EMPLOYMENT
AGREEMENT
THIS AGREEMENT , made and
entered into as of this 10 th day of
September , 2008 , by and between The Kansas City
Southern Railway Company, a Missouri corporation (referred to
herein as the “Company” or “ KCSR
” ) , and David L. Starling , an individual
(“ Executive” ).
WHEREAS , the Company and
Executive desire for the Company to employ Executive on the terms
and conditions set forth in this Agreement.
NOW, THEREFORE , in
consideration of the premises and the mutual covenants herein
contained, it is agreed by and between the Company and Executive as
follows:
1. Employment .
The Company hereby employs Executive as its President &
CEO and Executive hereby accepts such employment, to have such
titles, duties, powers and responsibilities as may be prescribed or
delegated from time to time by the Chairman , or other
officer to whom Executive reports. Executive shall faithfully
perform Executive’s duties under this Agreement to the best
of Executive’s ability and Executive shall devote
substantially all of Executive’s working time and efforts to
the business and affairs of the Company and its subsidiaries and
joint ventures ( “Affiliate(s)” ).
2. Compensation .
The Company shall pay Executive as compensation for
Executive’s services hereunder an annual base salary at the
rate approved by the appropriate committee of the Board of
Directors of Kansas City Southern (“ KCS ”)
(“ Salary ”), less applicable taxes and
withholdings. During the term of this Agreement, such rate shall
not be reduced except as agreed by the parties or except as part of
a general salary reduction program imposed by the Company
applicable to all officers of the Company.
3. Benefits .
During the term of the Agreement, the Company shall provide
Executive with coverage under such benefit plans and programs as
shall be made generally available to similarly situated employees
of the Company, provided (a) the Company shall have no
obligation with respect to any plan or program if Executive is not
eligible for coverage there under, and (b) Executive
acknowledges that any stock or equity participation awards
(including by way of example, but not limited to, stock options or
restricted or performance stock) are to be granted in the
discretion of the Company Board or the appropriate committee of the
Board of Directors of KCS and that Executive has no right to
receive any such stock or equity participation awards or any
particular number or level of such stock or equity participation
awards, if any. In determining contributions, coverage and benefits
under any disability insurance policy and under any cash
compensation-based plan provided to Executive, it shall be assumed
that the value of Executive’s annual compensation 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 and that the Company is not under any obligation to
continue in effect or to fund any such plan or program.
4. Business
Expenses . While Executive is employed with the Company,
Executive shall be entitled to reimbursement for reasonable
out-of-pocket business expenses incurred by Executive in the
performance of his/her duties hereunder to the extent and in the
manner provided in the general personnel policies of the Company
with respect to such reimbursement. Executive shall provide the
Company with supporting documentation for all such business
expenses.
5. Term and
Termination . The “ Term ” of this
Agreement shall begin on the date first written above and continue
until terminated as provided in this Paragraph 5.
(a) Termination by
Executive . Executive may terminate this Agreement and
Executive’s employment hereunder by providing at least thirty
(30) days advance written notice to the Company.
(b) Death or Disability
. This Agreement and Executive’s employment hereunder shall
terminate automatically (i) should Executive become unable to
perform the essential duties of Executive’s job with a
reasonable accommodation, should a reasonable accommodation exist,
or without a reasonable accommodation should no reasonable
accommodation exist, for a continuous period of one hundred eighty
(180) days as a result of a physical or mental impairment or
(ii) upon Executive’s death.
(c) Termination by the
Company For Cause . The Company may terminate this Agreement
and Executive’s employment for Cause immediately upon oral,
written or other notice to Executive at the Company’s sole
discretion. For purposes of this Agreement, except as otherwise
defined and used in Paragraph 8, “ Cause ”
shall mean any one or more of the following by Executive:
(i) Any
material breach of this Agreement or of any other written agreement
between Executive and the Company;
(ii) Any
dishonest act that the Company considers, in its sole discretion,
detrimental to its best interests or reputation;
(iii) Conviction or deferred adjudication of any felony, any
misdemeanor for a violent crime, or any other criminal offense
involving fraud or dishonesty, or a finding of such an offense in a
civil trial or other forum;
(iv) Gross
negligence or willful misconduct in the performance of
Executive’s duties;
(v) Failure
to substantially perform Executive’s duties and
responsibilities hereunder, including without limitation
Executive’s willful failure to follow reasonable instructions
of the Chairman , or other officer to whom Executive
reports;
(vi) Breach
of an employment policy of the Company or any Affiliate of the
Company;
(vii) Breach of Executive’s fiduciary duty to the
Company or any Affiliate of the Company; or
(viii) Any
other act or omission that would constitute just cause at common
law.
(d) Termination by the
Company Other Than For Cause .
(i) The
Company may terminate this Agreement and Executive’s
employment other than for Cause immediately upon oral, written or
other notice to Executive at the Company’s sole discretion,
and in such event, the Company shall provide severance benefits to
Executive in accordance with and subject to Paragraph 5(d)(ii)
below. Executive acknowledges and agrees that such severance
benefits constitute the exclusive remedy of Executive upon such a
termination of employment other than for Cause. Notwithstanding any
other provision of this Agreement, as a condition to receiving such
severance benefits, Executive shall execute a Confidential
Severance Agreement and Full and General Release, which shall
include among other provisions, at the Company’s sole
discretion, a full release of claims in favor of the Company and
its Affiliates substantially similar to the form attached hereto as
Appendix A (“Release”).
(ii) If
Executive’s employment is terminated under
Paragraph 5(d)(i) and Executive properly executes a Release,
the Company shall pay Executive in addition to any unpaid Salary,
unused vacation pay and reimbursement of documented accrued and
unreimbursed expenses, severance and benefits for a period of
twelve (12) months following Executive’s execution of
the Release and the expiration of any applicable revocation period
with respect to Executive’s execution of such Release, as
follows:
(a) During
the first six (6) months following Executive’s
termination of employment, the Company shall pay to Executive a
monthly amount equal to one-twelfth (1/12) of the annual Salary of
Executive referenced in Paragraph 2, less applicable taxes and
withholdings, at the rate in effect immediately prior to
Executive’s termination of employment, provided that in no
event shall the aggregate amount paid during such initial six
(6) months exceed two times the maximum amount that may be
taken into account under a qualified plan pursuant to
Section 401(a)(17) of the Internal Revenue Code of 1986, as
amended (“ Code ”), for the calendar year of
Executive’s termination of employment (the “401(a)(17)
limit”). During the remaining period of the twelve
(12) month period, the Company shall pay to Executive a
monthly amount equal to one-twelfth (1/12) of the annual Salary of
Executive referenced in Paragraph 2, less applicable taxes and
withholdings, at the rate in effect immediately prior to
Executive’s termination of employment; provided, that if
Executive’s severance pay during the first six (6) month
period referenced above is reduced in order to not exceed the
401(a)(17) limit, then the amount of such reduction shall also be
paid to Executive in equal monthly payments during the remainder of
the twelve (12) month period. The obligations of the Company
under this paragraph 5(d)(ii)(a) shall continue until the end of
the twelve (12) month period specified herein notwithstanding
the death of Executive; and
(b) During
the twelve (12) month period following Executive’s
termination the Company shall continue Executive’s group
health insurance coverage for Executive and/or his or her eligible
dependents, provided that such coverage shall terminate in the
event that Executive (i) becomes eligible for comparable
health coverage in connection with other employment,
(ii) fails to timely elect to continue such coverage for
himself or herself and/or his or her eligible dependents pursuant
to the Consolidated Omnibus Budget Reconciliation Act of 1985
(“COBRA”), (iii) fails to meet the eligibility
requirements under the applicable plan for any such coverage,
(iv) fails to timely pay the cost of such coverage at the rate
that would be charged to an active employee with similar coverage,
or (v) dies.
(e) Upon any termination of
Executive’s employment pursuant to Paragraph 5(a),
(b) or (c), notwithstanding any other provisions of this
Agreement, Executive shall not be entitled to receive thereafter
any payment from the Company except for unpaid Salary, unused
vacation pay and reimbursement of documented accrued and
unreimbursed expenses.
(f) Upon any termination of
Executive’s employment, Executive’s benefits in all
Company-sponsored benefit plans not elsewhere referred to in this
Agreement shall terminate in accordance with the terms and
conditions of such plans. To the extent Executive is not vested in
any equity awards as of any termination date, including without
limitation, with respect to stock options, restricted stock or
performance shares, such unvested equity awards shall be forfeited
as of the termination date. Nothing herein shall extend the
exercise period applicable to any unexercised options outstanding
as of any termination date.
6. Confidentiality and
Non-Disclosure .
(a) Executive understands and
agrees that Executive may be given Confidential Information (as
defined below) during Executive’s employment with the Company
relating to the business of the Company and its Affiliates, subject
to Executive’s agreement herein. Executive shall maintain in
strictest confidence and not use in any way (including without
limitation in any future business relationship of Executive),
publish, disclose or authorize anyone else to use in any way,
publish or disclose, any Confidential Information. Executive
further agrees not to remove or retain any calculations, letters,
documents, lists, papers, or copies thereof, which embody
Confidential Information and to return, prior to Executive’s
termination of employment for any reason, any such information in
Executive’s possession. If Executive discovers, or comes into
possession of, any Confidential Information after Executive’s
termination, Executive shall promptly return it to the Company.
Executive acknowledges that the provisions of this paragraph are
consistent with the Company’s policies and procedures to
which Executive, as an employee of the Company, is bound.
(b) For purposes
