Exhibit 10.14
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EMPLOYMENT AGREEMENT
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(Amended and Restated January 1, 2001)
THIS AGREEMENT, made and entered into as of this 1st day of January, 2001,
by and between Kansas City Southern Industries, Inc., a Delaware corporation
("KCSI") and Xxxxxx X. Xxxxx, an individual ("Executive").
WHEREAS, KCSI, Kansas City Southern Lines, Inc., a Missouri corporation
("KCSL") and Executive have heretofore entered into an Employment Agreement, as
amended and restated as of January 1, 1999 (the "Prior Agreement") pertaining to
the employment of Executive by KCSL; and
WHEREAS, KCSL was administratively merged into KCSI as of December 31,
2000, and thereby ceased existence as a separate entity; and
WHEREAS, KCSI and Executive desire for KCSI to employ Executive on the
terms and conditions set forth in this Agreement, which shall supercede the
Prior Agreement, and to provide an incentive to Executive to remain in the
employ of KCSI hereafter, particularly in the event of any change in control (as
herein defined) of KCSI or The Kansas City Southern Railway Company ("Railway"),
thereby establishing and preserving continuity of management of KCSI.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, it is agreed by and between KCSI and Executive as follows:
1. Employment. KCSI hereby employs Executive as its Senior Vice President
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and Chief Financial Officer to serve at the pleasure of the Board of Directors
of KCSI (the "KCSI Board") and to have such duties, powers and responsibilities
as may be prescribed or delegated
from time to time by the President or other officer to whom Executive reports,
subject to the powers vested in the KCSI Board and in the stockholders of KCSI.
Executive shall faithfully perform his duties under this Agreement to the best
of his ability and shall devote substantially all of his working time and
efforts to the business and affairs of KCSI and its affiliates.
2. Compensation.
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(a) Base Compensation. KCSI shall pay Executive as compensation for
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his services hereunder an annual base salary at the rate approved by the KCSI
Compensation Committee. Such rate shall not be increased prior to January 1,
2002 and shall not be reduced except as agreed by the parties or except as part
of a general salary reduction program imposed by KCSI for non-union employees
and applicable to all officers of KCSI.
(b) Incentive Compensation. For the year 2001, Executive shall [not]
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be entitled to participate in the KCSI Incentive Compensation Plan.
3. Benefits. During the period of his employment hereunder, KCSI shall
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provide Executive with coverage under such benefit plans and programs as are
made generally available to similarly situated employees of KCSI, provided (a)
KCSI shall have no obligation with respect to any plan or program if Executive
is not eligible for coverage thereunder, and (b) Executive acknowledges that
stock options and other stock and equity participation awards are granted in the
discretion of the KCSI Board or the Compensation Committee of the KCSI Board and
that Executive has no right to receive stock options or other equity
participation awards or any particular number or level of stock options or other
awards. In determining contributions, coverage and benefits under any disability
insurance policy and under any cash compensation-based plan provided to
Executive by KCSI, it shall be assumed that the value of Executive's
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annual compensation, pursuant to this Agreement, is 175% of Executive's annual
base salary. Executive acknowledges that all rights and benefits under benefit
plans and programs shall be governed by the official text of each plan or
program and not by any summary or description thereof or any provision of this
Agreement (except to the extent that this Agreement expressly modifies such
benefit plans or programs) and that neither KCSI nor Railway is under any
obligation to continue in effect or to fund any such plan or program, except as
provided in Paragraph 7 hereof.
4. Termination.
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(a) Termination by Executive. Executive may terminate this Agreement
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and his employment hereunder by at least thirty (30) days advance written notice
to KCSI, except that in the event of any material breach of this Agreement by
KCSI, Executive may terminate this Agreement and his employment hereunder
immediately upon notice to KCSI.
(b) Death or Disability. This Agreement and Executive's employment
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hereunder shall terminate automatically on the death or disability of Executive,
except to the extent employment is continued under KCSI's disability plan. For
purposes of this Agreement, Executive shall be deemed to be disabled if he
qualifies for disability benefits under KCSI's long-term disability plan.
(c) Termination by KCSI For Cause. KCSI may terminate this Agreement
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and Executive's employment "for cause" immediately upon notice to Executive. For
purposes of this Agreement (except for Paragraph 7), termination "for cause"
shall mean termination based upon any one or more of the following:
(i) Any material breach of this Agreement by Executive;
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(ii) Executive's dishonesty involving KCSI, Railway or any
subsidiary of KCSI or Railway;
(iii) Gross negligence or willful misconduct in the performance
of Executive's duties as determined in good faith by the KCSI Board;
(iv) Willful failure by Executive to follow reasonable
instructions of the President or other officer to whom Executive reports;
(v) Executive's fraud or criminal activity; or
(vi) Embezzlement or misappropriation by Executive.
(d) Termination by KCSI Other Than For Cause.
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(i) KCSI may terminate this Agreement and Executive's employment
other than for cause immediately upon notice to Executive, and in such
event, KCSI shall provide severance benefits to Executive in accordance
with Paragraph 4(d)(ii) below.
(ii) Unless the provisions of Paragraph 7 of this Agreement are
applicable, if Executive's employment is terminated under Paragraph
4(d)(i), KCSI shall continue, for a period of one (1) year following such
termination, (a) to pay to Executive as severance pay a monthly amount
equal to one-twelfth (1/12th) of the annual base salary referenced in
Paragraph 2(a) above, at the rate in effect immediately prior to
termination, and, (b) to reimburse Executive for the cost (including state
and federal income taxes payable with respect to this reimbursement) of
continuing the health insurance coverage provided pursuant to this
Agreement or obtaining health insurance coverage comparable to the health
insurance provided pursuant to this Agreement, and
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obtaining coverage comparable to the life insurance provided pursuant to
this Agreement, unless Executive is provided comparable health or life
insurance coverage in connection with other employment. The foregoing
obligations of KCSI shall continue until the end of such one (1) year
period notwithstanding the death or disability of Executive during said
period (except, in the event of death, the obligation to reimburse
Executive for the cost of life insurance shall not continue). In the year
in which termination of employment occurs, Executive shall be eligible to
receive benefits under the KCSI Incentive Compensation Plan and any
Executive Plan in which Executive participates (the "Executive Plan") (if
such Plans then are in existence and Executive was entitled to participate
immediately prior to termination) in accordance with the provisions of such
plans then applicable, and severance pay received in such year shall be
taken into account for the purpose of determining benefits, if any, under
the KCSI Incentive Compensation Plan but not under the Executive Plan.
After the year in which termination occurs, Executive shall not be entitled
to accrue or receive benefits under the KCSI Incentive Compensation Plan or
the Executive Plan with respect to the severance pay provided herein,
notwithstanding that benefits under such plan then are still generally
available to executive employees of KCSI. After termination of employment,
Executive shall not be entitled to accrue or receive benefits under any
other employee benefit plan or program, except that Executive shall be
entitled to participate in the KCSI Employee Stock Ownership Plan and the
KCSI 401(k) and Profit Sharing Plan (if KCSI employees then still
participate in such plans) in the year of termination of employment only if
Executive meets all requirements of such plans for participation in such
year.
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5. Non-Disclosure. During the term of this Agreement and at all times after
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any termination of this Agreement, Executive shall not, either directly or
indirectly, use or disclose any KCSI trade secret, except to the extent
necessary for Executive to perform his duties for KCSI while an employee. For
purposes of this Agreement, the term "KCSI trade secret" shall mean any
information regarding the business or activities of KCSI or any subsidiary or
affiliate, including any formula, pattern, compilation, program, device, method,
technique, process, customer list, technical information or other confidential
or proprietary information, that (a) derives independent economic value, actual
or potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from its disclosure or use, and (b) is the subject of efforts of KCSI or its
subsidiary or affiliate that are reasonable under the circumstance to maintain
its secrecy. In the event of any breach of this Paragraph 5 by Executive, KCSI
shall be entitled to terminate any and all remaining severance benefits under
Paragraph 4(d)(ii) and shall be entitled to pursue such other legal and
equitable remedies as may be available.
6. Duties Upon Termination; Survival.
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(a) Duties. Upon termination of this Agreement by KCSI or Executive
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for any reason, Executive shall immediately return to KCSI all KCSI trade
secrets which exist in tangible form and shall sign such written resignations
from all positions as an officer, director or member of any committee or board
of KCSI and all direct and indirect subsidiaries and affiliates of KCSI as may
be requested by KCSI and shall sign such other documents and papers relating to
Executive's employment, benefits and benefit plans as KCSI may reasonably
request.
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(b) Survival. The provisions of Paragraphs 5, 6(a) and 7 of this
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Agreement shall survive any termination of this Agreement by KCSI or Executive,
and the provisions of Paragraph 4(d)(ii) shall survive any termination of this
Agreement by KCSI under Paragraph 4(d)(i).
7. Continuation of Employment Upon Change in Control.
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(a) Continuation of Employment. Subject to the terms and conditions of
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this Paragraph 7, in the event of a Change in Control (as defined in Paragraph
7(d)) at any time during the term of this Agreement, Executive agrees to remain
in the employ of KCSI for a period of three years (the "Three-Year Period") from
the date of such Change in Control (the "Control Change Date"). KCSI agrees to
continue to employ Executive for the Three-Year Period. During the Three-Year
Period, (i) the Executive's position (including offices, titles, reporting
requirements and responsibilities), authority and duties shall be at least
commensurate in all material respects with the most significant of those held,
exercised and assigned at any time during the 12 month period immediately before
the Control Change Date and (ii) the Executive's services shall be performed at
the location where Executive was employed immediately before the Control Change
Date or at any other location less than 40 miles from such former location.
During the Three-Year Period, KCSI shall continue to pay to Executive an annual
base salary on the same basis and at the same intervals as in effect prior to
the Control Change Date at a rate not less than 12 times the highest monthly
base salary paid or payable to the Executive by KCSI in respect of the 12-month
period immediately before the Control Change Date.
(b) Benefits. During the Three-Year Period, Executive shall be
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entitled to participate, on the basis of his executive position, in each of the
following KCSI or Railway
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plans (together, the "Specified Benefits") in existence, and in accordance with
the terms thereof, at the Control Change Date:
(i) any benefit plan, and trust fund associated therewith,
related to (a) life, health, dental, disability, accidental death and
dismemberment insurance or accrued but unpaid vacation time, (b) profit
sharing, thrift or deferred savings (including deferred compensation, such
as under Sec. 401(k) plans), (c) retirement or pension benefits, (d) ERISA
excess benefits and similar plans and (e) tax favored employee stock
ownership (such as under ESOP, and Employee Stock Purchase programs); and
(ii) any other benefit plans hereafter made generally available
to executives of Executive's level or to the employees of KCSI generally.
In addition, KCSI shall use its best efforts to cause all outstanding
options held by Executive under any stock option plan of KCSI or its affiliates
to become immediately exercisable on the Control Change Date and to the extent
that such options are not vested and are subsequently forfeited, the Executive
shall receive a lump-sum cash payment within 5 days after the options are
forfeited equal to the difference between the fair market value of the shares of
stock subject to the non-vested, forfeited options determined as of the date
such options are forfeited and the exercise price for such options. During the
Three-Year Period Executive shall be entitled to participate, on the basis of
his executive position, in any incentive compensation plan of KCSI or Railway in
accordance with the terms thereof at the Control Change Date; provided that if
under KCSI or Railway programs or Executive's Employment Agreement in existence
immediately prior to the Control Change Date, there are written limitations on
participation for a designated time period in any incentive compensation plan,
such limitations
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shall continue after the Control Change Date to the extent so provided for prior
to the Control Change Date.
If the amount of contributions or benefits with respect to the Specified
Benefits or any incentive compensation is determined on a discretionary basis
under the terms of the Specified Benefits or any incentive compensation plan
immediately prior to the Control Change Date, the amount of such contributions
or benefits during the Three-Year Period for each of the Specified Benefits
shall not be less than the average annual contributions or benefits for each
Specified Benefit for the three plan years ending prior to the Control Change
Date and, in the case of any incentive compensation plan, the amount of the
incentive compensation during the Three-Year Period shall not be less than 75%
of the maximum that could have been paid to the Executive under the terms of the
incentive compensation plan.
(c) Payment. With respect to any plan or agreement under which
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Executive would be entitled at the Control Change Date to receive Specified
Benefits or incentive compensation as a general obligation of KCSI which has not
been separately funded (including specifically, but not limited to, those
referred to under Paragraph 7(b)(i)(d) above), Executive shall receive within
five (5) days after such date full payment in cash (discounted to the then
present value on the basis of a rate of seven percent (7%) per annum) of all
amounts to which he is then entitled thereunder.
(d) Change in Control. Except as provided in the last sentence of this
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Paragraph 7(d), for purposes of this Agreement, a "Change in Control" shall be
deemed to have occurred if:
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(i) for any reason at any time less than seventy-five percent
(75%) of the members of the KCSI Board shall be individuals who fall into
any of the following categories: (a) individuals who were members of the
KCSI Board on the date of the Agreement; or (b) individuals whose election,
or nomination for election by KCSI's stockholders, was approved by a vote
of at least seventy-five percent (75%) of the members of the KCSI Board
then still in office who were members of the KCSI Board on the date of the
Agreement; or (c) individuals whose election, or nomination for election,
by KCSI's stockholders, was approved by a vote of at least seventy-five
percent (75%) of the members of the KCSI Board then still in office who
were elected in the manner described in (a) or (b) above, or
(ii) any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange Act")) other
than KCSI shall have become after September 18, 1997, according to a public
announcement or filing, the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of KCSI or
Railway representing thirty percent (30%) (or, with respect to Paragraph
7(c) hereof, 40%) or more (calculated in accordance with Rule 13d-3) of the
combined voting power of KCSI's or Railway's then outstanding voting
securities; or
(iii) the stockholders of KCSI or Railway shall have approved a
merger, consolidation or dissolution of KCSI or Railway or a sale, lease,
exchange or disposition of all or substantially all of KCSI's or Railway's
assets, if persons who were the beneficial owners of the combined voting
power of KCSI's or Railway's voting securities immediately before any such
merger, consolidation, dissolution, sale, lease,
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exchange or disposition do not immediately thereafter, beneficially own,
directly or indirectly, in substantially the same proportions, more than
60% of the combined voting power of any corporation or other entity
resulting from any such transaction.
(e) Termination After Control Change Date. Notwithstanding any other
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provision of this Paragraph 7, at any time after the Control Change Date, KCSI
may terminate the employment of Executive (the "Termination"), but unless such
Termination is for Cause as defined in subparagraph (g) or for disability,
within five (5) days of the Termination KCSI shall pay to Executive his full
base salary through the Termination, to the extent not theretofore paid, plus a
lump sum amount (the "Special Severance Payment") equal to the product
(discounted to the then present value on the basis of a rate of seven percent
(7%) per annum) of (i) 175% of his annual base salary specified in Paragraph
7(a) multiplied by (ii) Three; and Specified Benefits (excluding any incentive
compensation) to which Executive was entitled immediately prior to Termination
shall continue until the end of the 3-year period ("Benefits Period") beginning
on the date of Termination. If any plan pursuant to which Specified Benefits are
provided immediately prior to Termination would not permit continued
participation by Executive after Termination, then KCSI shall pay to Executive
within five (5) days after Termination a lump sum payment equal to the amount of
Specified Benefits Executive would have received under such plan if Executive
had been fully vested in the average annual contributions or benefits in effect
for the three plan years ending prior to the Control Change Date (regardless of
any limitations based on the earnings or performance of KCSI or Railway) and a
continuing participant in such plan to the end of the Benefits Period. Following
the end of the Benefits Period, KCSI shall continue to provide to the Executive
and the Executive's family the following benefits ("Post-Period Benefits"): (1)
prior to the Executive's attainment of age sixty (60),
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health, prescription and dental benefits equivalent to those then applicable to
active peer executives of KCSI) and their families, as the same may be modified
from time to time, and (2) following the Executive's attainment of age sixty
(60) (and without regard to the Executive's period of service with KCSI) health
and prescription benefits equivalent to those then applicable to retired peer
executives of KCSI and their families, as the same may be modified from time to
time. The cost to the Executive of such Post-Period Benefits shall not exceed
the cost of such benefits to active or retired (as applicable) peer executives,
as the same may be modified from time to time. Notwithstanding the preceding two
sentences of this Paragraph 7(e), if the Executive is covered under any health,
prescription or dental plan provided by a subsequent employer, then the
corresponding type of plan coverage (i.e., health, prescription or dental),
required to be provided as Post-Period Benefits under this Paragraph 7(e) shall
cease. The Executive's rights under this Paragraph 7(e) shall be in addition to,
and not in lieu of, any post-termination continuation coverage or conversion
rights the Executive may have pursuant to applicable law, including without
limitation continuation coverage required by Section 4980 of the Code. Nothing
in this Paragraph 7(e) shall be deemed to limit in any manner the reserved right
of KCSI, in its sole and absolute discretion, to at any time amend, modify or
terminate health, prescription or dental benefits for active or retired
employees generally.
(f) Resignation After Control Change Date. In the event of a Change in
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Control as defined in Paragraph 7(d), thereafter, upon good reason (as defined
below), Executive may, at any time during the 3-year period following the Change
in Control, in his sole discretion, on not less than thirty (30) days' written
notice (the "Notice of Resignation") to the Secretary of KCSI and effective at
the end of such notice period, resign his employment with KCSI (the
"Resignation"). Within five (5) days of such a Resignation, KCSI shall pay to
Executive his full
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base salary through the effective date of such Resignation, to the extent not
theretofore paid, plus a lump sum amount equal to the Special Severance Payment
(computed as provided in the first sentence of Paragraph 7(e), except that for
purposes of such computation all references to "Termination" shall be deemed to
be references to "Resignation"). Upon Resignation of Executive, Specified
Benefits to which Executive was entitled immediately prior to Resignation shall
continue on the same terms and conditions as provided in Paragraph 7(e) in the
case of Termination (including equivalent payments provided for therein), and
Post-Period Benefits shall be provided on the same terms and conditions as
provided in Paragraph 7(e) in the case of Termination. For purposes of this
Agreement, "good reason" means any of the following:
(i) the assignment to the Executive of any duties inconsistent in
any respect with the Executive's position (including offices, titles,
reporting requirements or responsibilities), authority or duties as
contemplated by Section 7(a)(i), or any other action by KCSI which results
in a diminution or other material adverse change in such position,
authority or duties;
(ii) any failure by KCSI to comply with any of the provisions of
Paragraph 7;
(iii) KCSI's requiring the Executive to be based at any office or
location other than the location described in Section 7(a)(ii);
(iv) any other material adverse change to the terms and
conditions of the Executive's employment; or
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(v) any purported termination by KCSI of the Executive's
employment other than as expressly permitted by this Agreement (any such
purported termination shall not be effective for any other purpose under
this Agreement).
A passage of time prior to delivery of the Notice of Resignation or a failure by
the Executive to include in the Notice of Resignation any fact or circumstance
which contributes to a showing of Good Reason shall not waive any right of the
Executive under this Agreement or preclude the Executive from asserting such
fact or circumstance in enforcing rights under this Agreement.
(g) Termination for Cause After Control Change Date. Notwithstanding
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any other provision of this Paragraph 7, at any time after the Control Change
Date, Executive may be terminated by KCSI "for cause." Cause means commission by
the Executive of any felony or willful breach of duty by the Executive in the
course of the Executive's employment; except that Cause shall not mean:
(i) bad judgment or negligence;
(ii) any act or omission believed by the Executive in good faith
to have been in or not opposed to the interest of KCSI (without intent of
the Executive to gain, directly or indirectly, a profit to which the
Executive was not legally entitled);
(iii) any act or omission with respect to which a determination
could properly have been made by the KCSI Board that the Executive met the
applicable standard of conduct for indemnification or reimbursement under
KCSI's by-laws, any applicable indemnification agreement, or applicable
law, in each case in effect at the time of such act or omission; or
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(iv) any act or omission with respect to which Notice of
Termination of the Executive is given more than 12 months after the
earliest date on which any member of the KCSI Board, not a party to the act
or omission, knew or should have known of such act or omission.
Any Termination of the Executive's employment by KCSI for Cause shall be
communicated to the Executive by Notice of Termination.
(h) Gross-up for Certain Taxes. If it is determined (by the reasonable
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computation of KCSI's independent auditors, which determinations shall be
certified to by such auditors and set forth in a written certificate
("Certificate") delivered to the Executive) that any benefit received or deemed
received by the Executive from KCSI or Railway pursuant to this Agreement or
otherwise (collectively, the "Payments") is or will become subject to any excise
tax under Section 4999 of the Code or any similar tax payable under any United
States federal, state, local or other law (such excise tax and all such similar
taxes collectively, "Excise Taxes"), then KCSI shall, immediately after such
determination, pay the Executive an amount (the "Gross-up Payment") equal to the
product of:
(i) the amount of such Excise Taxes; multiplied by
(ii) the Gross-up Multiple (as defined in Paragraph 7(k)).
The Gross-up Payment is intended to compensate the Executive for
the Excise Taxes and any federal, state, local or other income or excise
taxes or other taxes payable by the Executive with respect to the Gross-up
Payment.
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KCSI shall cause the preparation and delivery to the Executive of
a Certificate upon request at any time. KCSI shall, in addition to
complying with this Paragraph 7(h), cause all determinations and
certifications under Paragraphs 7(h)-(o) to be made as soon as reasonably
possible and in adequate time to permit the Executive to prepare and file
the Executive's individual tax returns on a timely basis.
(i) Determination by the Executive.
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(i) If KCSI shall fail (a) to deliver a Certificate to the
Executive or (B) to pay to the Executive the amount of the Gross-up
Payment, if any, within 14 days after receipt from the Executive of a
written request for a Certificate, or if at any time following receipt of a
Certificate the Executive disputes the amount of the Gross-up Payment set
forth therein, the Executive may elect to demand the payment of the amount
which the Executive, in accordance with an opinion of counsel to the
Executive ("Executive Counsel Opinion"), determines to be the Gross-up
Payment. Any such demand by the Executive shall be made by delivery to KCSI
of a written notice which specifies the Gross-up Payment determined by the
Executive and an Executive Counsel Opinion regarding such Gross-up Payment
(such written notice and opinion collectively, the "Executive's
Determination"). Within 14 days after delivery of the Executive's
Determination to KCSI, KCSI shall either (a) pay the Executive the Gross-up
Payment set forth in the Executive's Determination (less the portion of
such amount, if any, previously paid to the Executive by KCSI) or (b)
deliver to the Executive a Certificate specifying the Gross-up Payment
determined by KCSI's independent auditors, together with an opinion of
KCSI's counsel ("KCSI Counsel Opinion"), and pay the Executive the Gross-up
Payment specified in such Certificate. If for any reason KCSI fails to
comply
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with clause (b) of the preceding sentence, the Gross-up Payment specified
in the Executive's Determination shall be controlling for all purposes.
(ii) If the Executive does not make a request for, and KCSI does
not deliver to the Executive, a Certificate, KCSI shall, for purposes of
Paragraph 7(j), be deemed to have determined that no Gross-up Payment is
due.
(j) Additional Gross-up Amounts. If, despite the initial conclusion of
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KCSI and/or the Executive that certain Payments are neither subject to Excise
Taxes nor to be counted in determining whether other Payments are subject to
Excise Taxes (any such item, a "Non-Parachute Item"), it is later determined
(pursuant to subsequently-enacted provisions of the Code, final regulations or
published rulings of the IRS, final IRS determination or judgment of a court of
competent jurisdiction or KCSI's independent auditors) that any of the
Non-Parachute Items are subject to Excise Taxes, or are to be counted in
determining whether any Payments are subject to Excise Taxes, with the result
that the amount of Excise Taxes payable by the Executive is greater than the
amount determined by KCSI or the Executive pursuant to Paragraph 7(h) or
Paragraph 7(i), as applicable, then KCSI shall pay the Executive an amount
(which shall also be deemed a Gross-up Payment) equal to the product of:
(i) the sum of (a) such additional Excise Taxes and (b) any
interest, fines, penalties, expenses or other costs incurred by the
Executive as a result of having taken a position in accordance with a
determination made pursuant to Paragraph 7(h); multiplied by
(ii) the Gross-up Multiple.
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(k) Gross-up Multiple. The Gross-up Multiple shall equal a fraction,
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the numerator of which is one (1.0), and the denominator of which is one (1.0)
minus the sum, expressed as a decimal fraction, of the rates of all federal,
state, local and other income and other taxes and any Excise Taxes applicable to
the Gross-up Payment; provided that, if such sum exceeds 0.8, it shall be deemed
equal to 0.8 for purposes of this computation. (If different rates of tax are
applicable to various portions of a Gross-up Payment, the weighted average of
such rates shall be used.)
(l) Opinion of Counsel. "Executive Counsel Opinion" means a legal
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opinion of nationally recognized executive compensation counsel that there is a
reasonable basis to support a conclusion that the Gross-up Payment determined by
the Executive has been calculated in accord with this Paragraph 7 and applicable
law. "Company Counsel Opinion" means a legal opinion of nationally recognized
executive compensation counsel that (i) there is a reasonable basis to support a
conclusion that the Gross-up Payment set forth in the Certificate of KCSI's
independent auditors has been calculated in accord with this Paragraph 7 and
applicable law, and (ii) there is no reasonable basis for the calculation of the
Gross-up Payment determined by the Executive.
(m) Amount Increased or Contested. The Executive shall notify KCSI in
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writing of any claim by the IRS or other taxing authority that, if successful,
would require the payment by KCSI of a Gross-up Payment. Such notice shall
include the nature of such claim and the date on which such claim is due to be
paid. The Executive shall give such notice as soon as practicable, but no later
than 10 business days, after the Executive first obtains actual knowledge of
such claim; provided, however, that any failure to give or delay in giving such
notice shall affect KCSI's obligations under this Paragraph 7 only if and to the
extent that such failure results
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in actual prejudice to KCSI. The Executive shall not pay such claim less than 30
days after the Executive gives such notice to KCSI (or, if sooner, the date on
which payment of such claim is due). If KCSI notifies the Executive in writing
before the expiration of such period that it desires to contest such claim, the
Executive shall:
(i) give KCSI any information that it reasonably requests
relating to such claim;
(ii) take such action in connection with contesting such claim as
KCSI reasonably requests in writing from time to time, including, without
limitation, accepting legal representation with respect to such claim by an
attorney reasonably selected by KCSI;
(iii) cooperate with KCSI in good faith to contest such claim;
and
(iv) permit KCSI to participate in any proceedings relating to
such claim; provided, however, that KCSI shall bear and pay directly all
costs and expenses (including additional interest and penalties) incurred
in connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax,
including related interest and penalties, imposed as a result of such
representation and payment of costs and expenses. Without limiting the
foregoing, KCSI shall control all proceedings in connection with such
contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option,
either direct the Executive to pay the tax claimed and xxx for a refund or
contest the claim in any permissible manner. The Executive agrees to
prosecute such contest to a
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determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as KCSI shall determine;
provided, however, that if KCSI directs the Executive to pay such claim and
xxx for a refund, KCSI shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify the Executive, on
an after-tax basis, for any Excise Tax or income tax, including related
interest or penalties, imposed with respect to such advance; and further
provided that any extension of the statute of limitations relating to
payment of taxes for the taxable year of the Executive with respect to
which such contested amount is claimed to be due is limited solely to such
contested amount. The KCSI's control of the contest shall be limited to
issues with respect to which a Gross-up Payment would be payable. The
Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the IRS or other taxing authority.
(n) Refunds. If, after the receipt by the Executive of an amount
-------
advanced by KCSI pursuant to Paragraph 7(m), the Executive receives any refund
with respect to such claim, the Executive shall (subject to KCSI's complying
with the requirements of Paragraph 7(m)) promptly pay KCSI the amount of such
refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by KCSI pursuant to Paragraph 7(m), a determination is made that the
Executive shall not be entitled to a full refund with respect to such claim and
KCSI does not notify the Executive in writing of its intent to contest such
determination before the expiration of 30 days after such determination, then
the applicable part of such advance shall be forgiven and shall not be required
to be repaid and the amount of such advance shall offset, to the extent thereof,
the
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amount of Gross-up Payment required to be paid. Any contest of a denial of
refund shall be controlled by Paragraph 7(m).
(o) Expenses. If any dispute should arise under this Agreement after
--------
the Control Change Date involving an effort by Executive to protect, enforce or
secure rights or benefits claimed by Executive hereunder, KCSI shall pay
(promptly upon demand by Executive accompanied by reasonable evidence of
incurrence) all reasonable expenses (including attorneys' fees) incurred by
Executive in connection with such dispute, without regard to whether Executive
prevails in such dispute except that Executive shall repay KCSI any amounts so
received if a court having jurisdiction shall make a final, nonappealable
determination that Executive acted frivolously or in bad faith by such dispute.
To assure Executive that adequate funds will be made available to discharge
KCSI's obligations set forth in the preceding sentence, KCSI has established a
trust and upon the occurrence of a Change in Control shall promptly deliver to
the trustee of such trust to hold in accordance with the terms and conditions
thereof that sum which the KCSI Board shall have determined is reasonably
sufficient for such purpose.
(p) Prevailing Provisions. On and after the Control Change Date, the
---------------------
provisions of this Paragraph 7 shall control and take precedence over any other
provisions of this Agreement which are in conflict with or address the same or a
similar subject matter as the provisions of this Paragraph 7.
8. Mitigation and Other Employment. After a termination of Executive's
-------------------------------
employment pursuant to Paragraph 4(d)(i) or a Change in Control as defined in
Paragraph 7(d), Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise,
and except as otherwise specifically
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provided in Paragraph 4(d)(ii) with respect to health and life insurance and in
Paragraph 7(e) with respect to health, prescription and dental benefits, no such
other employment, if obtained, or compensation or benefits payable in connection
therewith shall reduce any amounts or benefits to which Executive is entitled
hereunder. Such amounts or benefits payable to Executive under this Agreement
shall not be treated as damages but as severance compensation to which Executive
is entitled because Executive's employment has been terminated.
9. Notice. Notices and all other communications to either party pursuant to
------
this Agreement shall be in writing and shall be deemed to have been given when
personally delivered, delivered by facsimile or deposited in the United States
mail by certified or registered mail, postage prepaid, addressed, in the case of
KCSI, to KCSI at 000 Xxxx 00xx Xxxxxx, Xxxxxx Xxxx, Xxxxxxxx 00000, Attention:
Secretary, or, in the case of the Executive, to him at 00000Xxxxx Xxxxxxxxx
Xxxx, Xxxxxx, Xxxxxx 00000, or to such other address as a party shall designate
by notice to the other party.
10. Amendment. No provision of this Agreement may be amended, modified,
---------
waived or discharged unless such amendment, waiver, modification or discharge is
agreed to in writing signed by Executive and the President of KCSI. No waiver by
any party hereto at any time of any breach by another party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the time or at any prior or subsequent time.
11. Successors in Interest. The rights and obligations of KCSI under this
----------------------
Agreement shall inure to the benefit of and be binding in each and every respect
upon the direct and indirect successors and assigns of KCSI, regardless of the
manner in which such successors or assigns
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shall succeed to the interest of KCSI hereunder, and this Agreement shall not be
terminated by the voluntary or involuntary dissolution of KCSI or by any merger
or consolidation or acquisition involving KCSI, or upon any transfer of all or
substantially all of KCSI's assets, or terminated otherwise than in accordance
with its terms. In the event of any such merger or consolidation or transfer of
assets, the provisions of this Agreement shall be binding upon and shall inure
to the benefit of the surviving corporation or the corporation or other person
to which such assets shall be transferred. Neither this Agreement nor any of the
payments or benefits hereunder may be pledged, assigned or transferred by
Executive either in whole or in part in any manner, without the prior written
consent of KCSI.
12. Severability. The invalidity or unenforceability of any particular
------------
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provisions were omitted.
13. Controlling Law and Jurisdiction. The validity, interpretation and
--------------------------------
performance of this Agreement shall be subject to and construed under the laws
of the State of Missouri, without regard to principles of conflicts of law.
14. Entire Agreement. This Agreement constitutes the entire agreement among
----------------
the parties with respect to the subject matter hereof and terminates and
supersedes all other prior
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agreements and understandings (including, without limitation, the Prior
Agreement), both written and oral, between the parties with respect to the terms
of Executive's employment or severance arrangements.
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Agreement as of the 1st day of January, 2001.
KANSAS CITY SOUTHERN INDUSTRIES, INC.
By /s/ X.X. Xxxxxxx
---------------------------------------
Xxxxxxx X. Xxxxxxx, President & CEO
EXECUTIVE
/s/ Xxxxxx X. Xxxxx
------------------------------------------
Xxxxxx X. Xxxxx
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