shares upon later
disposition would be the exercise price. Any gain would be taxed to the
participant as long-term capital gain and the Company would not be entitled to a
deduction. Net capital gains on shares held more than 12 months may be taxed at
a maximum federal rate of 20% (lower rates may apply depending upon when the
stock is acquired and the applicable income tax bracket of the taxpayer).
Capital losses are generally allowed in full against capital gains and up to
$3,000 against other income. The excess of the market value on the exercise date
over the exercise price is an item of tax preference, potentially subject to the
alternative minimum tax.

If the grantee disposes of the shares prior to the expiration of either of
the holding periods, the grantee would recognize ordinary income and the Company
would be entitled to a deduction equal to the lesser of the fair market value of
the shares on the exercise date minus the exercise price or the amount realized
on disposition minus the option price. Any gain in excess of the ordinary income
portion would be taxable as long-term or short-term capital gain.

Generally, upon exercise of a non-qualified stock option, the participant
will realize ordinary income in an amount equal to the difference between the
price paid for the shares and the fair market value of the shares on the date of
exercise. The Company would be entitled to a tax deduction in the same amount.
Any appreciation (or depreciation) after date of exercise will be either
short-term or long-term capital gain or loss, depending upon the length of time
that the participant has held the shares.

NEW PLAN BENEFITS

Because benefits under the 2002 Employee Stock Option Plan will depend on
the Compensation Committee's actions and the fair market value of the Common
Stock at various future dates, it is not possible

to determine the benefits that would be received by participants in the 2002
Employee Stock Option Plan if such plan is approved by shareholders.

APPROVAL

To be approved, this proposal requires the affirmative vote of the holders
of a majority of the shares of Common Stock present in person or represented by
proxy at the 2002 Annual Meeting and entitled to vote thereon. Abstentions from
voting on this proposal will have the same effect as voting against this
proposal. Broker non-votes will have no effect on the outcome of this proposal.

It is intended that the shares represented by the accompanying form of
proxy will be voted at the 2002 Annual Meeting for the approval of the 2002
Employee Stock Option Plan, unless the proxy specifies otherwise.

THE BOARD RECOMMENDS A VOTE FOR THIS PROPOSAL

PROPOSAL NUMBER FOUR -- PROPOSAL TO APPROVE
THE LANDSTAR SYSTEM, INC. EXECUTIVE INCENTIVE COMPENSATION PLAN

INTRODUCTION

To further its policy of providing the Company's key employees the
opportunity to earn competitive levels of incentive compensation based primarily
on the performance of the Company, the Board has adopted the Landstar System,
Inc. Executive Incentive Compensation Plan (the "EICP"), effective January 1,
2002, but subject to the approval of the Company's shareholders. The EICP has
been designed to assure that any amounts paid to executive officers will not
fail to be deductible by the Company for federal income tax purposes because of
the limitations imposed by Section 162(m) of the Internal Revenue Code of 1986,
as amended ("Section 162(m)").

The proposed EICP is set forth in Exhibit B. A summary of the EICP is set
forth below and is qualified in its entirety by reference to the full text of
the EICP.

EXECUTIVE INCENTIVE COMPENSATION PLAN

ELIGIBILITY. The EICP authorizes the Compensation Committee of the Board
or any subcommittee thereof (the "Committee") to award annual incentive
compensation to officers and other key employees of the Company and its
subsidiaries, including all of the Company's executive officers. The number of
eligible participants in the EICP will vary from year to year at the discretion
of the Committee. It is expected that approximately 6 employees (including all
of the Company's current executive officers) will be eligible to receive
incentive compensation under the EICP in 2002.

PERFORMANCE CRITERIA. On or before April 1 of each year (or such other
date as may be required or permitted under Section 162(m)), the Committee will
establish performance objectives that must be attained in order for the Company
to pay bonuses under the EICP. The performance objectives will be based upon one
or more of the following criteria: (i) actual earnings per share on the Common
Stock, (ii) budgeted earnings per share on the Common Stock, (iii) the Company's
consolidated earnings before income taxes, (iv) the Company's consolidated
operating income, (v) individual subsidiary operating income, (vi) total return
to the Company's shareholders, assuming the reinvestment of dividends, and/or
(vii) return on shareholders' equity.

PAYMENT OF ANNUAL AWARDS. If any of the performance criteria established
by the Committee is satisfied, the Committee may award an annual bonus to an
eligible participant in an amount equal to a maximum of $2,000,000. The
Committee has the discretion to pay amounts which are less than the maximum
amount payable under the EICP based on individual performance or such other
criteria as the Committee shall deem relevant and may establish annually rules
or procedures that will limit the amounts payable to each participant to a level
which is below the maximum amount authorized. The Committee, in its discretion,
may pay up to 50% of a bonus award in Common Stock, the number of shares of
Common Stock so paid to be determined by dividing the dollar value of the
portion of the award to be paid in Common Stock by the Fair Market Value (as
defined in the EICP) of a share of Common Stock on the date of grant. In no
event shall the aggregate market value of the Common Stock awarded under the
EICP with respect to any calendar year

exceed $1,000,000. The distribution of Common Stock shall be subject to such
terms and conditions as the Committee shall determine, including such
requirements as continued services for the vesting of such award. A participant
who is not an employee of the Company or one of its subsidiaries on the last day
of the calendar year for which the award is payable shall receive a pro-rated
award, based on the full year's performance, unless the Committee determines
that the participant will not receive such an award.

Notwithstanding anything else in the EICP to the contrary, the Committee
shall also have the authority, in its discretion, (i) to pay annual bonuses for
any calendar year to eligible participants whose compensation is not subject to
the restrictions of Section 162(m) for that calendar year and (ii) to provide
for a minimum bonus amount for any calendar year in connection with the hiring
of any person who is or becomes subject to the restrictions of Section 162(m).

ADMINISTRATION. The Committee, which shall at all times be comprised of at
least two directors, each of whom is an "outside director" for purposes of
Section 162(m), shall administer and interpret the EICP. In all events, the EICP
shall be interpreted in a manner which is consistent with the requirements to
qualify the payments made thereunder as performance based compensation under
Section 162(m). Subject to the express provisions of the EICP, the Committee
shall have the authority to select officers and key employees eligible to
participate in the EICP, to establish the performance objectives for each
calendar year, and to reduce the amount that may be paid to any participant from
the maximum amount otherwise payable pursuant to the EICP. Prior to making any
payment to any executive officer pursuant to the EICP, the Committee shall be
required to certify that the performance objectives have been attained and the
amount payable to such executive officer.

AMENDMENT AND TERMINATION. The Board or the Committee may at any time
amend, terminate or suspend the EICP, except that (i) no such action shall,
without the consent of such participant, adversely affect the rights of any
participant with respect to any award with respect to any calendar year which
already commenced and (ii) no such action shall be effective without approval by
shareholders of the Company to the extent that such approval is required to
continue to qualify the payments under the EICP for treatment as performance
based compensation under Section 162(m). Notwithstanding anything else in the
EICP to the contrary, the EICP will not be effective with respect to calendar
years ending after December 31, 2006, unless otherwise extended by action of the
Board.

FEDERAL INCOME TAX CONSEQUENCES

Cash payments made under the EICP will be taxable to the recipients thereof
when paid and the Company will generally be entitled to a federal income tax
deduction in the calendar year for which the amount is paid. Any portion of a
bonus award which is to be paid in Common Stock will be taxable to the recipient
in an amount equal to the fair market value of such Common Stock on the date
when such Common Stock is no longer subject to any restrictions. The Company
will generally be entitled to a deduction in the calendar year in which the
participant recognizes such income.

NEW PLAN AWARDS

Because payment of any award will be contingent on the attainment of
performance objectives established for such year by the Committee, the amounts
payable to eligible participants under the EICP for any calendar year during
which the EICP is in effect cannot be determined. The Company expects that in
operation the EICP, as it relates to the Company's current executive officers,
will produce results substantially similar to the predecessor plan that was
adopted by shareholders in 1995.

APPROVAL

THE BOARD RECOMMENDS A VOTE FOR THIS PROPOSAL.

SHAREHOLDER PROPOSALS

In accordance with regulations issued by the Securities and Exchange
Commission, shareholder proposals intended for presentation at the 2003 Annual
Meeting of Shareholders must be received by the Secretary of the Company no
later than November 20, 2002, 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 2003 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
no later than 35 days prior to the 2003 Annual Meeting of Shareholders. For any
proposal that is not submitted for inclusion in the next year's Proxy Statement,
but is instead sought to be presented directly at the 2003 Annual Meeting,
Securities and Exchange Commission rules permit management to vote proxies in
its discretion if the Company: (1) receives notice of the proposal before the
close of business on March 31, 2003, and advises share owners in the 2003 Proxy
Statement about the nature of the matter and how management intends to vote on
such matter; or (2) does not receive notice of the proposal prior to the close
of business on March 31, 2003.

In addition, in accordance with the Company's Bylaws, shareholder proposals
intended for presentation at the 2002 Annual Meeting of Shareholders that are
not intended for inclusion in the Company's Proxy Statement must be received by
the Company not later than April 10, 2002. For any proposal that is not
submitted for inclusion in this year's Proxy Statement, but is instead sought to
be presented directly at the 2002 Annual Meeting, Securities and Exchange
Commission rules permit management to vote proxies in its discretion if the
Company: (1) receives notice of the proposal before the close of business on
March 31, 2002, and advises share owners in this year's Proxy Statement about
the nature of the matter and how management intends to vote on such matter; or
(2) does not receive notice of the proposal prior to the close of business on
March 31, 2002.

Proposals should be mailed via certified mail and addressed to Robert C.
LaRose, Secretary, Landstar System, Inc., 13410 Sutton Park Drive South,
Jacksonville, Florida 32224.

DELIVERY OF DOCUMENTS TO SECURITY HOLDERS SHARING AN ADDRESS

The Company and its intermediaries shall provide one copy of a proxy
statement or annual report to two or more security holders who share an address
in accordance with Rule 14a-3(e)(1) of the Securities Exchange Act where consent
of such security holders has been properly obtained and where neither the
Company nor the intermediary has received contrary instructions from one or more
of such security holders. The Company undertakes to deliver promptly upon
written or oral request a separate copy of a proxy statement or annual report,
as applicable, to any security holder at a shared address to which a single copy
of the documents was delivered. A security holder can notify the registrant that
the security holder wishes to receive a separate copy of a proxy statement or
annual report by contacting the Company at the following phone number and/or
mailing address:

Landstar System, Inc.
Investor Relations
13410 Sutton Park Drive South
Jacksonville, FL 32224
Phone: 904-398-9400

Security holders sharing an address can also request delivery of a single
copy of proxy statement or annual report if they are receiving multiple copies
of proxy statements or annual reports by contacting the Company at the preceding
phone number and/or mailing address.

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.

PLEASE COMPLETE, SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD PROMPTLY

By Order of the Board of Directors

/s/ Robert C. LaRose

Robert C. LaRose
Vice President,
Chief Financial Officer
and Secretary

13410 Sutton Park Drive South
Jacksonville, FL 32224

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 29, 2001, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
ANY SUCH REQUEST SHOULD BE DIRECTED TO LANDSTAR SYSTEM, INC., ATTENTION: HENRY
H. GERKENS, INVESTOR RELATIONS, 13410 SUTTON PARK DRIVE SOUTH, JACKSONVILLE,
FLORIDA 32224.

EXHIBIT A

LANDSTAR SYSTEM, INC.
2002 EMPLOYEE STOCK OPTION PLAN
SECTION 1.
PURPOSE

The purpose of the Plan is to foster and promote the long-term financial
success of the Company and materially increase shareholder value by (a)
motivating superior performance by means of performance-related incentives, (b)
encouraging and providing for the acquisition of an ownership interest in the
Company by Employees, and (c) enabling the Company to attract and retain the
services of an outstanding management team upon whose judgment, interest, and
special effort the successful conduct of its operations is largely dependent.

SECTION 2.
DEFINITIONS

2.1. Definitions. Whenever used herein, the following terms shall have
the respective meanings set forth below:

(a) "Act" means the Securities Exchange Act of 1934, as amended.

(b) "Board" means the Board of Directors of the Company.

(c) "Cause" means (i) the willful failure by the Participant to
perform substantially his duties as an Employee of the Company (other than
due to physical or mental illness) after reasonable notice to the
Participant of such failure, (ii) the Participant's engaging in serious
misconduct that is injurious to the Company or any Subsidiary, (iii) the
Participant's having been convicted of, or entered a plea of nolo
contendere to, a crime that constitutes a felony or (iv) the breach by the
Participant of any material written policy of the Company or any
Subsidiary, or any written covenant or agreement with the Company or any
Subsidiary not to disclose any information pertaining to the Company or any
Subsidiary or not to compete or interfere with the Company or any
Subsidiary.

(d) "Change in Control" means the occurrence of any of the following
events:

(i) any "person" including a "group" (as such terms are used in
Sections 13(d) and 14(d)(2) of the Act, but excluding the Company, any
of its Subsidiaries, 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 securities of
the Company representing the greater of 35% or more of the combined
voting power of the Company's then outstanding securities; or

(ii) the consummation of a (a) 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 stockholders 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) sale or
other disposition in a transaction or a series of related transactions
of all or substantially all of the assets of the Company; provided that
if a Participant's employment with the Company is terminated between the
date the stockholders of the Company approve a transaction described in
the preceding clauses (a) or (b) and the date of the consummation of
such transaction, such Participant shall be entitled to the provisions
of Section 8 as if such Participant had remained continuously employed
through the date of such consummation; or

(iii) the purchase of Stock 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, an employee benefit plan of the Company or any of
its Subsidiaries, for 35% or more of the Stock of the Company.

(e) "Change in Control Price" means the highest price per share of
Stock offered in conjunction with any transaction resulting in a Change in
Control (as determined in good faith by the Committee if any part of the
offered price is payable other than in cash).

(f) "Code" means the Internal Revenue Code of 1986, as amended.

(g) "Committee" means the Compensation Committee of the Board, which
shall consist of two or more "outside directors" within the meaning of
Section 1-162-27(e) of the Treasury Regulations issued pursuant to Section
162(m) of the Code.

(h) "Company" means Landstar System, Inc., a Delaware corporation, and
any successor thereto.

(i) "Disability" means total disability as determined in accordance
with the terms of the long-term disability plan of the Company or any of
its Subsidiaries in which the Participant is eligible to participate.

(j) "Employee" means any officer or other key executive and management
employee of the Company or any of its Subsidiaries.

(k) "Fair Market Value" means, on any date, the average of the bid and
asked for price of a share of Stock as reported on the National Association
of Securities Dealers Automated Quotation/National Market System (or on
such other recognized market or quotation system on which the trading
prices of the Stock are traded or quoted at the relevant time) on such
date. In the event that there are no Stock transactions reported on
NASDAQ/NMS (or such other system) on such date, Fair Market Value shall
mean the closing price on the immediately preceding date on which Stock
transactions were so reported.

(l) "Option" means the right to purchase Stock at a stated price for a
specified period of time. For purposes of the Plan, an Option may be either
(i) an "Incentive Stock Option" within the meaning of Section 422 of the
Code or (ii) a "Nonstatutory Stock Option."

(m) "Participant" means any Employee designated by the Committee to
participate in the Plan.

(n) "Plan" means the Landstar System, Inc. 2002 Employee Stock Option
Plan, as in effect from time to time.

(o) "Retirement" means termination of a Participant's employment on or
after the date the Participant attains age 62.

(p) "Stock" means the common stock of the Company, par value $0.01 per
share.

(q) "Subsidiary" means any corporation or partnership in which the
Company owns, directly or indirectly, 50% or more of the total combined
voting power of all classes of stock of such corporation or of the capital
interest or profits interest of such partnership.

2.2. Gender and Number. Except when otherwise indicated by the context,
words in the masculine gender used in the Plan shall include the feminine
gender, the singular shall include the plural, and the plural shall include the
singular.

SECTION 3.
ELIGIBILITY AND PARTICIPATION

Participants in the Plan shall be those Employees selected by the Committee
to participate in the Plan. The selection of an Employee as a Participant shall
neither entitle such Employee to, nor disqualify such Employee from,
participation in any other award or incentive plan.

SECTION 4.
POWERS OF THE COMMITTEE

4.1. Power to Grant. The Committee shall determine the Participants to
whom Options shall be granted and the terms and conditions of any and all such
Options. The Chairman of the Board may suggest to

the Committee the Participants who should receive Options under the Plan. The
terms and conditions of each Option shall be determined by the Committee at the
time of grant, and such terms and conditions shall not be subsequently changed
in a manner which would be adverse to participants without the consent of the
Participant to whom such Option has been granted. The Committee may establish
different terms and conditions for different Participants receiving Options and
for the same Participant for each Option such Participant may receive, whether
or not granted at different times.

4.2. Administration. The Committee shall be responsible for the
administration of the Plan. The Committee, by majority action thereof, is
authorized to prescribe, amend and rescind rules and regulations relating to the
Plan, to provide for conditions deemed necessary or advisable to protect the
interests of the Company, and to make all other determinations necessary or
advisable for the administration and interpretation of the Plan in order to
carry out its provisions and purposes. Determinations, interpretations, or other
actions made or taken by the Committee pursuant to the provisions of the Plan
shall be final, binding, and conclusive for all purposes and upon all persons.

SECTION 5.
STOCK SUBJECT TO PLAN

5.1. Number. Subject to the provisions of Section 5.3, the number of
shares of Stock subject to Options under the Plan may not exceed 800,000 shares
of Stock. The shares to be delivered under the Plan may consist, in whole or in
part, of treasury Stock or authorized but unissued Stock, not reserved for any
other purpose.

5.2. Cancelled, Terminated, or Forfeited Options. Any shares of Stock
subject to an Option which for any reason is cancelled, terminated or otherwise
settled without the issuance of any Stock shall again be available under the
Plan.

5.3. Adjustment in Capitalization. In the event of any Stock dividend or
Stock split, recapitalization (including, without limitation, the payment of an
extraordinary dividend), merger, consolidation, combination, spin-off,
distribution of assets to stockholders, exchange of shares, or other similar
corporate change, the aggregate number of shares of Stock available for Options
under Section 5.1 or subject to outstanding Options, the limitations under
Section 6.1 on the number of Options that may be granted to any Participant
during any fiscal year of the Company, and the respective prices and/or
performance criteria applicable to outstanding Options may be appropriately
adjusted by the Committee, whose determination shall be conclusive.

SECTION 6.
STOCK OPTIONS

6.1. Grant of Options. Options may be granted to Participants at such
time or times as shall be determined by the Committee. Options granted under the
Plan may be of two types: (i) Incentive Stock Options and (ii) Nonstatutory
Stock Options. The Committee shall have complete discretion in determining the
number of Options, if any, to be granted to a Participant, provided that no
Participant shall receive more than 50,000 Options during any fiscal year of the
Company. Each Option shall be evidenced by an Option agreement that shall
specify the type of Option granted, the exercise price, the duration of the
Option, the number of shares of Stock to which the Option pertains, and such
other terms and conditions not inconsistent with the Plan as the Committee shall
determine.

6.2. Option Price. Nonstatutory Stock Options and Incentive Stock Options
granted pursuant to the Plan shall have an exercise price which is not less than
the Fair Market Value on the date the Option is granted.

6.3. Exercise of Options. Options awarded to a Participant under the Plan
shall be exercisable at such times and shall be subject to such restrictions and
conditions including the performance of a minimum period of service or the
satisfaction of performance goals, as the Committee may impose either at or
after the time of grant of such Options, subject to the Committee's right to
accelerate the exercisability of such Option in its

discretion. Notwithstanding the foregoing, no Option shall be exercisable more
than 10 years after the date on which it is granted.

6.4. Payment. The Committee shall establish procedures governing the
exercise of Options, which shall require that written notice of exercise be
given and that the Option price be paid in full in cash or cash equivalents,
including by personal check, at the time of exercise. The Committee may, in its
discretion, permit a Participant to make payment in Stock already owned by him
or her, valued at its Fair Market Value on the date of exercise, as partial or
full payment of the exercise price. As soon as practicable after receipt of a
written exercise notice and full payment of the exercise price, the Company
shall deliver to the Participant a certificate or certificates representing the
acquired shares of Stock.

6.5. Incentive Stock Options. Notwithstanding anything in the Plan to the
contrary, no term of the Plan relating to Incentive Stock Options shall be
interpreted, amended or altered, nor shall any discretion or authority granted
under the Plan be so exercised, so as to disqualify the Plan under Section 422
of the Code, or, without the consent of any Participant affected thereby, to
cause any Incentive Stock Option previously granted to fail to qualify for the
Federal income tax treatment afforded under Section 421 of the Code.

SECTION 7.
TERMINATION OF EMPLOYMENT

7.1. Termination of Employment Due to Retirement. Unless otherwise
determined by the Committee at the time of grant, in the event a Participant's
employment terminates by reason of Retirement, any Options granted to such
Participant which are then outstanding (whether or not exercisable prior to the
date of such termination) may be exercised at any time prior to the expiration
of the term of the Options or within one (1) year (or such other period as the
Committee shall determine at the time of grant) following the Participant's
termination of employment, whichever period is shorter.

7.2. Termination of Employment Due to Death or Disability. Unless
otherwise determined by the Committee at the time of grant, in the event a
Participant's employment terminates by reason of death or Disability, any
Options granted to such Participant which are then outstanding (whether or not
exercisable prior to the date of such termination) may be exercised by the
Participant or the Participant's designated beneficiary, and if none is named,
in accordance with Section 10.2, at any time prior to the expiration date of the
term of the options or within one (1) year (or such other period as the
Committee shall determine at the time of grant) following the Participant's
termination of employment, whichever period is shorter.

7.3. Termination of Employment For Cause. Unless otherwise determined by
the Committee at the time of grant, in the event a Participant's employment is
terminated for Cause, any Options granted to such Participant which are then
outstanding (whether or not exercisable prior to the date of such termination)
shall be forfeited.

7.4. Termination of Employment for Any Other Reason. Unless otherwise
determined by the Committee at or after the time of grant, in the event the
employment of the Participant shall terminate for any reason other than one
described in Section 7.1, 7.2 or 7.3, any Options granted to such Participant
which are exercisable at the date of the Participant's termination of employment
shall be exercisable at any time prior to the expiration of the term of such
Options or the thirtieth day following the Participant's termination of
employment, whichever period is shorter.

SECTION 8.
CHANGE IN CONTROL

8.1. Accelerated Vesting and Payment. Subject to the provisions of
Section 8.2 below, in the event of a Change in Control, each Option shall be, at
the discretion of the Committee, either cancelled in exchange for a payment in
cash of an amount equal to the excess of the Change in Control Price over the
exercise price for such Option, or fully exercisable regardless of the exercise
schedule otherwise applicable to such Option.

8.2. Alternative Awards. Notwithstanding Section 8.1, no cancellation,
acceleration of exercisability or vesting or cash settlement or other payment
shall occur with respect to any Option if the Committee reasonably determines in
good faith prior to the occurrence of a Change in Control that such Option shall
be honored or assumed, or new rights substituted therefore (such honored,
assumed or substituted award hereinafter called an "Alternative Award"), by a
Participant's employer (or the parent or a subsidiary of such employer)
immediately following the Change in Control, provided that any such Alternative
Award must:

(i) be based on stock which is traded on an established securities
market, or which will be so traded within 60 days of the Change in Control;

(ii) provide such Participant (or each Participant in a class of
Participants) with rights and entitlements substantially equivalent to or
better than the rights, terms and conditions applicable under such Award,
including, but not limited to, an identical or better exercise or vesting
schedule and identical or better timing and methods of payment;

(iii) have substantially equivalent economic value to such Award
(determined at the time of the Change in Control);

(iv) have terms and conditions which provide that in the event that
the Participant's employment is involuntarily terminated or constructively
terminated, any conditions on a Participant's rights under, or any
restrictions on transfer or exercisability applicable to, each such
Alternative Award shall be waived or shall lapse, as the case may be.

For this purpose, a constructive termination shall mean a termination by a
Participant following a material reduction in the Participant's compensation or
a material reduction in the Participant's responsibilities, in each case without
the Participant's written consent.

SECTION 9.
AMENDMENT, MODIFICATION AND TERMINATION OF PLAN

The Board may at any time terminate or suspend the Plan, and from time to
time may amend or modify the Plan, provided that without the approval by a
majority of the votes cast at a meeting of shareholders at which a quorum
representing a majority of the shares of Stock is present in person or by proxy,
no amendment or modification to the Plan may (i) materially increase the
benefits accruing to participants under the Plan, (ii) except as otherwise
expressly provided in Section 5.3, materially increase the number of shares of
Stock subject to Options under the Plan or the number of Options that may be
granted to a participant in a single calendar year under the Plan, or (iii)
materially modify the requirements for participation in the Plan. No amendment,
modification, or termination of the Plan shall in any manner adversely affect
any Option theretofore granted under the Plan, without the consent of the
Participant.

SECTION 10.
MISCELLANEOUS PROVISIONS

10.1. Nontransferability of Options. No Options granted under the Plan
may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution. All
rights with respect to Options granted to a Participant under the Plan shall be
exercisable during his lifetime only by such Participant.

10.2. Beneficiary Designation. Each Participant under the Plan may from
time to time name any beneficiary or beneficiaries (who may be named
contingently or successively) to whom any benefit under the Plan is to be paid
or by whom any right under the Plan is to be exercised in case of his death.
Each designation will revoke all prior designations by the same Participant,
shall be in a form prescribed by the Committee, and will be effective only when
filed by the Participant in writing with the Committee during his lifetime. In
the absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to or exercised by the Participant's surviving
spouse, if any, or otherwise to or by his estate.

10.3. No Guarantee of Employment or Participation. Nothing in the Plan
shall interfere with or limit in any way the right of the Company or any
Subsidiary to terminate any Participant's employment at any time, nor confer
upon any Participant any right to continue in the employ of the Company or any
Subsidiary or

affiliate. No Employee shall have a right to be selected as a Participant, or,
having been so selected, to receive any future Options.

10.4. Tax Withholding. The Company shall have the power to withhold, or
require a Participant to remit to the Company, an amount sufficient to satisfy
federal, state and local withholding tax requirements on any Option under the
Plan, and the Company may defer payment of cash or issuance of Stock until such
requirements are satisfied.

10.5. Indemnification. Each person who is or shall have been a member of
the Committee or of the Board shall be indemnified and held harmless by the
Company against and from any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by him in connection with or resulting from
any claim, action, suit, or proceeding to which he may be made a party or in
which he may be involved by reason of any action taken or failure to act under
the Plan and against and from any and all amounts paid by him in settlement
thereof, with the Company's approval, or paid by him in satisfaction of any
judgment in any such action, suit, or proceeding against him, provided he shall
give the Company an opportunity, at its own expense, to handle and defend the
same before he undertakes to handle and defend it on his own behalf. The
foregoing right of indemnification shall not be exclusive and shall be
independent of any other rights of indemnification to which such persons may be
entitled under the Company's Articles of Incorporation or Bylaws, by contract,
as a matter of law, or otherwise.

10.6. No Limitation on Compensation. Nothing in the Plan shall be
construed to limit the right of the Company to establish other plans or to pay
compensation to its employees in cash or property, in a manner which is not
expressly authorized under the Plan.

10.7. Requirements of Law. The granting of Options and the issuance of
shares of Stock shall be subject to all applicable laws, rules and regulations,
and to such approvals by any governmental agencies or national securities
exchanges as may be required.

10.8. Term of Plan. The Plan shall be effective upon its adoption by the
Board and approval by a majority of the shareholders of the Company. The Plan
shall continue in effect, unless sooner terminated pursuant to Section 9, until
the tenth anniversary of the date on which it is adopted by the Board.

10.9. Governing Law. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of Delaware.

10.10. No Impact On Benefits. Options granted under the Plan are not
compensation for purposes of calculating an Employee's rights under any employee
benefit plan.

10.11. Freedom of Action. Subject to Section 9, nothing in the Plan or
any Option agreement shall be construed as limiting or preventing the Company or
any subsidiary thereof from taking any action with respect to the operation or
conduct of its business that it deems appropriate or in its best interest.

10.12. Headings and Captions. The headings and captions herein are
provided for reference and convenience only, shall not be considered part of the
Plan and shall not be employed in the construction of the Plan.

10.13. No Rights as Stockholder. No Participant shall have any voting or
other rights as a stockholder of the Company with respect to any Stock covered
by any Option until the issuance of a certificate or certificates to the
Participant for such Stock. No adjustment shall be made for dividends or other
rights for which the record date is prior to the issuance of such certificate or
certificates.

EXHIBIT B

LANDSTAR SYSTEM, INC.
EXECUTIVE INCENTIVE COMPENSATION PLAN
(EFFECTIVE AS OF JANUARY 1, 2002)

1. PURPOSE.

The purposes of the Plan are to enable the Company and its Subsidiaries to
attract, retain, motivate and reward the best qualified executive officers and
key employees by providing them with the opportunity to earn competitive
compensation directly linked to the Company's performance. The Plan is designed
to assure that amounts paid to certain executive officers of the Company will
not fail to be deductible by the Company for Federal income tax purposes because
of the limitations imposed by Section 162(m).

2. DEFINITIONS.

Unless the context requires otherwise, the following words as used in the
Plan shall have the meanings ascribed to each below, it being understood that
masculine, feminine and neuter pronouns are used interchangeably and that each
comprehends the others.

(a) "Board" shall mean the Board of Directors of the Company.

(b) "Committee" shall mean the Compensation Committee of the Board (or such
other committee of the Board that the Board shall designate from time to time)
or any subcommittee thereof comprised of two or more directors each of whom is
an "outside director" within the meaning of Section 162(m).

(c) "Common Stock" shall mean the common stock of the Company, par value
$.01, any common stock into which such common stock may be changed, and any
common stock resulting from any reclassification of such common stock.

(d) "Company" shall mean Landstar System, Inc.

(e) "Covered Employee" shall have the meaning set forth in Section 162(m).

(f) "Fair Market Value" shall mean, on any date, the average of the bid and
asked for price of a share of Common Stock as reported on the National
Association of Securities Dealers Automated Quotation/National Market System
("NASDAQ/NMS") (or on such other recognized market or quotation system on which
the trading prices of the Common Stock are traded or quoted at the relevant
time) on such date. In the event that there are no Common Stock transactions
reported on NASDAQ/NMS (or such other system) on such date, Fair Market Value
shall mean the closing price on the immediately preceding date on which Common
Stock transactions were so reported.

(g) "Grant Date" shall mean, with respect to any shares of Common Stock
awarded pursuant to the Plan, the date on which the Committee determines the
portion, if any, of a Participant's bonus which is payable in Common Stock.

(h) "Participant" shall mean (i) each executive officer of the Company and
(ii) each other key employee of the Company or a Subsidiary who the Committee
designates as a participant under the Plan.

(i) "Plan" shall mean the Landstar System, Inc. Executive Incentive
Compensation Plan, as set forth herein and as may be amended from time to time.

(j) "Section 162(m)" shall mean Section 162(m) of the Internal Revenue Code
of 1986, as amended, and any regulations promulgated thereunder (including any
proposed regulations).

(k) "Subsidiary" shall mean any corporation in which the Company owns,
directly or indirectly, stock representing more than 50% of the voting power of
all classes of stock entitled to vote.

3. ADMINISTRATION.

The Committee shall administer and interpret the Plan, provided that, in no
event, shall the Plan be interpreted in a manner which would cause any amount
payable under the Plan to any Covered Employee to fail to qualify as
performance-based compensation under Section 162(m). The Committee shall
establish the performance objectives for any calendar year in accordance with
Section 4 and certify whether such performance objectives have been obtained.
Any determination made by the Committee under the Plan shall be final and
conclusive. The Committee may employ such legal counsel, consultants and agents
(including counsel or agents who are employees of the Company or a Subsidiary)
as it may deem desirable for the administration of the Plan and may rely upon
any opinion received from any such counsel or consultant or agent and any
computation received from such consultant or agent. All expenses incurred in the
administration of the Plan, including, without limitation, for the engagement of
any counsel, consultant or agent, shall be paid by the Company. No member or
former member of the Board or the Committee shall be liable for any act,
omission, interpretation, construction or determination made in connection with
the Plan other than as a result of such individual's willful misconduct.

4. BONUSES.

(a) Performance Criteria. On or before April 1 of each year (or such other
date as may be required or permitted under Section 162(m)), the Committee shall
establish the performance objective or objectives that must be satisfied in
order for a Participant to receive a bonus for such year. Any such performance
objectives will be based upon the relative or comparative achievement of one or
more of the following criteria, as determined by the Committee: (i) actual
earnings per share on the Common Stock; (ii) budgeted earnings per share on the
Common Stock; (iii) the Company's consolidated earnings before income taxes;
(iv) the Company's consolidated operating income; (v) individual Subsidiary's
operating income; (vi) total return to the Company's shareholders, assuming the
reinvestment of dividends; and (vii) return on shareholders equity.

(b) Maximum Amount Payable. If the Committee certifies in writing that any
of the performance objectives established for the relevant year under Section
4(a) has been satisfied, each Participant who is employed by the Company or one
of its Subsidiaries on the last day of the calendar year for which the bonus is
payable shall be entitled to receive an annual bonus equal to a maximum of
$2,000,000. Unless the Committee shall otherwise determine, if a Participant's
employment terminates for any reason (including, without limitation, his death,
disability or retirement under the terms of any retirement plan maintained by
the Company or a Subsidiary) prior to the last day of the calendar year for
which the bonus is payable, such Participant shall receive an annual bonus equal
to the amount the Participant would have received as an annual bonus award if
such Participant had remained an employee through the end of the year multiplied
by a fraction, the numerator of which is the number of days that elapsed during
the calendar year in which the termination occurs prior to and including the
date of the Participant's termination of employment and the denominator of which
is 365.

(c) Negative Discretion. Notwithstanding anything else contained in
Section 4(b) to the contrary, the Committee shall have the right, in its
absolute discretion, (i) to reduce or eliminate the amount otherwise payable to
any Participant under Section 4(b) based on individual performance or any other
factors that the Committee, in its discretion, shall deem appropriate and (ii)
to establish rules or procedures that have the effect of limiting the amount
payable to each Participant to an amount that is less than the maximum amount
otherwise authorized under Section 4(b).

(d) Affirmative Discretion. Notwithstanding any other provision in the
Plan to the contrary, (i) the Committee shall have the right, in its discretion,
to pay to any Participant who is not a Covered Employee an annual bonus for such
year in an amount up to the maximum bonus payable under Section 4(b), based on
individual performance or any other criteria that the Committee deems
appropriate and (ii) in connection with the hiring of any person who is or
becomes a Covered Employee, the Committee may provide for a minimum bonus amount
in any calendar year, regardless of whether performance objectives are attained.

(e) Awards of Common Stock. The Committee in its discretion may determine
that up to 50% of a Participant's bonus shall be payable in Common Stock. The
number of shares of Common Stock to be
32

awarded shall be determined by dividing the dollar value of the portion of a
Participant's bonus which is payable in Common Stock by the Fair Market Value of
a share of Common Stock on the Grant Date, provided, however, that in no event
shall the aggregate Fair Market Value of Common Stock awarded under the Plan
with respect to any calendar year exceed $1,000,000. The distribution of Common
Stock shall be subject to such terms and conditions as the Committee shall
determine, including such requirements as continued services for the vesting of
such award.

5. PAYMENT.

Except as may be determined pursuant to the terms of Section 4(e) or as
otherwise provided hereunder, payment of any bonus amount determined under
Section 4 shall be made to each Participant as soon as practicable after the
Committee certifies that one or more of the applicable performance objectives
have been attained (or, in the case of any bonus payable under the provisions of
Section 4(d), after the Committee determines the amount of any such bonus).

6. GENERAL PROVISIONS.

(a) Effectiveness of the Plan. Subject to the approval by the holders of
the Common Stock at the 2002 Annual Meeting of Shareholders, the Plan shall be
effective with respect to calendar years beginning on or after January 1, 2002
and ending on or before December 31, 2006, unless the term hereof is extended by
action of the Board.

(b) Amendment and Termination. Notwithstanding Section 6(a), the Board or
the Committee may at any time amend, suspend, discontinue or terminate the Plan;
provided, however, that no such amendment, suspension, discontinuance or
termination shall adversely affect the rights of any Participant in respect of
any calendar year which has already commenced and no such action shall be
effective without approval by the shareholders of the Company to the extent
necessary to continue to qualify the amounts payable hereunder to Covered
Employees as performance-based compensation under Section 162(m).

(c) Designation of Beneficiary. Each Participant may designate a
beneficiary or beneficiaries (which beneficiary may be an entity other than a
natural person) to receive any payments which may be made following the
Participant's death. Such designation may be changed or canceled at any time
without the consent of any such beneficiary. Any such designation, change or
cancellation must be made in a form approved by the Committee and shall not be
effective until received by the Committee. If no beneficiary has been named, or
the designated beneficiary or beneficiaries shall have predeceased the
Participant, the beneficiary shall be the Participant's spouse or, if no spouse
survives the Participant, the Participant's estate. If a Participant designates
more than one beneficiary, the rights of such beneficiaries shall be payable in
equal shares, unless the Participant has designated otherwise.

(d) No Right of Continued Employment. Nothing in this Plan shall be
construed as conferring upon any Participant any right to continue in the
employment of the Company or any of its Subsidiaries.

(e) No Limitation on Corporate Actions. Nothing contained in the Plan
shall be construed to prevent the Company or any Subsidiary from taking any
corporate action which is deemed by it to be appropriate or in its best
interest, whether or not such action would have an adverse effect on any awards
made under the Plan. No employee, beneficiary or other person shall have any
claim against the Company or any Subsidiary as a result of any such action.

(f) Nonalienation of Benefits. Except as expressly provided herein, no
Participant or beneficiary shall have the power or right to transfer,
anticipate, or otherwise encumber the Participant's interest under the Plan. The
Company's obligations under this Plan are not assignable or transferable except
to (i) a corporation which acquires all or substantially all of the Company's
assets or (ii) any corporation into which the Company may be merged or
consolidated. The provisions of the Plan shall inure to the benefit of each
Participant and the Participant's beneficiaries, heirs, executors,
administrators or successors in interest.

(g) Withholding. Any amount payable to a Participant or a beneficiary
under this Plan shall be subject to any applicable federal, state and local
income and employment taxes and any other amounts that the Company or a
Subsidiary is required at law to deduct and withhold from such payment.

(h) Severability. If any provision of this Plan is held unenforceable, the
remainder of the Plan shall continue in full force and effect without regard to
such unenforceable provision and shall be applied as though the unenforceable
provision were not contained in the Plan.

(i) Governing Law. The Plan shall be construed in accordance with and
governed by the laws of the State of Delaware, without reference to the
principles of conflict of laws.

(j) Headings. Headings are inserted in this Plan for convenience of
reference only and are to be ignored in a construction of the provisions of the
Plan.