THIS
AGREEMENT, made and entered into as of this 1st day of May, 2000,
by and between The Kansas City Southern Railway Company, a Missouri
corporation (“Railway”), Kansas City Southern
Industries, Inc., a Delaware corporation (“KCSI”) and
Scott E. Arvidson, an individual
(“Executive”).
WHEREAS,
Executive is now employed by Railway, and Railway, KCSI and
Executive desire for Railway to continue to employ Executive on the
terms and conditions set forth in this Agreement and to provide an
incentive to Executive to remain in the employ of Railway
hereafter, particularly in the event of any change in control (as
herein defined) of KCSI, Railway or Kansas City Southern Lines,
Inc., thereby establishing and preserving continuity of management
of Railway.
NOW,
THEREFORE, in consideration of the mutual covenants and agreements
herein contained, it is agreed by and between Railway, KCSI and
Executive as follows:
1.
Employment . Railway hereby continues the employment of
Executive as its Chief Information Officer, to serve at the
pleasure of the Board of Directors of Railway (the “Railway
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 Railway Board and in the stockholder of
Railway. 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
Railway and its affiliates.
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(a)
Base Compensation . Railway shall pay Executive as
compensation for 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, 2001 and shall not
be reduced except as agreed by the parties or except as part of a
general salary reduction program imposed by Railway for non-union
employees and applicable to all officers of Railway.
(b)
Incentive Compensation . For the year 2000, Executive shall
not be entitled to participate in the Railway Incentive
Compensation Plan.
3.
Benefits . During the period of his employment hereunder,
Railway shall provide Executive with coverage under such benefit
plans and programs as are made generally available to similarly
situated employees of Railway, provided (a) Railway 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 Board of
Directors of KCSI (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 Railway, it shall be assumed that the
value of Executive’s annual compensation, pursuant to this
Agreement, is 145% 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 none of KCSI,
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KCSL
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.
(a)
Termination by Executive . Executive may terminate this
Agreement and his employment hereunder by at least thirty
(30) days advance written notice to Railway, except that in
the event of any material breach of this Agreement by Railway,
Executive may terminate this
Agreement and his employment hereunder immediately upon notice to
Railway.
(b)
Death or Disability . This Agreement and Executive’s
employment hereunder shall terminate automatically on the death or
disability of Executive, except to the extent employment is
continued under Railway’s disability plan. For purposes of
this Agreement, Executive shall be deemed to be disabled if he
qualifies for disability benefits under Railway’s long-term
disability plan.
(c)
Termination by Railway For Cause . Railway may terminate
this Agreement 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;
(ii)
Executive’s dishonesty involving Railway, KCSI, KCSL or any
subsidiary of Railway, KCSI or KCSL;
(iii)
Gross negligence or willful misconduct in the performance of
Executive’s duties as determined in good faith by the Railway
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
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(vi)
Embezzlement or misappropriation by Executive.
(d)
Termination by Railway Other Than For Cause .
(i)
Railway may terminate this Agreement and Executive’s
employment other than for cause immediately upon notice to
Executive, and in such event, Railway 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), Railway 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
(l/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 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 Railway 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 Railway 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
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pay
received in such year shall be taken into account for the purpose
of determining benefits, if any, under the Railway 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 Railway 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 Railway.
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 Profit Sharing Plan, the KCSI Employee Stock Ownership
Plan and the KCSI Section 401 (k) Plan (if Railway
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.
5.
Non-Disclosure . During the term of this Agreement and at
all times after any termination of this Agreement, Executive shall
not, either directly or indirectly, use or disclose any Railway
trade secret, except to the extent necessary for Executive to
perform his duties for Railway while an employee. For purposes of
this Agreement, the term “Railway trade secret” shall
mean any information regarding the business or activities of
Railway 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 Railway 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, Railway shall be entitled to terminate any and all
remaining severance
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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 .
(a)
Duties . Upon termination of this Agreement by Railway or
Executive for any reason, Executive shall immediately return to
Railway all Railway 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 Railway
and all direct and indirect subsidiaries and affiliates of Railway
as may be requested by Railway and shall sign such other documents
and papers relating to Executive’s employment, benefits and
benefit plans as Railway may reasonably request.
(b)
Survival . The provisions of Paragraphs 5, 6(a) and 7 of
this Agreement shall survive any termination of this Agreement by
Railway or Executive, and the provisions of Paragraph 4(d)(ii)
shall survive any termination of this Agreement by Railway under
Paragraph 4(d)(i).
7.
Continuation of Employment Upon Change in Control
(a)
Continuation of Employment . Subject to the terms and
conditions of 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
Railway for a period of three years (the “Three-Year
Period”) from the date of such Change in Control (the
“Control Change Date”). Railway 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
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the
Control Change Date or at any other location less than 40 miles
from such former location. During the Three-Year Period, Railway
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 Railway in
respect of the 12-month period immediately before the Control
Change Date.
(b)
Benefits . During the Three-Year Period, Executive shall be
entitled to participate, on the basis of his executive position, in
each of the following KCSI, KCSL or Railway 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
Railway generally.
In
addition, Railway and KCSI shall use their 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
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be
entitled to participate, on the basis of his executive position, in
any incentive compensation plan of KCSI, KCSL or Railway in
accordance with the terms thereof at the Control Change Date;
provided that if under KCSI, KCSL 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 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
Executive would be entitled at the Control Change Date to receive
Specified Benefits or incentive compensation as a general
obligation of Railway 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.
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(d)
Change in Control . Except as provided in the last sentence
of this Paragraph 7(d), for purposes of this Agreement, a
“Change in Control” shall be deemed to have occurred
if:
(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), di
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