SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Kansas City Southern Industries, Inc.
(Name of Registrant as Specified In Its Charter)
Watson, Ess, Marshall & Enggas
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[x] $125 per Exchange Act Rules 0-11(c)1)(ii), 14a6(i)(1), or 14a-
6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules
14a(6)(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction
applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule O-11 (Set forth
the amount on which the filing fee is calculated and
state how it was determined).
4) Proposed maximum aggregate value of transaction:
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
KCSI
114 West 11th Street
Kansas City, Missouri 64105-1804
KANSAS CITY SOUTHERN INDUSTRIES, INC.
NOTICE AND PROXY STATEMENT
For
The Annual Meeting of Stockholders
to be held
Tuesday, May 3, 1994
YOUR VOTE IS IMPORTANT!
Please mark, date and sign the enclosed proxy card and promptly
return it to the Company in the enclosed envelope.
<PAGE>
KANSAS CITY SOUTHERN INDUSTRIES, INC.
114 West 11th Street
Kansas City, Missouri 64105-1804
March 30, 1994
TO OUR STOCKHOLDERS:
You are cordially invited to attend the Annual Meeting of
Stockholders of Kansas City Southern Industries, Inc., which will
be held at the Kansas City Marriott Downtown Hotel, 200 West
Twelfth Street, Kansas City, Missouri, at 10:00 a.m., Central
Daylight Time, on Tuesday, May 3, 1994. The purposes of this
meeting are set forth in the accompanying Notice of Annual Meeting
and Proxy Statement.
We urge you to read these proxy materials and the enclosed
Annual Report, and to participate in the meeting either in person
or by proxy.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON,
PLEASE SIGN AND RETURN PROMPTLY THE ACCOMPANYING PROXY CARD IN THE
ENVELOPE PROVIDED TO ASSURE THAT YOUR SHARES WILL BE REPRESENTED.
<TABLE>
<S> <C>
Sincerely,
Paul H. Henson
Chairman of the Board
Landon H. Rowland
President and
Chief Executive Officer
</TABLE>
<PAGE>
KANSAS CITY SOUTHERN INDUSTRIES, INC.
114 West 11th Street
Kansas City, Missouri 64105-1804
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 3, 1994
The Annual Meeting of the Stockholders of Kansas City Southern
Industries, Inc., a Delaware corporation ("KCSI"), will be held at
the Kansas City Marriott Downtown Hotel, 200 West Twelfth Street,
Kansas City, Missouri, at 10:00 a.m., Central Daylight Time on
Tuesday, May 3, 1994, to consider and vote upon the following
matters:
(1) Election of four directors.
(2) Approval of an amendment to KCSI's Certificate
of Incorporation to increase the number of
authorized shares of common stock.
(3) Approval of an amendment to KCSI's Certificate
of Incorporation to set a par value for the
common stock.
(4) Ratification of the Board of Directors'
selection of Price Waterhouse as KCSI's
independent accountants for 1994.
(5) Such other matters as may properly come before
the Annual Meeting or any adjournment thereof.
Only stockholders of record at the close of business on March
4, 1994, are entitled to notice of and to vote at this meeting or
any adjournment thereof.
By Order of the Board of Directors,
Albert P. Mauro
Vice President and Secretary
The date of this Notice is March 30, 1994.
PLEASE DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY CARD,
REGARDLESS OF THE NUMBER OF SHARES YOU MAY OWN AND WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING IN PERSON. YOU MAY REVOKE YOUR
APPOINTMENT OF A PROXY AND VOTE YOUR SHARES IN PERSON IF REVOKED IN
ACCORDANCE WITH THE PROCEDURES DESCRIBED IN THE ATTACHED PROXY
STATEMENT. PLEASE ALSO INDICATE ON YOUR PROXY CARD WHETHER YOU
PLAN TO ATTEND THE ANNUAL MEETING.
<PAGE>
KANSAS CITY SOUTHERN INDUSTRIES, INC.
114 West 11th Street
Kansas City, Missouri 64105-1804
PROXY STATEMENT
TABLE OF CONTENTS
General Information and Voting . . . . . . . . . . . . . . .
Principal Stockholders . . . . . . . . . . . . . . . . . . .
Stock Owned Beneficially by Directors and
Certain Officers. . . . . . . . . . . . . . . . . . . . .
Proposal (1) - Election of Four Directors. . . . . . . . . .
Information Concerning the KCSI Board of Directors and Certain
Committees . . . . . . . . . . . . . . . . . . . . . . . . .
Proposal (2) - Approval of an amendment to KCSI's Certificate of
Incorporation to Increase the Number of Authorized Shares
of Common Stock . . . . . . . . . . . . . . . . . . . . .
Proposal (3) - Approval of an amendment to KCSI's Certificate of
Incorporation to Set a Par Value for the Common Stock. .
Proposal (4) - Ratification of the Board of Directors'
Selection of Independent Accountants . . . . . . . . . .
Management Compensation. . . . . . . . . . . . . . . . . . .
Certain Transactions . . . . . . . . . . . . . . . . . . . .
Compliance With Section 16(a) of the
Securities Exchange Act of 1934 . . . . . . . . . . . . .
Stockholder Proposals. . . . . . . . . . . . . . . . . . . .
Other Matters. . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
GENERAL INFORMATION AND VOTING
This Proxy Statement is furnished to the stockholders of
Kansas City Southern Industries, Inc., a Delaware corporation
("KCSI"), in connection with the solicitation of proxies by its
Board of Directors for use at the Annual Meeting of Stockholders to
be held at the Kansas City Marriott Downtown Hotel, 200 West
Twelfth Street, Kansas City, Missouri, on Tuesday, May 3, 1994, at
10:00 a.m., Central Daylight Time, and any adjournment thereof (the
"Annual Meeting"). The Notice of Annual Meeting, KCSI's 1993
Annual Report, and the proxy card accompany this Proxy Statement.
Mailing of this Proxy Statement, the enclosed proxy card, the
accompanying Notice and the 1993 Annual Report is expected to
commence on or about March 30, 1994.
A stockholder may revoke a properly executed proxy with a
later-dated, properly executed proxy or other writing delivered to
the Secretary of KCSI at any time before the proxy originally
submitted is voted at the Annual Meeting. Attendance at the Annual
Meeting will not have the effect of revoking a properly executed
proxy unless the stockholder delivers a written revocation to the
Secretary before the proxy is voted.
KCSI will bear the cost of the Annual Meeting, including the
cost of mailing the proxy materials. Proxies may also be solicited
by telephone, telegraph or in person by directors, officers and
employees not specifically engaged or compensated for that purpose.
Morrow & Co., Inc. has been retained to assist in the solicitation
of proxies at a cost not expected to exceed $6,500, plus expenses.
Brokers, dealers, banks, voting trustees, other custodians,
and their nominees are asked to forward soliciting materials to the
beneficial owners of shares held of record by them and upon request
will be reimbursed for their reasonable expenses in completing the
mailing of soliciting materials to such beneficial owners.
Stockholders at the Annual Meeting will consider and vote upon
(1) the election of four directors, (2) approval of an amendment to
KCSI's Certificate of Incorporation to increase the number of
authorized shares of common stock, (3) approval of an amendment to
KCSI's Certificate of Incorporation to establish a par value for
KCSI's common stock, (4) ratification of the Board of Directors'
selection of Price Waterhouse as KCSI's independent accountants for
1994, and (5) such other matters as may properly come before the
Annual Meeting.
Only the holders of KCSI's preferred stock, par value $25.00
per share (the "Preferred Stock"), and common stock, no par value
(the "Common Stock"), of record at the close of business on March
4, 1994 (the "Record Date"), are entitled to notice of and to vote
at the Annual Meeting. On that date, KCSI had outstanding 243,170
shares of Preferred Stock (excluding 406,566 shares held in
treasury) and 43,369,807 shares of Common Stock, (excluding
5,032,385 shares held in treasury) for a total of 43,612,977 shares
eligible to be voted at the Annual Meeting.
The Common Stock and Preferred Stock (collectively the "Voting
Stock") constitute KCSI's only classes of voting securities and
will vote together as a single class on all matters to be
considered at the Annual Meeting. Each stockholder of Voting Stock
is entitled to cast one vote for each share of Voting Stock held on
the Record Date on all matters other than the election of
directors. There is cumulative voting in the election of
directors. Therefore, each stockholder is entitled to cast a
number of votes equal to the number of shares of Voting Stock held
by such stockholder on the Record Date multiplied by the number of
directors to be elected, and all such votes may be cast for a
single nominee or distributed among the nominees as the stockholder
chooses. This Proxy Statement solicits discretionary authority to
vote cumulatively, and the accompanying form of proxy grants such
authority.
In order for a proposal to be approved by the stockholders at
the Annual Meeting, the holders of a quorum of the shares of Voting
Stock entitled to vote must be present at the meeting, and the
required percentage of such quorum must be affirmatively voted for
approval by such holders. Under KCSI's By-laws, the presence of
the holders, either in person or through a proxy, of a majority of
the Voting Stock entitled to vote at the Annual Meeting will
constitute a quorum, regardless of whether the holders vote such
shares.
Under Delaware law, in all proposals other than the election
of directors, the affirmative vote of the majority of the quorum of
shares of Voting Stock present at the Annual Meeting that are
entitled to vote on the proposal is required for approval. In
determining the percentage of shares that have been affirmatively
voted for a particular proposal, the affirmative votes are measured
against the votes for and against the proposal plus the abstentions
from voting on the proposal. A stockholder may abstain from voting
on any proposal other than the election of directors, and shares
for which the holders abstain from voting are not considered to be
votes affirmatively cast. Thus, abstaining will have the effect of
a vote against a proposal.
The directors are elected by an affirmative vote of the
plurality of the quorum of shares of Voting Stock present at the
Annual Meeting that are entitled to vote on the election of
directors. With regard to the election of directors, votes may be
cast in favor or withheld; votes that are withheld will be excluded
entirely from the vote and will have no effect.
Under the rules of the New York Stock Exchange, Inc. (the
"NYSE"), member brokers who hold shares of Voting Stock in the
broker's name for customers are required to solicit directions on
how to vote such shares from their beneficial owners and have the
authority to vote on certain proposals when they have not received
directions. The Staff of the NYSE determines which proposals that
the brokers (other than KCSI's subsidiaries that are brokers) are
entitled to vote the shares for which the brokers do not receive
directions and informs the brokers prior to the Annual Meeting.
Under the policies of the NYSE, if KCSI's subsidiaries that are
brokers do not receive directions, they are entitled to vote only
in the same proportion as the shares represented by votes from all
record holders.
When a broker does not vote, it is referred to as a "broker
non-vote" (customer directed abstentions are not broker non-votes).
Broker non-votes do not affect the determination of whether a
quorum is present at the Annual Meeting because by definition the
shares held in the broker's name have been voted on at least some
proposals, and therefore, the shares are considered present at the
Annual Meeting. Under applicable Delaware law, a broker non-vote
will have the same effect as a vote against any proposal other than
the election of directors and will have no effect on the outcome of
the election of directors.
All shares of Voting Stock represented at the Annual Meeting
by proxies solicited hereunder will be voted in accordance with the
specifications made by the stockholders executing such proxies. If
a properly executed and unrevoked proxy solicited hereunder does
not specify how the shares represented thereby is to be voted, such
shares will be voted FOR the election as directors of the persons
nominated by management, FOR the amendment to KCSI's Certificate of
Incorporation to increase the number of authorized shares of Common
Stock, FOR the amendment to KCSI's Certificate of Incorporation to
set a par value for the Common Stock, FOR the ratification of the
Board of Directors' selection of Price Waterhouse as KCSI's
independent accountants for 1994, and in accordance with the
discretion of the persons appointed proxy for such shares upon such
other matters as may properly come before the Annual Meeting.
However, such persons appointed proxies reserve the right to vote
such proxies cumulatively and for the election of less than all of
the nominees for directors, but do not intend to do so unless other
persons are nominated and such a vote appears necessary to assure
the election of the maximum number of management nominees.
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information based on the most
recent information available to KCSI concerning the beneficial
ownership of any of KCSI's Voting Stock by (i) beneficial owners of
more than five percent of any of KCSI's outstanding classes of
Voting Stock and (ii) all KCSI officers and directors as a group.
<TABLE>
<CAPTION>
S
<PAGE>
<C> <C> Name and Address Common Stock
(1)<PAGE>
Preferred
Stock(1)<PAGE>
FMR Corp. and
Edward C. Johnson 3d
82 Devonshire Street
Boston, Massachusetts 02109<PAGE>
3,942,790(2)
8.58%<PAGE>
0 Fidelity Management and
Research Company
82 Devonshire Street
Boston, Massachusetts 02109<PAGE>
3,905,890(2)
8.50%<PAGE>
0 Fidelity Magellan Fund
82 Devonshire Street
Boston, Massachusetts 02109<PAGE>
3,278,700(2)
7.13%<PAGE>
0 Warburg, Pincus Capital Company,
L.P., E.M. Warburg, Pincus & Co.,
Inc., Warburg, Pincus Ventures,
Inc. and Warburg, Pincus & Co.
466 Lexington Avenue
New York, New York 10017<PAGE>
3,978,400(3)
8.66%<PAGE>
0 Kansas City Southern Industries,
Inc. Employee Stock Ownership Plan
1010 Grand Avenue
Kansas City, Missouri 64106<PAGE>
5,484,272(4)
11.93%<PAGE>
0 United Missouri Bancshares, Inc.
and United Missouri Bank, n.a., as
co-trustee of the Kansas City
Southern Industries, Inc. Employee
Stock Ownership Plan and other
fiduciary accounts, 1010 Grand
Avenue, Kansas City, Missouri
64106<PAGE>
5,496,712(4)
11.96%<PAGE>
0 All Officers and Directors as a
Group (24 Persons)<PAGE>
3,420,796(5)
7.44%<PAGE>
400(*)
</TABLE>
* Less than 1% of the outstanding shares of the class
(1) Share amounts are stated in accordance with Rule 13d-3
under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), which results in the inclusion of
shares that may be acquired upon the exercise of stock
options that are exercisable on the Record Date or will
become exercisable within 60 days of such date and shares
allocated to the accounts of such persons under KCSI's
Employee Stock Ownership Plan (the "KCSI ESOP"). The
percentage ownership is based on number of shares
outstanding as of the Record Date. Except as otherwise
noted, the holders have sole voting and dispositive
power.
(2) Based on information reported in a joint filing on
Schedule 13G dated February 11, 1994. The Schedule 13G
also provides as follows: Edward C. Johnson 3d owns
34.0% of the outstanding voting common stock of FMR Corp.
and is Chairman of FMR Corp. Various Johnson family
members and trusts for the benefit of Johnson family
members own FMR Corp. voting common stock. These Johnson
family members, through their ownership of voting common
stock, form a controlling group with respect to FMR Corp.
Fidelity Management & Research Company ("Fidelity"),
which is a wholly-owned subsidiary of FMR Corp. and an
investment adviser registered under Section 203 of the
Investment Advisers Act of 1940, is the beneficial owner
of the Common Stock of KCSI as a result of acting as
investment adviser to several investment companies
registered under Section 8 of the Investment Company Act
of 1940, including the Fidelity Magellan Fund. Neither
FMR Corp. nor Edward C. Johnson 3d has the sole power to
vote or direct the voting of the shares of Common Stock
of KCSI owned directly by such investment companies,
which power resides with the boards of trustees of such
investment companies. Fidelity carries out the voting of
the shares of Common Stock of KCSI under written
guidelines established by such boards of trustees.
(3) Based on information reported in a joint filing on
Schedule 13D, as amended on November 29, 1988. All
shares are held by Warburg, Pincus Capital Company, L.P.
On February 14, 1994, Warburg, Pincus Capital Company,
L.P., an affiliate of E.M. Warburg, Pincus & Co.,
announced plans to distribute 4 million shares of the
Company's Common Stock to its limited partners, including
institutional holders and pension funds. The general
partners of Warburg, Pincus & Co. intend to continue to
retain a significant portion of the shares which they
will receive in the planned distribution.
(4) Based on information reported in Amendment No. 6 to
Schedule 13G, dated February 11, 1994 filed by United
Missouri Bank, n.a. ("UMB"), in Amendment No. 2 to
Schedule 13G dated February 11, 1994 filed by United
Missouri Bancshares, Inc. ("UMBI") and the Kansas City
Southern Industries, Inc. Employee Stock Ownership Plan
(the "KCSI ESOP"). Shares held by UMB include the shares
held as co-trustees of the KCSI ESOP. Voting and
dispositive power over the shares held by the KCSI ESOP
that are allocated to participant accounts are vested in
the KCSI ESOP participants (they have the right to direct
the voting of all such allocated shares and the tendering
of such shares in response to offers to purchase). All
unallocated shares are to be voted by the trustees in the
same proportion as the allocated shares. Mercantile Bank
of Kansas City, a subsidiary of Mercantile
Bancorporation, Inc. is co-trustee of the KCSI ESOP only
for purposes of voting. As trustee, UMB may be deemed to
have shared voting power and shared dispositive power
over the shares. UMBI may be deemed to beneficially own
the shares because of its ownership of UMB. However,
beneficial ownership is disclaimed by UMB and the KCSI
ESOP of the shares allocated to participants accounts
under the KCSI ESOP. UMBI is prohibited by law from
directing voting or disposition of the shares. Also
includes 12,440 shares held by UMB in other fiduciary
capacities, over which UMB may also be deemed to have
voting or dispositive power. Amounts do not include
shares held by UMB in custody accounts for which UMB does
not have voting or dispositive power.
(5) Includes 1,494,976 shares for which options are
exercisable or will become exercisable within 60 days and
115,288 shares allocated to the accounts of officers
under the KCSI ESOP.
<PAGE>
STOCK OWNED BENEFICIALLY BY DIRECTORS AND CERTAIN OFFICERS
The following table sets forth information, as of March 4,
1994, concerning the Board of Directors' of KCSI and certain
officers' beneficial ownership of any of KCSI's Voting Stock. No
officer or director of KCSI owns any equity securities of any
subsidiary of KCSI, except for directors' qualifying shares and
Thomas H. Bailey, who serves as president and chairman of the board
of Janus Capital Corporation, a KCSI subsidiary, owns 1,738,738
(17.5%) of the outstanding common stock of that subsidiary.
<TABLE>
<CAPTION>
<S> <C> <C>
Name and Relationship<PAGE>
Common Stock (1) Preferred
Stock (1)<PAGE>
A. Edward Allinson
Director<PAGE>
6,800(*)(2) --- Thomas H. Bailey
Chairman and President
of Janus Capital
Corporation<PAGE>
5,578(*)(4) --- Paul F. Balser
Director<PAGE>
6,000(*)(5) --- James E. Barnes
Director<PAGE>
9,000(*)(5) --- Thomas S. Carter
Director<PAGE>
319,134(*)(8) 400(*) James B. Dehner
Vice President of KCSI
and Executive Vice
President and Chief
Operating Officer of
KCSR<PAGE>
77,117(*)(6) --- George W. Edwards, Jr.
Director, Executive
Vice President and
Member of the Office of
the Chief Executive of
KCSI, and President and
Chief Executive Officer
of KCSR<PAGE>
430,014(*)(7) --- Michael G. Fitt
Director<PAGE>
7,200(*)(3) --- Paul H. Henson
Chairman of the Board<PAGE>
198,340(*)(9) --- Mark M. Levin
Director<PAGE>
100(*) --- Thomas A. McDonnell
Director, Executive
Vice President and
Member of the Office of
the Chief Executive of
KCSI, and Vice
Chairman, President,
Chief Executive Officer
and Treasurer of DST
Systems, Inc.<PAGE>
545,357(1.19%)(10) --- Landon H. Rowland
Director, President,
Chief Executive Officer
and Member of the
Office of the Chief
Executive of KCSI<PAGE>
1,179,534(2.57%)(11) --- Morton I. Sosland
Director<PAGE>
91,688(*)(12) --- All Directors and
Officers as a Group (24
Persons)<PAGE>
3,420,796(7.44%)(13) 400(*)</TABLE>
* Less than 1% of the shares outstanding of the class
(1) Share amounts calculated in accordance with Rule 13d-3 under
the Exchange Act, which results in the inclusion of shares
that may be acquired upon the exercise of options that are
exercisable at the Record Date or will become exercisable
within 60 days of such date and shares allocated to the
accounts of such persons under the KCSI ESOP. Percentage
ownership is based on the number of shares outstanding as of
the Record Date. The holders may disclaim beneficial
ownership of shares included that are owned by or with family
members, trusts or other entities. Except as noted and except
for shares held by the KCSI ESOP, the holders have sole voting
and dispositive power.
(2) Includes 4,800 shares with respect to which options are
exercisable or will become exercisable within 60 days.
(3) Includes 4,000 shares with respect to which options are
exercisable or will become exercisable within 60 days.
(4) Includes 4,246 shares allocated to his account under the KCSI
ESOP.
(5) Includes 6,000 shares with respect to which options are
exercisable or will become exercisable within 60 days.
(6) Includes 40,000 shares with respect to which options are
exercisable or will become exercisable within 60 days and
10,202 shares allocated to his account under the KCSI ESOP.
(7) Includes 60,000 shares with respect to which options are
exercisable or will become exercisable within 60 days and
4,246 shares allocated to his account under the KCSI ESOP.
(8) Includes 2,000 shares with respect to which options are
exercisable or will become exercisable within 60 days.
(9) Includes 5,570 shares allocated to his account under the KCSI
ESOP.
(10) Includes 1,596 shares held by his wife as to which beneficial
ownership is disclaimed and 80,000 shares with respect to
which options are exercisable or will become exercisable
within 60 days and 14,958 shares allocated to his account
under the KCSI ESOP, but does not include shares owned by the
DST Profit Sharing Plan.
(11) Includes 948,952 shares with respect to which options are
exercisable or will become exercisable within 60 days and
16,884 shares allocated to his account under the KCSI ESOP and
156 shares in the KCSI Profit Sharing Plan.
(12) Includes 6,000 shares with respect to which options are
exercisable or will become exercisable within 60 days and
1,600 shares held as trustee over which he has sole voting and
dispositive power. Also includes the following shares over
which he has shared voting and dispositive power, but as to
which beneficial ownership is disclaimed: 4,000 shares held by
Sosland Companies, Inc.; 16,800 shares held as co-trustee of
a testamentary trust; 25,600 shares in a charitable foundation
of which he is a director as to which he disclaims beneficial
ownership; 8,000 shares held by Nine-Fifteen Wyandotte, Inc.
of which he is a director; 12,000 shares in a testamentary
trust of which he is co-trustee; and 4,000 shares held by his
wife.
(13) Includes 1,494,976 shares with respect to which options are
exercisable or will become exercisable within 60 days and
115,288 shares allocated to the accounts of officers under the
KCSI ESOP.
<PAGE>
PROPOSAL (1) - ELECTION OF FOUR DIRECTORS
Four directors are to be elected for three-year terms, to
serve until the Annual Meeting of Stockholders in 1997 or until
their successors are elected and qualified. All of the nominees
are presently directors of KCSI, have indicated that they are
willing and able to serve as directors if elected, and have
consented to be named as nominees in this Proxy Statement. For a
possible limitation on the service of some of the KCSI directors,
including two of the nominees, see "Depository Institution
Management Interlocks Act" below. If any nominee should become
unable or unwilling to serve, the persons appointed proxy pursuant
to the enclosed proxy card intend to vote for one or more
substitute nominees chosen by them in their sole discretion. The
directors are elected by the affirmative vote of the plurality of
shares of Voting Stock present at the Annual Meeting that are
entitled to vote on the election of directors.
The Board of Directors is divided into three classes, with
members of each class serving a three-year term.
INFORMATION ABOUT NOMINEES AND PRESENT DIRECTORS
The following tables set forth certain information about the
nominees and about the other present directors of KCSI who will
continue in office after the Annual Meeting. Other information
about the directors, nominees and the Board is set forth below
under "Information Concerning the KCSI Board of Directors and
Certain Committees".
<TABLE>
<CAPTION>
Nominees For Reelection
S
<PAGE>
<C> <C> <C> <C> Name Age Position
with KCSI<PAGE>
Director
Since<PAGE>
Nominated
for Term
Expiring<PAGE>
George W.
Edwards, Jr.<PAGE>
54 Executive
Vice
President,
Member of
the Office
of the
Chief
Executive
and
Director<PAGE>
1991 1997 Michael G.
Fitt
(1),(3),(4)<PAGE>
63 Director 1986 1997 Thomas A.
McDonnell<PAGE>
48 Executive
Vice
President,
Member of
the Office
of the
Chief
Executive
and
Director<PAGE>
1983 1997 Morton I.
Sosland
(1),(2),(4)<PAGE>
68 Director 1976 1997 Directors Who Will Continue in Office A. Edward
Allinson
(1),(3)<PAGE>
59 Director 1990 1995 Paul F.
Balser
(2),(4)<PAGE>
52 Director 1990 1995 Paul H.
Henson
(3),(4)<PAGE>
68 Chairman of
the Board<PAGE>
1990 1995 Landon H.
Rowland (3)<PAGE>
56 President,
Chief
Executive
Officer,
Member of
the Office
of the
Chief
Executive
and
Director<PAGE>
1983 1995 James E.
Barnes
(2),(4)<PAGE>
60 Director 1986 1996
<PAGE>
Thomas S.
Carter
(3),(2)<PAGE>
72 Director 1973 1996 Mark M.
Levin<PAGE>
46 Director 1993 1996
</TABLE>
____________________
(1) Audit Committee Member
(2) Compensation and Organization Committee Member
(3) Executive Committee Member
(4) Finance and Strategy Committee Member
<PAGE>
INFORMATION CONCERNING THE KCSI BOARD OF DIRECTORS
AND CERTAIN COMMITTEES
PRINCIPAL OCCUPATIONS
Information concerning the principal occupations of the
nominees and directors during the past five years is set forth
below.
NOMINEES FOR DIRECTOR TO SERVE UNTIL THE ANNUAL MEETING OF
STOCKHOLDERS IN 1997
GEORGE W. EDWARDS, JR., Executive Vice President of KCSI and a
member of the Office of Chief Executive of KCSI and President and
Chief Executive Officer of The Kansas City Southern Railway Company
("KCSR") since April 1, 1991. He previously served as Chairman of
the Board and Chief Executive Officer of The United Illuminating
Company, New Haven, Connecticut from April 1987 through April 1991
and as President and Chief Executive Officer of that company from
April 1985 to April 1987. He also serves as a director of The
Aquarion Company, Bridgeport, Connecticut, El Paso Electric
Company, El Paso, Texas and Hubbell, Inc., Orange, Connecticut.
MICHAEL G. FITT, Retired. He was Chairman and Chief Executive
Officer of Employers Reinsurance Corporation, Overland Park,
Kansas, from 1980 through 1992 and President of that company from
1979 through 1991. He is also a director of Boatmen's Bancshares,
Inc., St. Louis, Missouri, Boatmen's First National Bank, Kansas
City, Missouri and NACRE Corp., Greenwich, Connecticut. Employers
Reinsurance Corporation is a subsidiary of General Electric
Financial Services, Inc. For a possible limitation on the service
of Mr. Fitt, stockholders should see the discussion below under
"Depository Institutions Management Interlocks Act".
THOMAS A. MCDONNELL, Executive Vice President of KCSI since
February 1987 and a member of the Office of Chief Executive of KCSI
since 1989. He has served as Vice Chairman of the Board of KCSI's
subsidiary, DST Systems, Inc. ("DST") since October 1984, as a
director of DST since 1971, as President of DST since March 1987
(having previously served in such position from 1973 until October
1984), and as Treasurer of DST since 1973. He is Chief Executive
Officer of DST and has had executive responsibility of DST since
1985. He has also served as a director of KCSR since December
1989. He is a director of Janus Capital Corporation, Denver,
Colorado, Informix Software, Inc., Menlo Park, California, BHA
Group, Inc., Kansas City, Missouri, and The Continuum Company,
Inc., Austin, Texas.
MORTON I. SOSLAND, Chairman of Sosland Companies, Inc., Kansas
City, Missouri, as of January 1993 and President from July 1968
through December 1992, which are publishers and venture investors.
He is also a director of Brown Group, Inc., St. Louis, Missouri,
Hallmark Cards, Incorporated, Kansas City, Missouri, H & R Block,
Inc., Kansas City, Missouri, AgriStar, Inc., Conroe, Texas, and
Commerce Bancshares, Inc., Kansas City, Missouri. For a possible
limitation on the service of Mr. Sosland, stockholders should see
the discussion below under "Depository Institutions Management
Interlocks Act".
DIRECTORS SERVING UNTIL THE ANNUAL MEETING OF STOCKHOLDERS IN 1995
A. EDWARD ALLINSON, Executive Vice President of the Global
Financial Asset Services, formerly the Mutual Fund Services, of
State Street Bank and Trust Company, Chairman of the Board of
Directors and Chief Executive Officer of Boston Financial Data
Services, Inc. and Executive Vice President of State Street Boston
Corporation since March 1990. He served as a director of DST from
1977 to November 1990 and as President of Mitchell Hutchins Asset
Management from June 1987 to February 1990. From December 1977 to
June 1987, Mr. Allinson was Executive Vice President of the Chase
Manhattan Bank, New York, New York.
PAUL F. BALSER, a Partner of Centre Partners, New York, New York,
since September 1986. He served as a director of DST from 1983 to
November 1990, and was a Managing Director and member of the Board
of Directors of J. Henry Schroder Corporation, New York, New York
from April 1982 until September 1986. He also serves as a director
of Carbide/Graphite Group, Inc., Pittsburgh, Pennsylvania,
Scientific Games, Inc., Atlanta, Georgia, and United Retail Group,
Inc., Rochelle Park, New Jersey.
PAUL H. HENSON, Chairman of the Board of KCSI since May 1, 1990.
He previously served as Chairman of the Board of United
Telecommunications, Inc., which has been renamed as Sprint
Corporation, Shawnee Mission, Kansas, from 1966 to April 30, 1990,
and he still serves as a director of that company. He is also a
director of Armco, Inc., Parsippany, New Jersey, Duke Power Company
of Charlotte, North Carolina, and Hallmark Cards, Incorporated,
Kansas City, Missouri. Mr. Henson also served as Chief Executive
Officer of United Telecommunications, Inc. from 1966 to 1985 and
was a director of KCSI from 1966 through 1980.
LANDON H. ROWLAND, President of KCSI since July 1983, has been
Chief Executive Officer of KCSI since January 1987 and was Chief
Operating Officer from July 1983 through December 1986. He was
President and Chief Executive Officer of KCSR from October 1990 to
April 1991, and has been Chairman of the Board since May 1990 and
a director since May 1982 of KCSR, and has been Chairman of the
Board and a director of DST since June 1983. He was Vice President
of KCSI from August 1980 until July 1983. He was also a director
of Boatmen's First National Bank, Kansas City, Missouri until
March 31, 1992.
DIRECTORS SERVING UNTIL THE ANNUAL MEETING OF STOCKHOLDERS IN 1996
JAMES E. BARNES, Chairman of the Board of MAPCO, Inc., Tulsa,
Oklahoma, since May 1986, and Chief Executive Officer of that
company since February 1984. He also served as President of that
company from February 1984 until December 1991. MAPCO owns,
develops, produces and transports coal, petroleum and gas products.
In addition to serving as a director of MAPCO, he is also a
director of Southwestern Bell Corporation, San Antonio, Texas and
a director of BOK Financial Corporation, Tulsa, Oklahoma.
THOMAS S. CARTER, Retired. He previously served as Chairman of the
Board of KCSI's subsidiaries, KCSR and the Louisiana and Arkansas
Railway Company ("L&A") from July 1983 until 1990, and as a
director of both companies from 1973, until May 1, 1990. He also
served as President of both companies from January 1983 to January
1986, and as Chief Executive Officer of KCSR from 1982 to 1990 and
of L&A from 1981 to 1990.
MARK M. LEVIN, Consultant. He is currently consulting with the
management of KCSR. He previously served as Chairman and Chief
Executive Officer of MidSouth Corporation, which was a holding
company of four operating railroad subsidiaries and that was
acquired by KCSI in June 1993, from March 1989 through June 1993.
Prior to that he was a partner in a law firm from November 1984
through March 1989.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of KCSI has established an executive
committee (which also makes nominations), an audit committee, a
compensation and organization committee, and a finance and strategy
committee, among others.
EXECUTIVE COMMITTEE
The Executive Committee consists of KCSI's Chairman of the
Board, its Chief Executive Officer and three outside directors
elected by the Board to serve one-year terms. When the Board is
not in session, the Executive Committee has all the powers in the
management of KCSI of the Board in all cases in which specific
direction has not been given by the full Board.
The Executive Committee also serves as the Board's nominating
committee and makes recommendations to the Board as to suitable
nominees for election to the Board of Directors by KCSI's
stockholders and to fill newly created directorship or vacancies in
the Board. The Chief Executive Officer is a non-voting member with
respect to nomination activities. As a part of its nominating
duties, the Executive Committee may meet with and consider
suggestions from Board members, management, consultants and others
in formulating its recommendations. The Executive Committee
generally will consider director nominees recommended by
stockholders. Stockholders should see "Stockholder Proposals" and
"Other Matters" below for information relating to the submission by
stockholders of nominees and matters for consideration at a meeting
of KCSI stockholders.
AUDIT COMMITTEE
The Audit Committee consists of three outside directors
elected by the Board of Directors to serve staggered three-year
terms. The Audit Committee meets with and considers suggestions
from members of management and of KCSI's internal audit staff, as
well as KCSI's independent accountants, concerning the financial
operations of KCSI. The Audit Committee also reviews the audited
financial statements of KCSI and considers and recommends the
employment of and approves the fee arrangement with independent
accountants for audit functions and for advisory and other
consulting services.
COMPENSATION AND ORGANIZATION COMMITTEE
The Compensation and Organization Committee (the "COC")
consists of four outside directors elected by the Board to serve
one-year terms. The COC authorizes all salaries for KCSI and
subsidiary company officers and supervisory employees, other than
officers and supervisory employees of Janus Capital Corporation
earning $100,000 or more per year, administers the incentive
compensation plans of KCSI, KCSR and DST in accordance with the
terms of those plans and determines any incentive allowances made
to their officers and staff. In addition, the committee
administers KCSI's employee stock purchase plan under which
eligible employees of KCSI and its subsidiaries and affiliates are
permitted to subscribe to and purchase shares of KCSI common stock
through payroll deductions.
The COC also has the authority to review the consolidated
earnings of KCSI and to make recommendations to the Board about the
allocation of funds to KCSI's profit sharing plan. The COC also
reviews the results of the investment program of the profit sharing
plan and reports to the Board.
The COC acts as KCSI's stock option plan committee, and
administers KCSI's stock option plans, other than the 1993
Directors' Stock Option Plan, in accordance with KCSI's By-laws,
the terms of the plans and the applicable laws. The COC is also
responsible for an annual update of succession plans and major
organizational changes.
FINANCE AND STRATEGY COMMITTEE
The Finance and Strategy Committee consists of KCSI's Chairman
of the Board and four outside directors elected by the Board to
serve one-year terms. The Finance and Strategy Committee is
responsible for reviewing financial plans, major capital
investments, long-term strategic plans, and KCSI's acquisition and
divestiture programs and to make recommendations to the Board.
ATTENDANCE AT BOARD AND COMMITTEE MEETINGS
During 1993, there were six meetings of the Board of
Directors, two meetings of the Executive Committee, three meetings
of the Audit Committee, two meetings of the Finance and Strategy
Committee and six meetings of the Compensation and Organization
Committee and one meeting of the Pricing Committee. All directors
attended at least 75% of the total of all meetings of the Board and
all committees on which they served during 1993.
COMPENSATION OF DIRECTORS
During 1993, directors, who are not officers or employees of
KCSI, its subsidiaries or affiliates, received a $21,000 annual
retainer, payable quarterly, and $2,000 plus expenses for each KCSI
Board meeting attended and $1,000 for each telephonic board meeting
in which they participated. Such directors also received $1,000
plus expenses for each KCSI committee meeting attended and each
committee chairman received a $3,000 annual retainer fee.
Directors of KCSI and certain subsidiaries are permitted to
defer receipt of directors' fees under unfunded directors' deferred
fee plans adopted by the respective boards of directors, and either
to receive interest on such fees until they have been paid to them
or if they are a director of KCSI, in lieu of receiving interest,
to have earnings on their deferred fees determined pursuant to a
formula based on the performance of certain mutual funds advised by
Janus Capital Corporation. The rate of interest to be paid under
the KCSI and KCSR plans is set at the prime rate of a certain
national bank less 1%. Under the DST Deferred Fee Plan, interest
paid on deferred fees is based upon the performance of the DST
Profit Sharing Plan. Distributions under the plans are allowed in
certain instances as approved by the respective boards of
directors. The KCSI, KCSR and DST deferred fee plans also allow
the respective directors to elect to receive deferred amounts in
installments payable over several years. Deferred fees and accrued
interest thereon for 1993 are included in the amounts shown in the
Summary Compensation Table below.
Pursuant to the terms of the KCSI Directors' Retirement Plan,
any director of KCSI who has served five years as a director
without simultaneously being employed by KCSI or any of its
subsidiaries is eligible to receive benefits under the plan. The
retirement plan provides that, following retirement, eligible
directors will receive a monthly benefit payment equal to one-
twelfth of a percentage, varying from 40% to 55% depending upon the
number of years of service, of the average monthly directors' fee
paid the directors for Board and committee service during the 36
month period immediately preceding retirement. Directors serving
five to eight years will receive benefits at a 40% level and
directors serving from nine to fifteen years will receive benefits
at a 50% level for a period equal to the number of months served,
whereas directors serving over 15 years will receive benefits at a
55% level until their death. The retirement plan also allows
directors to choose a reduced benefit payable until the death of
both the retired director and his spouse, and allows KCSI to
convert retirement benefits to an annuity payable over a number of
years.
Members of the Board of Directors of Janus Capital Corporation
receive an annual retainer fee of $3,500 and a fee of $500 per
meeting attended. Mr. McDonnell received no fee as a director of
Janus in 1993, 1992 and 1991. Beginning May 1, 1993, no directors'
fees will be paid to the Directors of KCSR.
KCSI has entered into a three year contract with Mark Levin
commencing July 15, 1993, which agreement may be terminated at the
will and in the sole discretion of KCSR management. Mr. Levin is
to provide advice to the management of KCSR in the areas of
strategic planning, acquisitions, certain international business
ventures and such other duties as Mr. Edwards shall determine. Mr.
Levin is to be paid $100,000 per year for his services and is to be
reimbursed for the reasonable costs of maintaining an office. In
addition, Mr. Levin was granted options for 50,000 shares of Common
Stock. The options become exercisable for the first 20,000 shares
on the first annual anniversary date of the grant, the next 15,000
shares on the second anniversary date and the remaining 15,000
shares on the third anniversary date. Upon termination of the
agreement, Mr. Levin is entitled to receive the salary that he had
accrued through the date of termination and may exercise those
options that were exercisable on or before his termination date for
90 days after such date.
COMPENSATION AND ORGANIZATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
A. Edward Allinson, who served as a member of the Compensation
and Organization Committee for part of 1993, is the Chairman of the
Board of Boston Financial Data Services, Inc. ("BFDS"), a joint
venture between DST Systems, Inc. and State Street Bank and Trust
Co., which each have a 50% interest in the venture. Thomas S.
Carter, who is a member of the Compensation and Organization
Committee, was an officer of KCSR and L&A until his retirement in
May of 1990.
DEPOSITORY INSTITUTION MANAGEMENT INTERLOCKS ACT
A federal law, the Depository Institution Management
Interlocks Act, precludes, in certain circumstances, persons from
serving as directors or officers of more than one "depository
institution" or "affiliate" of such institution. Under some
interpretations of that Act, Investors Fiduciary Trust Company, a
subsidiary of KCSI ("IFTC"), may be regarded as a "depository
institution," and KCSI may be regarded as its "affiliate." In such
event, Messrs. Barnes, Fitt and Sosland could be precluded from
continuing to serve as directors of KCSI if they remained on the
boards of directors of the banks and bank holding companies
identified above, and Mr. Allinson also could not continue as a
KCSI director if he remained a bank officer. The appropriate
regulatory authorities have indicated that they will take no action
to require these directors to resign their positions, pending
completion of a review and reconsideration of such interpretations
of the Act. This forbearance is predicated upon the directors'
undertaking that they will not vote or otherwise participate in
matters relating to IFTC. If it should be determined that the Act
precludes such continued service, these directors will be required
to resign their positions with such banks or bank holding companies
or to resign from the Board of KCSI.
<PAGE>
PROPOSAL (2) - APPROVAL OF AN AMENDMENT TO KCSI'S CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON
STOCK
The Board of Directors has unanimously voted in favor of
proposing to KCSI's stockholders an amendment to KCSI's Certificate
of Incorporation to increase the number of shares of Common Stock
currently authorized in such certificate. The proposed amendment
is to increase the number of shares of Common Stock authorized for
issuance by KCSI from 100,000,000 to 400,000,000. Of the
100,000,000 shares of Common Stock currently authorized, 43,369,807
shares were issued and outstanding on the Record Date.
The increase will give KCSI additional shares for such uses as
the Board may from time to time in the future determine
appropriate, including for the declaration of stock dividends or
splits, for raising additional capital, for acquisitions or for
issuance in connection with KCSI's employee benefit, stock purchase
or stock option plans. The Board is not currently considering any
such transactions, however. Approval of the proposed amendment at
the Annual Meeting will also minimize any additional costs and
delays in obtaining stockholder approval of an increase of
authorized shares of Common Stock should the Board resolve to issue
the additional shares in the future.
The Board does not intend that the increase in the number of
authorized shares of Common Stock be part of any series of anti-
takeover measures by KCSI and is not aware of any proposed plans to
takeover KCSI. Nonetheless, the availability of authorized but
unissued shares of Common Stock could be used to make any attempt
to gain control of KCSI more difficult and thereby more difficult
to remove current management. The authorized but unissued shares
of Common Stock could be issued to increase the number of shares of
Common Stock that a stockholder would need to take control of KCSI
or cause it to merge or consolidate with another entity or
dissolve.
The stockholders of KCSI currently do not have any preemptive
right to purchase additional shares of Common Stock upon the
issuance of such shares. The proposed amendment would not give the
stockholders that right.
The affirmative vote of a majority of shares entitled to vote
on the proposal that are present at the Annual Meeting is required
for adoption of the proposed amendment, assuming a quorum is
present. The Board does not anticipate soliciting the
authorization of KCSI's stockholders for the issuance of additional
shares of Common Stock except as the Board may determine is
appropriate or as may be required by applicable law or by the rules
of any stock exchange on which the Common Stock may then be listed.
If the proposed amendment is approved at the Annual Meeting,
such amendment will become effective on the date on which a
certificate of amendment is filed with the Secretary of State of
Delaware, KCSI's state of incorporation. If approved, management
of KCSI anticipates filing the amendment as soon as practicable
following the Annual Meeting.
YOUR BOARD RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF
AMENDMENT TO KCSI'S CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF SHARES OF AUTHORIZED COMMON STOCK
<PAGE>
PROPOSAL (3) - APPROVAL OF AMENDMENT TO KCSI'S CERTIFICATE OF
INCORPORATION TO SET A PAR VALUE FOR THE COMMON STOCK
The Board of Directors has unanimously voted in favor of
proposing to KCSI's stockholders an amendment to KCSI's Certificate
of Incorporation to set a par value for the shares of Common Stock.
The proposed amendment is to set the par value per share of Common
Stock at $0.01. KCSI's Certificate of Incorporation currently
provides that the Common Stock has no par value.
The establishment of a par value for the Common Stock will
help lower the fees and taxes assessed against KCSI by Missouri, a
state in which KCSI is qualified to do business, and may help to
reduce fees and taxes assessed by states in which KCSI may qualify
to do business in the future. (Management currently has no plans
to register to do business in any other states.) Some states,
including Missouri, assess certain fees and taxes based upon the
par value of the stock of a company incorporated or doing business
there. When a company's stock has no par value, some states,
including Missouri, arbitrarily assign a stated value to the stock
and assess the fees and taxes based upon such stated value. The
par value that the Board is proposing to set is lower than the
stated value assigned by Missouri, and therefore is expected to
reduce the amount of the fees and taxes that are assessed by
Missouri.
Under Delaware law, a specified portion of the consideration
received by KCSI upon the sale of its stock is to be capital unless
the Board of Directors determines that only part of such
consideration is capital and allocates the remainder to surplus.
If stock with no par value is sold, the Board is required to leave
in capital an amount equal to part of the consideration received,
with no minimum prescribed. In contrast, if stock with a par value
is sold, the Board is required to leave in capital an amount equal
to the aggregate par value of the shares sold. Thus, if the
proposed amendment is approved, in connection with future offerings
of the Common Stock, the Board will not be able to allocate to
surplus as much as it could with no par stock.
Under Delaware law, the Board also has the authority to reduce
capital by transferring a portion to surplus. If KCSI has
outstanding stock with no par value, the Board is required to leave
in capital an amount equal to some of the capital represented by
issued shares of no par stock outstanding, with no minimum
prescribed. In contrast, if KCSI has outstanding stock with a par
value, the Board is required to leave in capital an amount equal to
the aggregate par value of the shares outstanding. Thus, if the
amendment is approved, the Board will not be able to allocate to
surplus as much as it could with no par stock.
Approval of this amendment would have no effect on KCSI's
stockholders current rights, to the best of management's knowledge
and belief. The amendment will also not have any current effect on
the capital of KCSI. Approval of the proposed amendment will not
require, under Delaware law, an adjustment to capital, and although
the Board has the authority under Delaware law to change capital,
the Board has no current plans to do so.
Management believes that any future impact of the proposed
amendment on KCSI's stockholders should be minimal. The Board may
only declare dividends out of surplus and not out of capital and,
as discussed above, the proposed amendment would increase the
minimum amount of capital KCSI could have. If the proposed
amendment is adopted, KCSI would be required to maintain as capital
no less than $433,698 as of the Record Date. As of December 31,
1993, KCSI had $30,900,000 in capital associated with the Common
Stock and $102,600,000 in surplus.
The affirmative vote of a majority of shares entitled to vote
on the proposal that are present at the Annual Meeting is required
for adoption of the proposed amendment, assuming a quorum is
present. If the proposed amendment is approved at the Annual
Meeting, such amendment will become effective on the date on which
a certificate of amendment is filed with the Secretary of State of
Delaware, KCSI's state of incorporation. If approved, management of
KCSI anticipates filing the amendment as soon as practicable
following the annual meeting.
YOUR BOARD RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF
AMENDMENT TO KCSI'S CERTIFICATE OF INCORPORATION
TO SET A PAR VALUE FOR THE COMMON STOCK
PROPOSAL (4) - RATIFICATION OF THE BOARD OF DIRECTORS'
SELECTION OF INDEPENDENT ACCOUNTANTS
The Audit Committee has recommended, and the Board of
Directors has selected, the firm of Price Waterhouse as independent
accountants to examine the consolidated financial statements of
KCSI for the year 1994. No relationship exists between KCSI and
Price Waterhouse other than that of independent accountant and
client.
Price Waterhouse served as KCSI's, KCSR's and DST's
independent accountants for 1993. As such, Price Waterhouse
performed professional services in connection with the examination
of the consolidated financial statements of KCSI. Such services
included examinations of the consolidated financial statements of
KCSI and of the financial statements of various subsidiaries,
review of reports filed with the Securities and Exchange Commission
and review of control procedures of the mutual fund processing
system of DST. In addition, Price Waterhouse provided consulting
services to KCSI and certain of its subsidiaries during 1993.
One or more representatives of Price Waterhouse will be
present at the Annual Meeting and will have the opportunity to make
a statement if they desire and to respond to appropriate questions
by stockholders.
YOUR BOARD RECOMMENDS THAT YOU VOTE "FOR"
RATIFICATION OF THE BOARD OF DIRECTORS
SELECTION OF PRICE WATERHOUSE
<PAGE>
MANAGEMENT COMPENSATION
COMPENSATION AND ORGANIZATION COMMITTEE REPORT ON EXECUTIVE
COMPENSATION
The Board of Directors of KCSI believes that increasing the
value of KCSI to its stockholders is the Board's most important
objective and should be the key measure of management performance.
The Board also believes that executive compensation should be
objectively determined. For this reason, the Compensation and
Organization Committee, which is made up of four directors who are
not employees of KCSI, is responsible for determining the
compensation packages of KCSI's executives.
The Committee's role in determining the compensation of the
executives of KCSI is to assure that KCSI's compensation strategy
is aligned with the Board's overall objective and that executive
compensation is structured to provide fair, reasonable and
competitive base salary levels and the opportunity for the
executives to earn incentive compensation reflecting both KCSI's
and the individual's performance. The Committee, from time-to-
time, utilizes the expertise of independent compensation
consultants.
The Committee has significantly restructured the executives'
compensation packages in the last several years to implement a
strategy designed to accomplish the Board's objective. The
strategy is based upon the principles that executive performance
should be judged and compensated primarily on the basis of KCSI's
earnings and the strength of KCSI's financial position; long-term
changes in stockholder value are the most appropriate measure of
KCSI's financial performance; and the most effective approach to
promoting the financial success of KCSI is to align the
stockholders' and the executives' interests.
The Committee concluded that this alignment is best
accomplished through a compensation strategy emphasizing long-term
stock ownership. As a result, the executives' compensation
packages were restructured to decrease the proportion of short-term
cash compensation and to increase the proportion of long-term
compensation tied to increases in KCSI's earnings and financial
position. For the members of the Office of the Chief Executive,
who are Messrs. Rowland, McDonnell and Edwards, annual cash
compensation will be primarily in the form of base salary, which is
being maintained at levels consistent with competitive market pay
practices, along with incentive compensation primarily in the form
of restricted stock and stock options. The intent of the
restructured compensation packages is to link the level of the
executives' compensation with changes in stockholders' value.
In order to help ensure that this strategy is implemented, the
Committee has expressed its intent in the employment agreements of
executives that future awards of stock incentives to the executives
are dependent upon such executives retaining ownership of a
substantial portion of the shares of KCSI Common Stock acquired
through the stock incentives awarded after March 1992. The members
of the Office of the Chief Executive, as part of their employment
agreements, have agreed to retain a majority (less shares forfeited
or used to pay the option exercise price or taxes) of all
restricted stock and stock acquired through the exercise of options
awarded under those agreements.
The Committee believes that while KCSI should provide an
opportunity for its executives to acquire a significant equity
stake in KCSI, realization of the benefits of this opportunity
should generally occur only after the stockholders have had the
benefit of an increase in the value of their investment in KCSI.
The Committee intends that the application of these principles
results in total compensation and capital accumulation potential
for the executives above competitive levels for superior
stockholder returns and below competitive levels for average or
lesser returns.
There are three components to KCSI's executives' compensation
packages: Base Salary, Annual Cash Incentives and Stock
Compensation. Each of these components is discussed in detail
below.
Base Salary
The Committee determines the level of base salaries by
competitive market practices and by individual contribution and
performance. The Committee utilizes a number of surveys to
determine compensation practices. The surveys are prepared or
otherwise obtained by the independent compensation consultants to
the Committee, and focus only on U. S. based companies generally of
similar size because competition for executives is not limited to
the asset management, railroad and transaction processing
industries. In certain instances, however, the Committee looked at
industry specific surveys. The financial performance of the
companies surveyed is not a factor of the survey. These surveys do
include some of the companies that make up the Fortune 50
Transportation Group, which is the industry group used for
comparing share investment performance in the Stock Performance
Graph below.
Based upon the surveys, the Committee is able to determine
what the competitive range of base salaries is for a particular
position. The Committee targets the median of the range for
setting base salary levels for the executives, but may adjust the
salaries as a result of an individual's past performance, level of
responsibility and experience as well as business performance and
general economic factors.
Effective January 1992, the members of the Office of the Chief
Executive entered into employment contracts with KCSI that fixed
their base salaries for five years at $500,000 annually. The
Committee set their base salaries at levels that were between the
median and seventy-fifth percentile levels indicated in the
surveys. The Committee chose such levels based upon its overall
strategy of compensating such executives primarily through stock
based incentives.
Annual Incentives
Annual cash incentive awards to executives are based primarily
on overall business unit and corporate earnings and cash flow
performance, modified to reflect individual contribution and
performance. Under the incentive awards program, minimum, target
and maximum level corporate and personal goals are established
annually by the Committee. The minimum level goals must be met in
order for an executive to receive any incentive award. If the
corporate and the executive's target goals are attained, an
executive will receive an incentive award of between 30 and 50
percent of his or her base salary depending upon the executive's
level of responsibility. Incentive awards for attainment of the
corporate and personal minimum goals are one-half of the target
goal award and maximum goals are two times the target goal award.
For the members of the Office of the Chief Executive, participation
in KCSI's annual cash incentive programs has been discontinued
through December 1996.
Stock Compensation
The key component to the Committee's strategy is to make stock
incentives, which consist primarily of awards of stock options and
restricted stock, a significant portion of the executives'
compensation package. Generally, the number of options and shares
of restricted stock that an executive is awarded is tied to the
compensation targets for that individual during the period covered
by the grant. Through the application of option pricing models and
other valuation analysis to data concerning stock incentives in the
compensation surveys (see the discussion under Base Salary), the
Committee is able to determine a range of values and numbers of
stock incentives to be awarded. In determining the amount of stock
incentives to be awarded to an executive, the Committee also
considers previous awards, whether the executive has exercised, to
the extent possible, options previously awarded and whether the
shares of KCSI Common Stock acquired thereby or shares of
restricted stock previously awarded have been retained.
For purposes of determining the number of options to be
granted the members of the Office of the Chief Executive under
their employment agreements, the Committee also considered the risk
adjusted present value of annual cash incentives that these
executives might have earned over the five-year term of their
employment agreements had they participated in such programs. In
addition, these options were structured so that there had to be
substantial appreciation in the market price of KCSI Common Stock
in order for total compensation of the members of the Office of the
Chief Executive to equal or exceed the estimated amount of total
compensation that they would have received under the prior
compensation structure. To provide additional incentives to the
members of the Office of the Chief Executive, the Committee
structured the awards of stock options incentives in 1991 and 1992
to reward the executives when KCSI's market value reached certain
predetermined levels and remained at or above those levels for
thirty consecutive trading days or if the executives remain
employed with KCSI over a prescribed period. Each of these
predetermined levels were established by assuming appreciation in
the market price for KCSI Common Stock from the date of grant at a
rate that was slightly above the average historical return of the
S&P 500 (See the footnotes to the Performance Graph below). By
structuring the option awards this way, the members of the Office
of the Chief Executive would not be rewarded unless the
stockholders of KCSI first received an above average market return.
All of these levels were reached in 1992.
The Committee also has a policy of encouraging the executives
to retain such stock incentives, as previously discussed. By tying
the executives' compensation and net worth to KCSI's Common Stock,
the Committee seeks to focus the attention of the executives on the
Board's overall objective of building long-term stockholder value.
The Committee did not award any stock options to the members
of the Office of the Chief Executive in 1993. However, consistent
with KCSI's compensation strategy, the Committee awarded options to
certain other executives.
Landon H. Rowland, CEO
KCSI entered into an employment agreement with Mr. Rowland
that was effective January 1, 1992, which is based upon the
principles discussed above in connection with the members of the
Office of the Chief Executive. Thus, during the five-year term of
the agreement, Mr. Rowland's base salary is fixed, and he is
ineligible to participate in KCSI's annual cash incentive
compensation programs. In addition, Mr. Rowland was awarded stock
incentive compensation, in the form of restricted stock and stock
options, under the agreement, which is discussed elsewhere in this
Proxy Statement, subject to the terms and conditions discussed
above. The grant of this stock-based compensation was intended to
provide incentives to increase stockholder value over the five-year
term of the agreement. No stock compensation was awarded Mr.
Rowland in 1993.
Conclusion
The Committee intends for its strategy to result in
compensation packages providing the potential for the executives to
realize compensation above competitive levels for above average
increases in the market value of KCSI Common Stock, average
compensation for average market performance and reduced
compensation for below average market performance. The Committee
believes that through this type of compensation, the Committee is
best able to align the interests of the executives and KCSI's
stockholders.
This report was presented to and approved by the Board of
Directors.
The Compensation and Organization Committee
Paul F. Balser
James E. Barnes
Thomas S. Carter
Morton I. Sosland
<PAGE>
STOCK PERFORMANCE GRAPH
Set forth below is a graph, the blue line on which depicts the
yearly percentage change(1) of an assumed investment of $100 in
KCSI's Common Stock since December 31, 1988 in comparison with
other indices. The Performance Graph also depicts the yearly
percentage change of an assumed investment of $100, respectively,
of the stocks that comprise the S&P 500 index(2) (the dotted line)
and the stocks that comprise the Fortune 50 Transportation
Companies(3) (the green line).
KANSAS CITY SOUTHERN INDUSTRIES, INC.
RELATIVE MARKET PERFORMANCE
TOTAL RETURN 1989 - 1993
<TABLE>
<CAPTION>
S
<PAGE>
<C> <C> <C> <C> <C> <C> Year Ended
December 31,<PAGE>
1988 1989 1990 1991 1992 1993 KCSI Total Return $100 137 110 191 316 670 S&P 500 Index
Total Return<PAGE>
$100 132 127 166 179 197 Fortune 50
Transportation
Total Return<PAGE>
$100 123 105 160 175 217
</TABLE>
(1) The percentage change for all the assumed investments depicted
on the graph and in the table above has been calculated, assuming
that such dividends are reinvested at the end of each quarter
during such fiscal year, by dividing: (a) one minus the sum of (i)
the cumulative per share amount of dividends paid during each of
KCSI's fiscal year, and (ii) the difference between the beginning
and ending closing price per share of the respective stocks as
publicly quoted; by (b) the closing price per share of the
respective stocks as publicly quoted at the beginning of KCSI's
fiscal quarter. The graphs show the percentage change over KCSI's
fiscal year for each of the years covered.
(2) The S&P 500 is an index prepared by Standards and Poor's
Corporation, an independent company. The S&P 500 index reflects
the change in weighted average market value for 500 companies whose
shares are traded on the New York Stock Exchange, American Stock
Exchange and in the over the counter market from the base period of
1941 through 1943. The index also assumes reinvestment of all
dividends. These companies consist of approximately 400 industrial
firms, 40 public utilities, 40 financial institutions and 20
transportation companies. Altogether, the stocks of these
companies represent approximately 80 percent of the market value of
all the stock listed on these exchanges.
(3) This index is based upon the 1993 Fortune 50 Transportation
Companies (the "Transportation Group"), with certain adjustments as
explained below. Each year, Time, Inc., an independent company,
publishes in Fortune Magazine a list of the 50 largest
transportation companies for which public records are available.
The companies are ranked by consolidated total revenues as of
December 31 of the immediately preceding year. The total
consolidated revenues of each company in the Transportation Group
include revenues from non-transportation lines of business, if any.
However, to be included in the Transportation Group, a company must
derive 50 percent or more of its total revenues from transportation
services. KCSI was included in the Transportation Group in each of
the five years covered by the Performance Graph.
The index is then prepared using information about those companies
in the Transportation Group the stock of which is publicly traded
(i.e. the "public companies"). Those companies in the
Transportation Group the stock of which is not publicly traded
(i.e. the "private companies") are not included in the index. For
1993, the private companies that were included in the
Transportation Group were: Arco Transportation Alaska, BD
Pipelines, Colonial Pipeline, Exxon Pipeline Co., Grand Trunk,
Midland Enterprises, Northwest Airlines, Preston Corp., Southern
Pacific Transportation, TWA, Unigroup, and United Parcel Service.
Northwest Airlines and Preston Corp were public prior to 1993, but
were acquired during 1993 and went private. Also not included in
the Transportation Group index were Landstar System because the
stock has only been publicly traded since 1993 and Continental
Airlines because it filed for bankruptcy in 1993.
In addition, some of the public companies in this index have been
dropped from those included in the Transportation Group index
depicted in KCSI's proxy statement for the 1993 Annual Meeting of
Stockholders. Worldcorp, Seagull Energy, Westair Holdings and
Chemical Leamon were not included in the 1993 Transportation Group
because they did not have sufficient revenues from their
transportation businesses to meet the criteria established by
Fortune Magazine. KCSI may adopt a new index in the future for
comparison purposes if KCSI's revenues, assets and earnings from
its non-transportation businesses continue to increase as a
percentage of KCSI's consolidated business.
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth information with respect to the
compensation paid or accrued by KCSI and its subsidiaries for
services rendered during the years indicated for (i) the Chief
Executive Officer of KCSI and (ii) the four most highly compensated
executive officers during 1993 based upon the total salary and
bonus paid during 1993.
<PAGE>
<TABLE>
<CAPTION<PAGE>
<S> <C> <C> <C> <C> <C> <C> <PAGE>
Annual Compensation <PAGE>
Long Term
Compensation<PAGE>
Awards <PAGE>
Name
and
Principal
Position<PAGE>
Year<PAGE>
Salary ($)<PAGE>
Bonus(1) ($)<PAGE>
Restricted
Stock
Award(s)
($)<PAGE>
Securities
Underlying
Options/
SARs (#)
<PAGE>
All Other
Compen-
sation
($)<PAGE>
Landon H.
Rowland
President
and Chief
Executive
Officer<PAGE>
1993
1992
1991<PAGE>
500,345(2)
501,145(2)
476,847(2)<PAGE>
---
---
352,688<PAGE>
---
593,125(3)
---
<PAGE>
---
80,000
568,000<PAGE>
148,624(4)
262,224(4)
84,208(4)<PAGE>
Thomas A.
McDonnell
Executive
Vice
President
and Office
of the Chief
Executive of
KCSI, and
Vice
Chairman,
President,
Chief
Executive
Officer
and
Treasurer of
DST<PAGE>
1993
1992
1991<PAGE>
500,004
501,004(5)
521,000(5)
<PAGE>
---
---
608,000(8)
<PAGE>
---
593,125(6)
---<PAGE>
---
80,000
580,000<PAGE>
192,499(7)
306,099(7)
254,492(7)<PAGE>
George W.
Edwards, Jr.
Executive
Vice
President
and Office
of the Chief
Executive of
KCSI, and
Chief
Executive
Officer
of KCSR<PAGE>
1993
1992
1991<PAGE>
500,004
501,004(9)
401,000(9)
<PAGE>
---
---
873,315(12)
<PAGE>
---
593,125(10)
---<PAGE>
---
80,000
868,000<PAGE>
148,624(11)
306,099(11)
114,700(11)<PAGE>
Thomas H.
Bailey
Chairman,
Chief
Executive
Officer and
President of
Janus
Capital
Corporation<PAGE>
1993
1992
1991<PAGE>
556,492(13)
553,243(13)
530,152(13)<PAGE>
---
---
---<PAGE>
---
---
---<PAGE>
---
---
---<PAGE>
25,942(14)
30,000(14)
30,000(14)<PAGE>
James B.
Dehner
Vice
President of
KCSI,
Executive
Vice
President
and Chief
Operating
Officer of
KCSR<PAGE>
1993
1992
1991<PAGE>
185,004
175,008
140,008<PAGE>
185,004
175,008
55,440<PAGE>
---
108,938(15)
---<PAGE>
10,000
18,000
---<PAGE>
57,257(16)
79,734(16)
30,700(16)
</TABLE>
<PAGE>
(1) Except as otherwise indicated, bonuses paid to the named
executives represent cash awards under KCSI's incentive
compensation programs.
(2) Includes directors' fees of $1,000 per year for 1991 and 1992
paid by KCSR and L&A, which have been discontinued as of
January 1, 1993, and interest on the KCSR deferred directors'
fee plan for 1991, 1992 and 1993 of $531, $141, and $341,
respectively.
(3) Pursuant to the terms of his employment agreement, Mr. Rowland
was awarded 40,000 shares of KCSI Common Stock, which is
subject to certain restrictions. He has all rights of a
stockholder with respect to these shares, including the right
to receive dividends and other distributions on the shares and
the right to vote such shares. However, he may not transfer
the shares, except to KCSI, without prior approval of the
Board of Directors. In addition, Mr. Rowland must transfer
some or all of the shares back to KCSI without any payment by
KCSI if, prior to January 1, 1997, his employment with KCSI is
terminated for cause or Mr. Rowland voluntarily terminates his
employment. The restrictions on such shares and KCSI's right
to receive such shares back upon termination of employment
lapse on 20 percent of the shares on each of the five
anniversary dates beginning January 1, 1993. At the date of
award, the mean market price per share of such stock, as
quoted on the New York Stock Exchange (the "NYSE") was
$14.8281. The amount shown in the Summary Compensation Table
is the fair market value of the restricted stock on the date
of grant based upon the average of the high and low price as
quoted on the New York Stock Exchange. As of December 31,
1993, Mr. Rowland held 32,000 shares of restricted KCSI Common
Stock, the aggregate value of which at that date was
$1,616,000 (based on the average price of $50.50 per share).
(4) All other compensation for Mr. Rowland for the years indicated
is comprised of: (i) contributions to his account under KCSI's
ESOP for 1991, 1992 and 1993, of $16,008, $30,000, and
$14,150, respectively; (ii) contributions to his account under
the KCSI Profit Sharing Plan, for the years 1991, 1992 and
1993 of $6,711, none and $4,717, respectively; and (iii)
amounts credited to his account under the Executive Plan (a
non-qualified deferred contribution plan, which is discussed
in more detail under "Other Compensatory Plans" below) for
1991 and 1992 amounts estimated to be credited for 1993 of
$61,489, $232,224 and $129,757, respectively.
(5) Includes directors' fees of $1,000 per year for 1991 and 1992
paid by KCSR and L&A, which have been discontinued as of
January 1, 1993.
(6) Pursuant to the terms of his employment agreement, Mr.
McDonnell was awarded 40,000 shares of KCSI Common Stock,
which is subject to certain restrictions. He has all rights
of a stockholder with respect to these shares, including the
right to receive dividends and other distributions on the
shares and the right to vote such shares. However, he may not
transfer the shares, except to KCSI, without prior approval of
the Board of Directors. In addition, Mr. McDonnell must
transfer some or all of the shares back to KCSI without any
payment by KCSI if, prior to January 1, 1997, his employment
with KCSI is terminated for cause or Mr. McDonnell voluntarily
terminates his employment. The restrictions on such shares
and KCSI's right to receive such shares back upon termination
of employment lapse on 20 percent of the shares on each of the
five anniversary dates beginning January 1, 1993. At the date
of award, the mean market price per share of such stock, as
quoted on the NYSE was $14.8281. The amount shown in the
Summary Compensation Table is the fair market value of the
restricted stock on the date of grant based upon the average
of the high and low price as quoted on the New York Stock
Exchange. As of December 31, 1993, Mr. McDonnell held 32,000
shares of restricted KCSI Common Stock, the aggregate value of
which at that date was $1,616,000 (based on the average price
of $50.50 per share).
(7) All other compensation for Mr. McDonnell for the years
indicated is comprised of: (i) contributions to his account
under KCSI's ESOP for the years 1991, 1992 and 1993 of
$16,008, $30,000 and $14,150, respectively; (ii) contributions
to his account under the DST Profit Sharing Plan, for the year
1991, 1992 and 1993 of $8,073,none and $4,717, respectively;
(iii) amounts credited to his account under the Executive Plan
for 1991 and 1992 and amounts estimated to be credited for
1993 of $182,498, $232,224, and $129,757, respectively; and
(iv) payments in 1991, 1992 and 1993 for DST options which
were canceled when KCSI acquired DST's publicly held minority
interest in the amounts of $43,875, $43,875 and $43,875,
respectively.
(8) Includes KCSI incentive compensation for 1990 of $108,000 that
was paid in 1991 and not reported in 1990.
(9) Includes directors' fees of $1,000 per year for 1991 and 1992
paid by KCSR and L&A, which have been discontinued as of
January 1, 1993. Mr. Edwards was first employed by KCSI on
April 1, 1991.
(10) Pursuant to the terms of his employment agreement, Mr. Edwards
was awarded 40,000 shares of KCSI Common Stock, which is
subject to certain restrictions. He has all rights of a
stockholder with respect to these shares, including the right
to receive dividends and other distributions on the shares and
the right to vote such shares. However, he may not transfer
the shares, except to KCSI, without prior approval of the
Board of Directors. In addition, Mr. Edwards must transfer
some or all of the shares back to KCSI without any payment by
KCSI if, prior to January 1, 1997, his employment with KCSI is
terminated for cause or Mr. Edwards voluntarily terminates his
employment. The restrictions on such shares and KCSI's right
to receive such shares back upon termination of employment
lapse on 20 percent of the shares on each of the five
anniversary dates beginning January 1, 1993. At the date of
award, the mean market price per share of such stock, as
quoted on the NYSE was $14.8281. The amount shown in the
Summary Compensation Table is the fair market value of the
restricted stock on the date of grant based upon the average
of the high and low price as quoted on the New York Stock
Exchange. As of December 31, 1993, Mr. Edwards held 32,000
shares of restricted KCSI Common Stock, the aggregate value of
which at that date was $1,616,000 (based on the average price
of $50.50 per share).
(11) All other compensation for Mr. Edwards for the years indicated
is comprised of: (i) a contribution to his account under
KCSI's ESOP for 1991, 1992 and 1993 of $16,008, $30,000, and
$14,150, respectively; (ii) contributions to his account under
the KCSI Profit Sharing Plan for the years 1991, 1992 and 1993
of none, none and $4,717, respectively, and (iii) amounts
credited to his account under the Executive Plan for 1991 and
1992 and amounts estimated to be credited for 1993 of $98,762,
$232,224 and $129,757, respectively.
(12) Included in this amount is a $560,000 initial signing bonus
that is subject to repayment upon termination of employment
within a five-year period and interest of $13,315 paid thereon
on August 1, 1991.
(13) Includes directors' fees for 1991, 1992 and 1993 of $4,000,
$6,750, and $4,000, respectively, paid to Mr. Bailey in his
capacity as director of Janus Capital Corporation and $15,000,
$16,500 and $22,500 for the years 1991, 1992 and 1993 for fees
in his capacity as a director of the Janus Funds.
(14) All other compensation for Mr. Bailey for the years indicated
is comprised of: (i) contributions to his account under
KCSI's ESOP for 1991, 1992 and 1993 of $16,008, $30,000 and
$14,150, respectively; and (ii) contributions to his account
under the Janus Profit Sharing Plan, for 1991, 1992 and 1993
of $13,992, none and $11,792, respectively.
(15) Pursuant to the terms of his employment agreement, Mr. Dehner
was awarded 6,000 shares of KCSI Common Stock, which is
subject to certain restrictions. He has all rights of a
stockholder with respect to these shares, including the right
to receive dividends and other distributions on the shares and
the right to vote such shares. However, he may not transfer
the shares, except to KCSI, without prior approval of the
Board of Directors. In addition, Mr. Dehner must transfer
some or all of the shares back to KCSI without any payment by
KCSI if, prior to January 1, 1997, his employment with KCSI is
terminated for cause or Mr. Dehner voluntarily terminates his
employment. The restrictions on such shares and KCSI's right
to receive such shares back upon termination of employment
lapse on 20 percent of the shares on each of the five
anniversary dates beginning January 1, 1993. At the date of
award, the mean market price per share of such stock, as
quoted on the NYSE was $18.1563. The amount shown in the
Summary Compensation Table is the fair market value of the
restricted stock on the date of grant based upon the average
of the high and low price as quoted on the New York Stock
Exchange. As of December 31, 1993, Mr. Dehner held 4,800
shares of restricted KCSI Common Stock, the aggregate value of
which at that date was $242,400 (based on an average price of
$50.50).
(16) All other compensation for Mr. Dehner for the years indicated
is comprised of: (i) contributions to his account under
KCSI's ESOP for 1991, 1992 and 1993 of $16,008, $30,000 and
$14,150, respectively; and (ii) contributions to his account
under the KCSI Profit Sharing Plan, for 1991, 1992 and 1993 of
$6,711, none and $4,717, respectively; contributions to his
account under the Executive Plan for 1991, 1992 and amounts
estimated to be contributed for 1993 of $7,981, $49,734 and
$38,390, respectively.
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR 1993 OPTION GRANTS TABLE
The following table sets forth information with respect to the
options granted by KCSI during 1993 to the named Executive
Officers.
<PAGE>
<S> <C> <C> <C> <C> <C> Name Number of
Securities
Underlying
Options/
SARs
granted(#)(1)<PAGE>
% of
Total
Options/
SARs
Granted to
Employees
in Fiscal
Year(2)<PAGE>
Exercise
or Base
Price
(per
share)(3)<PAGE>
Expiration
Date<PAGE>
Grant
Date
Value(4)
Landon H. Rowland<PAGE>
0 0% ---
<PAGE>
- --- --- Thomas A. McDonnell 0 0% --- --- ---<PAGE>
George W. Edwards, Jr.<PAGE>
r<PAGE>
10,000 2.7% 28.1563 1/27/2003 $107,431
</TABLE>
<PAGE>
(1) The options were granted Mr. Dehner under KCSI's 1991 Stock
Option and Performance Award Plan. The options were granted
on January 28, 1993 and expire at the end of ten years,
subject to earlier termination as provided in the option
agreement, including termination of employment, disability,
retirement or death. The options become exercisable, in whole
or in part, on the first annual anniversary of the grant,
except if there is a change in control, as defined in the
agreement, in which case the options are immediately
exercisable. The options are subject to voluntary tax
withholding rights.
Granted in tandem with the options were limited rights. The
limited rights are exercisable only in the event of a change
in control and only to the extent the related options are
exercisable. The limited rights may be exercised in lieu of
the options or any portion thereof.
(2) Total option granted to eligible employees, excluding
directors, in 1993 were 376,000.
(3) Average of the high and low prices of the Common Stock on the
date of grant as reported on the New York Stock Exchange.
(4) Valuation determined using Black Scholes' option pricing model
with the following assumptions: market price of stock
$28.156; exercise price of option $28.156; stock volatility*
0.2627; annualized risk-free interest rate 7.00%; option term
(in years) 10; stock's dividend yield* 2.14%; vesting
restriction discount 3% per year. (*Stock's volatility and
dividend yield are based on 3-year monthly data).
<PAGE>
<PAGE>
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
The following table sets forth information with respect to the
aggregated option exercises during 1993 by the named Executive
Officers and the number and value of options held by such officers
as of December 31, 1993.
<TABLE>
<CAPTION>
S
<PAGE>
<C> <C> <C> <C> (a) (b) (c) (d)
Number of
Securities
Underlying
Unexercised
Options/
SARs
at FY-End
(#)(2)<PAGE>
(e)
Value of
Unexercised
In-the-Money
Options/SARs
at FY-End
($)(2)<PAGE>
Name<PAGE>
Shares
Acquired
on
Exercise (#)<PAGE>
Value
Realized(1)<PAGE>
Exercisable/
Unexercisable<PAGE>
Exercisable/
Unexercisable<PAGE>
Landon H.
Rowland
<PAGE>
84,698 $5,234,670 948,952/0 $35,485,639/0 Thomas A.
McDonnell
<PAGE>
58,595 $3,621,271
<PAGE>
700,000/0
$25,597,494/0
George W.
Edwards,
Jr.
417,256
$21,279,392
0/180,000
$ 0/7,135,308
Thomas H.
Bailey
- -0-
- -0-
- -0-
- -0-
James B.
Dehner
- -0-
- -0-
30,000/
10,000
1,037,624/
223,437
</TABLE>
1. The dollar value in columns (c) and (e) are calculated by
determining the difference between the fair market value of the
securities underlying the options and the exercise price of the
options on the date of exercise or December 31, 1993, respectively,
times the number of options exercised or held at year end.
2. Does not include change in control options for shares of KCSI
common stock, which can only be exercised in the event of a change
in control of KCSI as defined in the option agreements.
<PAGE>
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN
CONTROL ARRANGEMENTS WITH NAMED EXECUTIVE OFFICERS
EMPLOYMENT AGREEMENTS WITH MESSRS. ROWLAND, MCDONNELL AND EDWARDS
KCSI, DST and KCSR have entered into Employment Agreements
with Messrs. Rowland, McDonnell and Edwards effective January 1,
1992, which provide, respectively, for Mr. Rowland's continued
employment as President and Chief Executive Officer of KCSI, Mr.
McDonnell's continued employment as Executive Vice President of
KCSI and as President and Chief Executive Officer of DST, and Mr.
Edwards' continued employment as Executive Vice President of KCSI
and as President and Chief Executive Officer of KCSR. KCSI also
agreed to use its best efforts to enable such individuals to
continue in various other director and officer positions with KCSI,
DST and KCSR. The Employment Agreements with Messrs. Rowland,
McDonnell and Edwards were amended and restated in March, 1993 to
conform certain provisions and language to a standard form of
employment agreement developed in 1992 for other executives.
The Agreements are effective for a term of five years expiring
on January 2, 1997 subject to earlier termination under certain
circumstances. Pursuant to the Employment Agreements, each
individual receives a fixed annual base salary of $500,000 over the
term of the Agreement. Under the Agreements, none of the
individuals are entitled to participate in the KCSI Incentive
Compensation Plan, but each continues to participate in other
benefit plans or programs of his employer generally available to
executive employees and is provided with disability insurance
coverage comparable with that provided to executive officers of DST
and life insurance in the amount of $1,000,000 payable to
beneficiaries designated by the individual. The Agreements provide
that the value of each individual's annual compensation is fixed at
$875,000 for purposes of cash compensation based benefit plans.
The Agreements provide for twenty four months of severance pay at
an annual rate equal to the base salary and for certain health,
disability and life insurance benefits in the event of termination
of the individual's employment without cause unless such benefits
are provided by another employer. Mr. Edwards' Employment
Agreement also provides for the retention of the initial signing
bonus he received upon his employment by KCSR in 1991, subject to
repayment in amounts prorated for his years of service from April
1, 1991 through March 31, 1996 upon termination of employment by
voluntary resignation or by KCSR with cause.
In conjunction with the Employment Agreements and in lieu of
participation in the KCSI Incentive Compensation Plan, options to
purchase 568,000 shares of KCSI Common Stock were granted to
Messrs. Rowland and Edwards and options for 580,000 shares were
granted to Mr. McDonnell under the Plan. The stock options have an
option price of $13.0625 per share and were to first become
exercisable on January 1, 1997 or at earlier times if the trading
price of KCSI's Common Stock was at least equal to certain
threshold prices ranging from $14.50 to $21.25 for a period of at
least 30 consecutive trading days. As of December 31, 1992, all
threshold prices had been met and all such options were
exercisable. Options that became exercisable based on such
threshold prices will remain exercisable for a term of ten years
from date of grant.
Under the Employment Agreements, the individuals also were
each awarded 40,000 shares of KCSI Common Stock ("Restricted
Stock") that are subject to forfeiture in the event the
individual's employment is terminated for cause or voluntarily by
the individual. The number of shares subject to forfeiture
decreases by 8,000 shares on January 1 of each year through 1997
and the shares are no longer subject to forfeiture following
termination due to retirement to which the Board consents, death or
disability. Shares of Restricted Stock subject to forfeiture are
not transferable other than to KCSI without the prior approval of
KCSI's Board of Directors. In addition, each individual has agreed
to retain ownership in himself or members of his immediate family
of at least a majority of the number of shares of Common Stock
acquired pursuant to his Employment Agreement (other than shares
forfeited, exchanged for other shares or used to satisfy
withholding tax requirements).
If there is a change in control of KCSI (as defined in the
Employment Agreements) during the term of the Agreements, each
individual's employment, executive capacity, salary and benefits
shall be continued for a three year term at levels in effect on the
control change date (as defined in the Employment Agreements) and
the individuals also will participate in any incentive compensation
plan and be entitled to immediately exercise all outstanding stock
options and shares of Restricted Stock no longer will be subject to
forfeiture. With respect to unfunded employer obligations under
benefit plans, the individual would be entitled to a discounted
cash payment of amounts to which he is entitled. An individual's
employment may be terminated after the control change date, but
where it is other than "for cause" (as defined in the Employment
Agreements) the individual is entitled to payment of his base
salary through termination plus a discounted cash severance payment
based on his compensation for the remainder of the three year
period and for continuation or payment of benefits to the end of
that period. An individual is also permitted to resign employment
after a change in control upon "good reason" (as defined in the
Employment Agreements) and advance written notice, and to receive
the same payments and benefits as if his employment had been
terminated "for cause". The Employment Agreements also provide for
payments to such individuals necessary to relieve them of certain
adverse federal income tax consequences if amounts received under
these Agreements involve "parachute payments" under Section 4999 of
the Code. In addition, upon a change in control of KCSI, funds are
to be placed in trust to secure the obligations to pay any legal
expenses of the individuals in connection with disputes arising
with respect to the Agreements.
EMPLOYMENT CONTINUATION AGREEMENTS
Under the terms of the Employment Agreements with the named
executives, other than Mr. Bailey, if there is a change in control
(as defined in such agreements) during the term of an Employment
Agreement such agreements obligate KCSI (or KCSR) to continue for
a three year term the employee's executive capacity, salary and
benefits at levels in effect on the control change date (as defined
in the agreements). If the employee is terminated after the
control change date and within the three year period other than for
a defined cause, the Agreements provide for a severance payment to
the employee based on his compensation for the remainder of the
three year period and for continuation or payment of benefits to
the end of that period. The employee is also permitted to resign
employment after a change in control upon "good reason" (as defined
in the agreements) and to receive the same payments and benefits as
if his employment had been terminated. The Agreements also provide
for payments to such employees necessary to relieve them of certain
adverse federal income tax consequences if amounts received under
these Agreements involve "excess parachute payments" under Section
4999 of the Internal Revenue Code. Under these Agreements, upon a
change in control of KCSI, funds are to be placed in trust to
secure the companies' obligations to pay any legal expenses of
employees in connection with disputes arising with respect to the
Agreements.
INDEMNIFICATION AGREEMENTS
In 1987, KCSI entered into indemnification agreements with its
officers and, as approved by KCSI's stockholders at the 1987 Annual
Meeting, its directors. Such agreements are intended to supplement
KCSI's officer and director liability insurance and to provide the
officers and directors with specific contractual assurance that the
protection provided by KCSI's By-laws will continue to be available
regardless of, among other things, an amendment to the By-laws or
a change in management or control of KCSI. The indemnification
agreements provide for prompt indemnification "to the fullest
extent permitted by law" and for the prompt advancement of
expenses, including attorney's fees and all other costs and
expenses incurred in connection with any action, suit or proceeding
in which the director or officer is a witness or other participant,
or to which the director or officer is a party, by reason (in whole
or in part) of service in certain capacities. Under the
agreements, KCSI's determinations of indemnity are made by a
committee of disinterested directors unless a change in control of
KCSI has occurred, in which case the KCSI determination is made by
special independent counsel. The agreements also provide a
mechanism to seek court relief if indemnification or expense
advances are denied or not received within periods provided in the
agreement. Indemnification and advancement of expenses are also
provided with respect to a court proceeding initiated for a
determination of rights under the agreement or of certain other
matters. KCSI has entered into such indemnification agreements
with all current directors and officers of KCSI.
DST has entered into director indemnification agreements with
DST's directors, including Messrs. Rowland and McDonnell. The
agreements provide for indemnification for, among other things,
matters arising from service at DST's request as an officer or
director of DST. Such agreements are intended to supplement DST's
officer and director liability insurance and to provide the
officers and directors with specific contractual assurance that the
protection provided by DST's Articles of Incorporation will
continue to be available regardless of, among other things, an
amendment to the Articles of Incorporation or a change in
management or control of DST. The provisions of the agreements are
similar to those of the KCSI indemnification agreements.
AGREEMENT WITH MR. BAILEY
Mr. Bailey has the right under an agreement to require KCSI to
purchase his shares of stock of Janus Capital Corporation at a
price equal to fifteen times the defined after-tax earnings per
share of Janus Capital Corporation for the year ended December 31,
1987, or if greater, the year ended immediately prior to the date
of his notice. Under that agreement, Mr. Bailey is also entitled
upon a termination of his employment within one year of a defined
change in ownership of KCSI to receive a payment equal to his prior
year's current and deferred compensation.
AGREEMENT WITH MR. DEHNER
KCSI has also entered into an Employment Agreement with Mr.
Dehner effective April 1, 1992, which provides for Mr. Dehner's
employment as Senior Vice President of KCSR. The Agreement is
subject to termination under certain circumstances. Pursuant to
the Employment Agreement, Mr. Dehner is to receive an annual base
salary of $175,008, subject to such increases as may from time to
time be authorized by the Board, over the term of the Agreement.
Under the Agreement, as long as KCSR remains a subsidiary of KCSI,
Mr. Dehner is entitled to participate in the KCSI Incentive
Compensation Plan under such terms and conditions as determined
from time to time by the Board or the Compensation and Organization
Committee. In addition, Mr. Dehner may participate in other
benefit plans or programs generally available to executive
employees serving in the Office of the Chief Executive of KCSR.
The Agreement provides for twelve months of severance pay at an
annual rate equal to the base salary and for reimbursement for
costs incurred for obtaining comparable health and life insurance
benefits in the event of termination of the individual's employment
without cause, unless such benefits are proved by another employer.
Under the Employment Agreement, Mr. Dehner was also awarded
6,000 shares of KCSI Common Stock ("Restricted Stock") that are
subject to forfeiture in the event his employment is terminated for
cause or voluntarily by him. The number of shares subject to
forfeiture decreases by 1,200 shares on March 31st of each year
through 1997, and the shares are no longer subject to forfeiture
following termination due to retirement to which the Board or
Compensation Committee consents, death or disability. In addition,
shares of Restricted Stock subject to forfeiture are not
transferable other than to KCSI without the prior approval of
KCSI's Board of Directors.
If there is a change in control of KCSI (as defined in the
Employment Agreement) during the term of the Agreement, Mr.
Dehner's employment, executive capacity, salary and benefits shall
be continued for a three year term at levels in effect on the
control change date (as defined in the Employment Agreement), and
Mr. Dehner also will participate in certain incentive compensation
plans and be entitled to immediately exercise all outstanding stock
options and any forfeiture provisions associated with any
restricted stock previously awarded will lapse. With respect to
unfunded employer obligations under benefit plans, Mr. Dehner would
be entitled to a discounted cash payment of amounts to which he is
entitled. Mr. Dehner's employment may be terminated after the
control change date or he may resign. If he is terminated other
than for cause (as defined in the Employment Agreement) or resigns
for good cause (as defined in the Employment Agreement) and with
written notice, Mr. Dehner is entitled to payment of his base
salary through termination plus a discounted cash severance payment
based on his compensation for the remainder of the three year
period and for continuation or payment of benefits to the end of
that period. The Employment Agreement also provide for payments to
Mr. Dehner necessary to relieve him of certain adverse federal
income tax consequences if amounts received under the agreement
involves "parachute payments" under Section 4999 of the Code. In
addition, upon a change in control of KCSI, funds are to be placed
in trust to secure the obligations to pay any legal expenses of Mr.
Dehner in connection with disputes arising with respect to the
Employment Agreement.
CHANGE IN CONTROL ARRANGEMENTS
KCSI has established a series of trusts that are intended to
secure the rights of its officers, directors, employees, former
employees and others (the "Beneficiaries") under various contracts,
benefit plans, agreements, arrangements and commitments. The
function of each trust is to receive contributions from KCSI and,
following a change in control of KCSI (as defined by the trust), in
the event that KCSI fails to honor certain obligations to a
Beneficiary, the trust shall distribute to the Beneficiary amounts
accumulated in such Beneficiary's trust account sufficient to
discharge KCSI's obligation as such amounts become due and payable.
Most of the trusts require KCSI to be solvent as a condition to
making distributions and certain trusts allow distributions upon
Board of Director approval prior to a change in control. Trusts
have been instituted with respect to the employment continuation
commitments under the KCSI Employment Agreements, the Executive
Plan, the Directors Deferred Fee and Retirement Plans, the
Indemnification Agreements, Stock Option Plans, and KCSI's
charitable contribution commitments in addition to certain other
agreements, commitments and arrangements. The trusts are revocable
until a change in control of KCSI and will terminate automatically
if no such change in control occurs prior to December 31, 1994,
unless the trusts are extended prior to such date.
DST and KCSR have established similar trusts relating to their
employment continuation commitments under the Employment
Agreements, Directors Deferred Fee Plans and incentive compensation
arrangements, in addition to certain other agreements, commitments
and arrangements. KCSR also established a similar trust with
respect to its participation in the Executive Plan. As with the
KCSI trusts, distributions under the DST and KCSR trusts are tied
to failures by the respective companies to honor their obligations
to their respective Beneficiaries following a change of control of
KCSI.
TERMINATION OF EMPLOYMENT
Under the terms of the employment agreements with Messrs.
Rowland, McDonnell and Edwards, in the event of termination of
their employment, other than by the executive (whether voluntary or
by death or disability) or by KCSI, DST or KCSR, as may be the
case, for cause, they will continue for a period of 24 months
following such termination (i) to receive an amount equal to their
base salary and (ii) to be reimbursed for their costs (including
the income taxes payable with respect to the reimbursement) of
obtaining comparable coverage under the health, disability and life
insurance provided under the agreement, unless such executive is
provided comparable coverage in connection with other employment.
Under the terms of his employment contract, Mr. Dehner is to
receive the same benefits, but such benefits will only continue for
a 12 month period following his termination by KCSI other than for
cause.
OTHER COMPENSATORY PLANS
KCSI and its subsidiaries maintain compensation plans for
certain of their officers and employees. The description of the
plans set forth below is of those plans under which the executives
named in the Summary Compensation Table will receive benefits in
excess of $100,000 if they were to have retired from or terminated
their employment with KCSI or its subsidiaries on December 31,
1993.
KCSI EMPLOYEE STOCK OWNERSHIP PLAN
KCSI's Employee Stock Ownership Plan (the "ESOP") is designed
to be a qualified employee stock ownership plan under the Code.
Employees of KCSI and certain of its subsidiaries, including DST
and Janus Capital Corporation, participate in the plan.
By its terms, the KCSI ESOP will continue until terminated.
All employees of KCSI and certain KCSI subsidiaries not subject to
a collective bargaining agreement become eligible to begin
participation in the KCSI ESOP on January 1 or July 1 coincident
with or immediately following commencement of their employment. As
of December 31, 1993, approximately 4,426 employees of KCSI and
certain of its subsidiaries, including all of KCSI's execute
officers, were eligible to participate in the KCSI ESOP.
The KCSI ESOP is designed to invest primarily in shares of
KCSI Common Stock. KCSI will provide funding for the KCSI ESOP
through contributions in cash or in shares of KCSI Common Stock as
determined each year by the Board of Directors. Participants may
not make contributions to the KCSI ESOP. Contributions will be
limited by the maximum contribution limitations for qualified
employee stock ownership plans under the Code.
Allocations, if any, to participant accounts in the KCSI ESOP
with respect to any plan year are based upon each participant's
proportionate share of the total compensation paid during the plan
year to all participants in the KCSI ESOP, subject to Code maximum
allocations limitations. Forfeitures are similarly allocated. For
this purpose, compensation includes only compensation received
during the period the individual was actually a participant in the
KCSI ESOP.
A participant with less than five years of service is not
vested in KCSI's contributions, forfeitures and earnings. However,
a participant becomes 100% vested upon completion of five years of
service. In addition, a participant becomes 100% vested upon
attaining the KCSI ESOP's normal retirement age of 65, or if the
participant's employment is terminated because of death or
disability. Participants have been given credit for vesting
purposes for years of service rendered to KCSI or its subsidiaries
prior to the establishment of the ESOP.
Each participant has the right to direct the trustee as to the
manner in which (a) to vote any KCSI stock allocated to his or her
account in the KCSI ESOP as of the applicable record date of any
stockholder meeting on any matters put to a stockholder vote, and
(b) to respond with respect to a tender offer, exchange offer or
any other offer to purchase KCSI stock allocated to the
participant's account. The KCSI ESOP provides that shares
allocated to the accounts of participants who have not timely
instructed the trustee how to vote, tender, exchange or sell such
shares, and any unallocated shares will be voted, tendered,
exchanged or sold in the same proportions as the shares for which
the trustee has received timely instructions.
Distributions of benefits under the KCSI ESOP will be made in
connection with a participant's death, disability, retirement or
other termination of employment. In addition, participants who
have attained age fifty-five and have at least ten years of
participation in the KCSI ESOP have the option to diversify the
investment of their account balances by having the trustee
distribute a portion of their account balances. A participant has
the right to select whether payment of his or her benefit will take
the form of cash, whole shares of KCSI stock or a combination
thereof. In the event no election is made, the payment shall be
made in KCSI stock. A participant may further opt to receive
payment in a lump sum, in installments or in a combination thereof.
In the event that the Board of Directors declares a cash dividend
on the KCSI Common Stock, at the discretion of the Advisory
Committee, dividends paid on the shares of Common Stock held by the
KCSI ESOP may be: (i) paid directly to participants on the basis
of the number of shares of Common Stock allocated to each
participant's account; (ii) retained by the KCSI ESOP; or (iii)
used by the KCSI ESOP to pay interest or principal on indebtedness
incurred to acquire the shares on which the dividends are paid.
Pursuant to the KCSI ESOP, a trust fund has been established
to hold contributions thereto and the proceeds from investments for
the benefit of KCSI ESOP participants. MBKC serves as co-trustee
for the sole purpose of jointly voting with UMB the KCSI stock held
by the KCSI ESOP. The KCSI ESOP is administered by an Advisory
Committee appointed by KCSI's Board of Directors. The current
members of the Advisory Committee are officers and/or employees of
KCSI and DST. As trustee, UMB has the power to invest the KCSI
ESOP's funds, to sell the securities and other properties of the
KCSI ESOP, and to change the KCSI ESOP's investments from time to
time. The KCSI ESOP may be amended by KCSI's Board of Directors
and such amendment could increase the costs to KCSI, although it
may not adversely affect any person's accrued benefits under the
KCSI ESOP.
As of December 31, 1993, the ESOP held 5,484,272 shares of
KCSI's Common Stock, 3,957,778 shares of which have been allocated
to participants' accounts. The shares allocated to participants'
accounts do not reflect allocations made subsequent to December 31,
1993, that for purposes of the ESOP are allocated to participants'
accounts as of December 31, 1993. The ESOP borrowed funds to
purchase a number of the shares it holds, which borrowing is
secured by such shares and by a KCSI guaranty. As of December 31,
1993, the total outstanding debt owed by the ESOP was $22,767,249,
which does not reflect payments of principal made after December
31, but for purposes of the ESOP are considered payments made as of
December 31. The debt is paid through contributions by KCSI and
participating subsidiaries to the ESOP and a portion of the
dividends paid on the ESOP shares.
KCSI PROFIT SHARING PLAN
The Profit Sharing Plan is a qualified, non-contributory,
defined contribution plan. Employees of KCSI and certain of its
subsidiaries who have completed one year of service and meet
certain standards as to hours of service are eligible to receive
allocations under the plan. Contributions to the plan are made at
the discretion of the KCSI Board of Directors in amounts not to
exceed the maximum allowable deduction for federal income tax
purposes and certain Code allocation limits. No minimum
contribution is required. Subject to Code maximum allocations
limitations, each participant is allocated the same percentage of
the total contribution as the participant's compensation bears to
the total compensation of all participants. Vesting occurs under
the plan at the rate of 10% for each year of service for the first
four years and thereafter at the rate of 20% until the participant
is fully vested. A participant's interest also becomes fully
vested at retirement age, death or disability.
Distribution of benefits under the plan will be made in
connection with a participant's death, disability, retirement or
other termination of employment. A participant has the right to
elect whether payment of his or her benefits will be in a lump sum,
in installments, or in a combination thereof.
The assets of the plan are held in a trust fund by a trustee
appointed by the KCSI Board of Directors. The plan is administered
by an Advisory Committee appointed by KCSI's Board of Directors.
The current members of the Advisory Committee are officers,
employees or former employees of KCSI and DST. The trustee has the
responsibility for holding and investing plan assets other than
assets managed by an investment manager or managers appointed by
the Advisory Committee. The plan may be amended by KCSI's Board of
Directors and such amendment could increase the cost to KCSI,
although it may not adversely affect any person's accrued benefits
under the Profit Sharing Plan.
KCSI EXECUTIVE PLAN
Due to contribution limitations under the Code and ERISA and
eligibility requirements under KCSI's and DST's qualified plans,
the Executive Plan (formerly the ERISA Excess Benefit Plan)
provides benefits in addition to the annual contributions permitted
under qualified plans of KCSI and certain subsidiary companies.
The Executive Plan is a non-qualified plan for participants who are
certain employees and officers of KCSI and certain subsidiary
companies. Effective in 1992 for 1991, and future years, certain
employees of DST will participate in the Executive Plan.
The benefit accrued on behalf of each participant in the
Executive Plan equals the amount which would have been contributed
for such participant under the various qualified plans without
regard to statutory contribution limitations or eligibility
requirements, less the amount actually contributed on the
participant's behalf. In 1992, the Executive Plan was amended to
change the definition of compensation to base compensation plus
incentive compensation; however, if KCSI and the participant have
agreed that the participant's compensation is a fixed amount for
purposes of the plan, such amount is deemed to be the participant's
compensation. The compensation of Messrs. Rowland, Edwards and
McDonnell has been fixed at $875,000 for the plan as provided in
their Employment Agreements. The participant's account is
increased annually by an amount equal to the interest then being
credited under KCSI's Directors Deferred Fee Plan or, as amended in
1991, the earnings alternatively credited in accordance with the
mutual fund related formula under such Deferred Fee Plan. The
benefits become distributable in five annual installments upon
retirement on or after the age of 65, or termination of employment
because of disability or death. The Board of Directors may approve
an alternative form of distribution upon the recommendation of the
KCSI Compensation and Organization Committee. If the participant's
employment is terminated for any reason other than death or
disability, but before the age of 65, the participant shall receive
the nonforfeitable percentage of the participant's account equal to
the same vesting percentage under the terms of the KCSI Profit
Sharing Plan. The Executive Plan allows distributions prior to
retirement, death or becoming disabled in certain instances as
approved by the KCSI Compensation and Organization Committee.
DST PROFIT SHARING PLAN
The DST Profit Sharing Plan is a qualified, non-contributory,
defined contribution plan administered by DST's Profit Sharing
Advisory Committee. Employees of DST and certain of its
subsidiaries who have completed one year of service and meet
certain standards as to hours of service are eligible to receive
allocations under the plan. Contributions to the plan are at the
discretion of the Board of Directors with no minimum contribution
required. Each participant is allocated the same percentage of the
total contribution as the participant's compensation bears to the
total compensation of all participants. The plan provides for
vesting at the rate of 10% for each of the first four years of
service and 20% for each of the next three years of service,
resulting in 100% vesting at seven years of service. A
participant's interest also becomes fully vested at retirement age,
death or disability.
JANUS PROFIT SHARING PLAN
The Janus Profit Sharing Plan is a qualified, non-
contributory, defined contribution plan administered by Janus'
Profit Sharing Advisory Committee. Employees of DST and certain of
its subsidiaries who have completed one year of service and meet
certain standards as to hours of service are eligible to receive
allocations under the plan. Contributions to the plan are at the
discretion of the Board of Directors with no minimum contribution
required. Each participant is allocated the same percentage of the
total contribution as the participant's compensation bears to the
total compensation of all participants. The plan provides for
vesting at the rate of 25% after three years of service, 50% after
four years of service, and 100% after five years of service. A
participant's interest also becomes fully vested at retirement age,
death or disability.
CERTAIN TRANSACTIONS
Messrs. Rowland, McDonnell, Balser and Carter, who are
directors of KCSI, hold limited partnership interests for
themselves or members of their immediate family in certain limited
partnerships of which a DST subsidiary, National Realty Partners,
Inc. ("NRP"), serves as general partner. During 1993, management
fees of $25,000 and $50,000 were paid to NRP by Elgin Investors,
L.P. and Inwood Towers, L.P. ("Towers"), respectively. Towers also
paid a refinancing fee of $76,390 to NRP, repaid a $17,000 loan to
NRP and paid $371,946 to DST Realty, Inc. ("Realty"), a DST
subsidiary, in full satisfaction of a Purchase Money Obligation
owed by Towers to Realty. Another such limited partnership, Trails
Investors, L.P. ("Trails") received $442,719 in advances and loans
from NRP and Realty. At December 31, 1993, Trails was indebted to
NRP and Realty in the amount of $962,135.
Mr. Balser is a partner of Centre Partners, which may be
deemed to indirectly control over 75% of the Jungle Jim's
Playground, Inc., which has a $2.7 million secured equipment
purchase commitment with Southern Credit Corporation, a subsidiary
of KCSI.
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 KCSI's officers and directors, and persons who
own more than 10% of KCSI's Common Stock or Preferred Stock
(collectively "Insiders"), to file reports of ownership with the
Securities and Exchange Commission ("SEC"), the New York Stock
Exchange and KCSI. Based solely on review of the copies of such
reports furnished to KCSI, and written representations relative to
the filing of certain Forms 5, no such person was late in filing
such reports for fiscal year 1993.
STOCKHOLDER PROPOSALS
To be properly brought before the Annual Meeting, a proposal
must be either (i) specified in the notice of the meeting (or any
supplement thereto) given by or at the direction of the Board of
Directors, (ii) otherwise properly brought before the meeting by or
at the direction of the Board of Directors, or (iii) otherwise
properly brought before the meeting by a stockholder.
Director Nominations
With respect to stockholder nominations of candidates for
KCSI's Board of Directors, KCSI's By-laws provide that not less
than 45 days nor more than 90 days prior to the date of any meeting
of the stockholders at which directors are to be elected (the
"Election Meeting") any stockholder who intends to make a
nomination at the Election Meeting shall deliver a notice in
writing (the "Stockholder's Notice") to the Secretary of the
Corporation setting forth (a) as to each nominee whom the
stockholder proposes to nominate for election or re-election as a
director, (i) the name, age, business address and residence address
of the nominee, (ii) the principal occupation or employment of the
nominee, (iii) the class and number of shares of capital stock of
KCSI that are beneficially owned by the nominee, and (iv) any other
information concerning the nominee that would be required, under
the rules of the Securities and Exchange Commission, in a proxy
statement soliciting proxies for the election of such nominee; and
(b) as to the stockholder giving the notice, (i) the name and
address of the stockholder and (ii) the class and number of shares
of capital stock of the Corporation which are beneficially owned by
the stockholder and the name and address of record under which such
stock is held; provided, however, that in the event that the
Election Meeting is designated by the Board of Directors to be held
at a date other than the first Tuesday in May and less than 60
days' notice or prior public disclosure of the date of the Election
Meeting is given or made to stockholders, to be timely, the
Stockholder's Notice is given or made to stockholders, to be
timely, the Stockholder's Notice must be so delivered not later
than the close of business on the 15th day following the day on
which such notice of the date of the meeting was mailed or such
public disclosure was made, whichever first occurs. The
Stockholder's Notice shall include a signed consent of each such
nominee to serve as a director of the Corporation, if elected.
KCSI may require any proposed nominee or stockholder proposing a
nominee to furnish such other information as may reasonably be
required by KCSI to determine the eligibility of such proposed
nominee to serve as a director of KCSI or to properly complete any
proxy or information statement used for the solicitation of proxies
in connection with such Election Meeting.
Matters Other than Director Nominations
In addition to any other applicable requirements, for a
proposal to be properly brought before the meeting by a
stockholder, the stockholder must have given timely notice thereof
in writing to the Secretary of KCSI. To be timely, such a
stockholder's notice must be delivered to or mailed and received at
the principal executive offices of KCSI, not less than 45 days nor
more than 90 days prior to the meeting; provided, however, that in
the event that the meeting is designated by the Board of Directors
to be held at a date other than the first Tuesday in May and less
than 60 days' notice or prior public disclosure of the date of the
meeting is given or made to stockholders, to be timely, the notice
by the stockholder must be so received not later than the close of
business on the 15th day following the day on which such notice of
the date of the meeting was mailed or such public disclosure was
made, whichever first occurs. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder
proposes to bring before the meeting (i) a brief description of the
business desired to be brought before the meeting and the reasons
for conducting such business at the meeting, (ii) the name and
address of the stockholder proposing such business, (iii) the class
and number of shares of capital stock of the Corporation which are
beneficially owned by the stockholder and the name and address of
record under which such stock is held and (iv) any material
interest of the stockholder in such business.
1995 Annual Meeting Proxy Statement
If a holder of KCSI Common Stock or Preferred Stock wishes to
present a proposal, other than the election of a director, in
KCSI's Proxy Statement for next year's annual meeting of
stockholders, such proposal must be received by KCSI on or before
November 24, 1994. Such proposal must be made in accordance with
the applicable laws, rules of the Securities and Exchange
Commission and the interpretations thereof. Any such proposal
should be sent to the Corporate Secretary of KCSI at 114 West 11th
Street, Kansas City, Missouri 64105-1804.
OTHER MATTERS
The Board of Directors know of no other matters that are
expected to be presented for consideration at the Annual Meeting.
KCSI's By-laws require that stockholders intending to bring
business before an Annual Meeting, including the nomination of
candidates for election to the Board of Directors, give timely and
sufficient notice thereof to the Secretary of KCSI, not more than
90 and no less than 45 days before an Annual Meeting held on the
date specified in KCSI's By-laws and provide certain additional
information. As of the date of this Proxy Statement, no such
notice has been received.
However, if other matters properly come before the meeting, it
is intended that persons named in the accompanying proxy will vote
on them in accordance with their best judgement.
Notwithstanding anything to the contrary set forth in any of
KCSI's previous filings under the Securities Act of 1933, as
amended, or the Exchange Act that might incorporate future filings,
including this Proxy Statement, in whole or in part, the
Compensation and Organization Committee Report on Executive
Compensation and the Performance Graph included herein shall not be
incorporated by reference into any such filings.
<TABLE>
<C> <S>
By Order of the Board of Directors
/s/Albert P. Mauro
Vice President and Secretary
</TABLE>
Kansas City, Missouri
March 30, 1994.
A COPY OF KCSI'S ANNUAL REPORT ON FORM 10-K AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION FOR 1993 WILL BE FURNISHED TO
STOCKHOLDERS WITHOUT CHARGE, UPON REQUEST DIRECTED TO THE SECRETARY
OF KCSI, 114 WEST 11TH STREET, KANSAS CITY, MISSOURI 64105-1804.
<PAGE>
APPENDIX
GRAPHIC AND IMAGE MATERIAL
IN
PROXY STATEMENT
This appendix is included in this electronic format document
in accordance with Rule 304 of Regulation S-T. The following
graphic and image material is included in the KCSI's proxy
statement:
PHOTOGRAPHS OF EACH DIRECTORS
The proxy statement includes photographs of each director. A
photograph of a director is placed in the proxy statement next to
the discussion of the director's principal occupations in the
section entitled "INFORMATION CONCERNING THE KCSI BOARD OF
DIRECTORS AND CERTAIN COMMITTEES".
STOCK PERFORMANCE GRAPH*
The proxy statement also includes a stock performance graph,
which is supplemented by a table showing the dollar value of the
points on the graph. The table is set forth in this electronic
format document in the section entitled "STOCK PERFORMANCE GRAPH".
Both the graph and the table will be included in the paper format
definitive proxy mailed to KCSI's Stockholders. In accordance with
a letter to EDGAR filers dated November 16, 1992 from Mauri L.
Osheroff, Associate Director of Regulatory Policy of the Division
of Corporate Finance, no further explanation of the graph is set
forth in this appendix.
* In accordance with Rule 304(d) of Regulation S-T, a paper format
copy of the stock performance graph to be included in the
definitive proxy statement has been submitted to the Branch Chief
of Branch 5 of the Division of Corporate Finance.
<PAGE>
PROXY
[COMMON]
KANSAS CITY SOUTHERN INDUSTRIES, INC.
114 WEST 11TH STREET
KANSAS CITY, MISSOURI 64105
Paul H. Henson, L. H. Rowland, and Thomas A. McDonnell, or any one
of them, are hereby authorized, with full power of substitution, to
vote the undersigned's shares of stock of Kansas City Southern
Industries, Inc. ("KCSI") at the Annual Meeting of Stockholders to
be held on May 3, 1994, and at any adjournment thereof, as follows:
(1) Election of four directors:
NOMINEES: GEORGE W. EDWARDS, JR., MICHAEL F. FITT, THOMAS A.
MCDONNELL AND MORTON I. SOSLAND
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[ ] FOR all nominees [ ] WITHHOLD AUTHORITY
(except as indi- to vote for all
cated to the nominees
contrary below)
(THE BOARD OF DIRECTORS RECOMMENDS A "FOR" VOTE ON THIS
MATTER.)
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR A
PARTICULAR NOMINEE OR NOMINEES, WRITE THE NAME(S) OF SUCH
NOMINEE(S) IN THE SPACE PROVIDED BELOW. IN SUCH EVENT,
UNLESS YOU INDICATE OTHERWISE BELOW, YOUR VOTES WILL THEN
BE CUMULATED AND VOTED FOR THE OTHER NOMINEES TO ELECT
THE MAXIMUM NUMBER OF NOMINEES.
____________________________________________________
(2) Approval of an amendment to KCSI's Certificate of
Incorporation to increase the number of authorized shares of
common stock.
(THE BOARD OF DIRECTORS RECOMMENDS A "FOR" VOTE ON THIS
MATTER.)
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[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) Approval of an amendment to KCSI's Certificate of
Incorporation to set a par value for the common stock.
(THE BOARD OF DIRECTORS RECOMMENDS A "FOR" VOTE ON THIS
MATTER.)
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE>
[Back of Card]
(4) Ratification of the Board of Directors' selection of Price
Waterhouse as KCSI's independent accountants for 1994.
(THE BOARD OF DIRECTORS RECOMMENDS A "FOR" VOTE ON THIS
MATTER.)
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(5) In their discretion on all other matters as are properly
brought before the Annual Meeting.
[ ] GRANT [ ] WITHHOLD
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THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS AND WILL BE VOTED
AS SPECIFIED. UNLESS AUTHORITY TO VOTE FOR ANY NOMINEE IS
WITHHELD, AUTHORITY TO VOTE CUMULATIVELY FOR SUCH NOMINEE WILL BE
DEEMED GRANTED. IF NO SPECIFICATION IS MADE, IT WILL BE VOTED
"FOR" THE NOMINEES NAMED AND "FOR" PROPOSALS 2, 3 AND 4. IF OTHER
PERSONS ARE NOMINATED, THIS PROXY MAY BE VOTED FOR LESS THAN ALL
THE NOMINEES NAMED ABOVE, IN THE PROXY HOLDERS' DISCRETION, TO
ELECT THE MAXIMUM NUMBER OF MANAGEMENT NOMINEES.
THIS PROXY MAY BE REVOKED IN THE MANNER DESCRIBED IN THE PROXY
STATEMENT DATED _____________, 1994. THE UNDERSIGNED ACKNOWLEDGE
RECEIPT OF SUCH PROXY STATEMENT AND KCSI'S ANNUAL REPORT TO
STOCKHOLDERS.
PLEASE DATE, SIGN AND PROMPTLY RETURN IN THE POSTAGE-PREPAID
ENVELOPE ENCLOSED.
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Dated: _______________________, 1994
______________________________
______________________________
Signature(s)
</TABLE>
PLEASE SIGN EXACTLY AS NAME(S) APPEAR BELOW. ALL JOINT OWNERS
SHOULD SIGN. EXECUTORS, ADMINISTRATORS, TRUSTEES, GUARDIANS,
ATTORNEYS-IN-FACT, AND OFFICERS OF CORPORATE OWNERS SHOULD INDICATE
THE CAPACITY IN WHICH THEY SIGN.
PLEASE INDICATE WHETHER YOU PLAN TO ATTEND THE ANNUAL MEETING OF
STOCKHOLDERS.
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WILL ATTEND [ ] WILL NOT ATTEND [ ]
</TABLE>
