SECURITIES AND EXCHANGE COMMISSION
Washington, D.C> 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities and Exchange Act of 1934
[ ] Filed by the Registrant
[X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-
12
[ ] Confidential, for use of the Commission only (as permitted
by Rule 14a-6(e)(2)
Kansas City Southern Industries, Inc.
(Name of Registrant as Specified in its Charter)
Watson & Marshall L.C.
(Name of Person(s) filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), 14a-
6(j)(2), or Item 22(a)(2) of Schedule 14A.
[ ] $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: Not applicable.
2) Aggregate number of securities to which transaction applies:
Not applicable.
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:* Not
applicable.
4) Proposed maximum aggregate value of transaction: Not
applicable.
5) Total fee paid: Not applicable.
[ ] Fee paid previously with preliminary materials.
[ ] 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:
*Set forth the amount on which the filing fee is calculated and
state how it was determined.
<PAGE>
[LOGO]
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
Thursday, May 2, 1996
YOUR VOTE IS IMPORTANT!
Please mark, date and sign the enclosed proxy card and promptly
return it to the Company in the enclosed envelope.
Mailing of this Notice and Proxy Statement, and the accompanying
Proxy Card and the 1995 Annual Report, commenced on or about
March 25, 1996.
<PAGE>
KANSAS CITY SOUTHERN INDUSTRIES, INC.
114 West 11th Street
Kansas City, Missouri 64105-1804
March 25, 1996
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 Thursday, May 2, 1996. 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.
Sincerely,
Paul H. Henson
Chairman of the Board
Landon H. Rowland
President and Chief Executive
Officer
<PAGE>
KANSAS CITY SOUTHERN INDUSTRIES, INC.
114 West 11th Street
Kansas City, Missouri 64105-1804
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 2, 1996
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 Thursday, May 2, 1996, to consider and vote
upon the following matters:
(1) Election of Two Directors;
(2) Approval of an Increase in the Number of Shares
Authorized for Issuance under KCSI's Amended and
Restated 1991 Stock Option and Performance Award Plan
(the "1991 Plan");
(3) Approval of the Reinstatement of Automatic Grants of
Stock Options to KCSI's Outside Directors under the
1991 Plan;
(4) Approval of Extension of the Term of the 1991 Plan
through February 25, 2006;
(5) Approval of Change in Vesting Provisions of the 1991
Plan;
(6) Approval of the 1991 Plan for Purposes of Sections
162(m) and 422 of the Internal Revenue Code;
(7) Ratification of the Board of Directors'
selection of Price Waterhouse LLP as KCSI's
independent accountants for 1996; and
(8) 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 8, 1996, are entitled to notice of and to vote at this
meeting or any adjournment thereof.
By Order of the Board of Directors,
Richard P. Bruening, Esq.
Vice President, General Counsel
and Corporate Secretary
The date of this Notice is March 25, 1996.
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 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, Nominees and
Certain Officers . . . . . . . . . . . . . . . . . . . . . . . .
Proposal (1) - Election of Two Directors . . . . . . . . . . . .
The Board of Directors . . . . . . . . . . . . . . . . . . . . .
Background of Amendments to KCSI's Restated 1991 Stock
Option and Performance Award Plan,
as amended and restated in 1996 . . . . . . . . . . . . . . . . .
Proposal (2) - Approval of an Increase in the Number of
Shares Authorized for Issuance
under KCSI's Amended and Restated 1991 Stock Option
and Performance Award Plan . . . . . . . . . . . . . . . . . . .
Proposal (3) - Approval of the Reinstatement of Automatic
Grants of Stock Options to KCSI's Outside Directors
under KCSI's Restated 1991 Stock Option and Performance
Award Plan . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proposal (4) - Approval of Extension of the Term of KCSI's
Restated 1991 Stock Option and Performance Award Plan
through February 25, 2006 . . . . . . . . . . . . . . . . . . . .
Proposal (5) - Approval of Change in Vesting Provisions
of KCSI's Restated 1991 Stock Option and Performance
Award Plan . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proposal (6) - Approval of KCSI's Restated 1991 Stock Option and
Performance Award Plan for Purposes of Sections 162(m) and 422
of the Internal Revenue Code . . . . . . . . . . . . . . . . . .
Summary of KCSI's Restated 1991 Stock Option and
Performance Award Plan as Amended and Restated
in 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proposal (7) - Ratification of the Board of Directors'
Selection of Independent Accountants . . . . . . . . . . . . . .
Management Compensation . . . . . . . . . . . . . . . . . . . . .
Transactions with Management . . . . . . . . . . . . . . . . . .
Stockholder Proposals . . . . . . . . . . . . . . . . . . . . . .
Compliance With Section 16(a) of the Securities
Exchange Act of 1934 . . . . . . . . . . . . . . . . . . . . . .
Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . .
Appendix A - Kansas City Southern Industries, Inc.
1991 Stock Option and Performance Award Plan as
Amended and Restated in 1996 . . . . . . . . . . . . . . . . . .
<PAGE>
GENERAL INFORMATION AND VOTING
This Proxy Statement is being mailed on or about March 25,
1996 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 Thursday, May 2, 1996, at 10:00 a.m., Central
Daylight Time, and any adjournment thereof (the "Annual
Meeting"). The Notice of Annual Meeting of Stockholders, KCSI's
1995 Annual Report to Stockholders (the "Annual Report"), and the
proxy card accompany this Proxy Statement.
Attendance at the Annual Meeting of Stockholders is limited
to stockholders of record or their proxies, beneficial owners of
KCSI's stock having evidence of such ownership and guests of
KCSI. Any stockholder or stockholder's representative who,
because of a disability, may need special assistance or
accommodation to allow him or her to participate in the Annual
Meeting may request reasonable assistance or accommodation from
KCSI by contacting KCSI's Corporate Secretary's office at 114
West 11th Street, Kansas City, Missouri 64105, (816) 556-0237.
To provide KCSI sufficient time to arrange for reasonable
assistance please submit all requests by April 25, 1996.
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. In addition, KCSI may reimburse brokerage
firms and other persons representing beneficial owners of shares
for their expenses in forwarding this Proxy Statement, the Annual
Report and other soliciting materials to such beneficial owners.
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 two directors; (2) approval of an
increase in the number of shares authorized for issuance under
KCSI's restated 1991 Stock Option and Performance Award Plan (the
"1991 Plan"); (3) approval of the reinstatement of automatic
grants of stock options to KCSI's outside directors under the
1991 Plan; (4) approval of extension of the term of the 1991 Plan
through February 25, 2006; (5) approval of the change in the
vesting provisions of the 1991 Plan; (6) approval of the 1991
Plan for purposes of Sections 162(m) and 422 of the Internal
Revenue Code; (7) ratification of the Board of Directors'
selection of Price Waterhouse LLP as KCSI's independent
accountants for 1996; and (8) such other matters as may properly
come before the Annual Meeting or any adjournment thereof.
Stockholders do not have dissenters' rights of appraisal in
connection with any of those matters.
Only the holders of KCSI's preferred stock, par value $25.00
per share (the "Preferred Stock"), and common stock, par value
$0.01 per share (the "Common Stock"), of record at the close of
business on March 8, 1996 (the "Record Date"), are entitled to
notice of and to vote at the Annual Meeting. On that date, KCSI
had outstanding 242,170 shares of Preferred Stock (excluding
407,566 shares held in treasury) and 38,616,926 shares of Common
Stock, (excluding 9,785,266 shares held in treasury) for a total
of 38,859,096 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 holder 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. Such stockholders may vote
cumulatively in the election of directors. In other words, each
such 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 any of the proposals to be considered at the
Annual Meeting (other than the election of directors), to be
approved by the stockholders, a quorum, consisting of the holders
of a majority of the shares of Voting Stock entitled to vote,
must be present and a majority of such quorum must be
affirmatively voted for approval. A stockholder entitled to vote
at the Annual Meeting who is present, either in person or through
a proxy, is counted for purposes of determining whether there is
a quorum, regardless of whether the stockholder votes such
shares. 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.
The votes are counted and certified by three inspectors
appointed by the Board of Directors of KCSI in advance of the
Annual Meeting of Stockholders. 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. 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 stockbrokers who hold shares of Voting Stock in
the broker's name for customers are required to solicit
directions from their beneficial owners on how to vote such
shares. Such brokers may also vote shares on certain proposals
when they have not received such directions. In these instances,
the Staff of the NYSE, prior to the Annual Meeting, informs the
brokers of those proposals upon which the brokers are entitled
to vote the undirected shares. 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 other 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 generally do not affect the
determination of whether a quorum is present at the Annual
Meeting because generally some of the shares held in the broker's
name have been voted on at least some proposals, and therefore,
all of such shares are considered present at the Annual Meeting.
Under applicable 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.
Stockholders who return a properly executed proxy are
appointing the Proxy Committee to vote their shares of Voting
Stock covered by the Proxy. That Committee consists of three
directors of KCSI whose names are listed on the proxy card. A
stockholder wishing to name as his or her proxy someone other
than the Proxy Committee designated on the proxy card may do so
by crossing out the names of the designated proxies and inserting
the name of another person. In that case, it will be necessary
for the stockholder to sign the proxy card and deliver it to the
person so named and for that person to be present and vote at the
Annual Meeting. Proxy cards so marked should not be mailed
directly to KCSI.
The Proxy Committee will vote the shares of Voting Stock
covered by a proxy in accordance with the instructions given by
the stockholders executing such proxies. If a properly executed
and unrevoked proxy solicited hereunder does not specify how the
shares represented thereby are to be voted, the Proxy Committee
intends to vote such shares FOR the election as directors of the
persons nominated by management; FOR approval of an increase in
the number of shares authorized for issuance under the 1991 Plan;
FOR approval of the reinstatement of automatic grants of stock
options to KCSI's Outside Directors under the 1991 Plan; FOR
approval of extension of the term of the 1991 Plan through
February 25, 2006; FOR approval of the change in the vesting
provisions of the 1991 Plan; FOR approval of the 1991 Plan for
purposes of Sections 162(m) and 422 of the Internal Revenue Code;
FOR ratification of the Board of Directors' selection of Price
Waterhouse LLP as KCSI's independent accountants for 1996; and in
accordance with their discretion upon such other matters as may
properly come before the Annual Meeting. However, the Proxy
Committee reserves the right to vote such proxies cumulatively
and for the election of less than all of the nominees for
director, but does 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.
A stockholder may revoke a properly executed proxy with a
later-dated, properly executed proxy or other writing delivered
to the Corporate 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 Corporate Secretary before the proxy is voted.
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of the Record
Date concerning the beneficial ownership of KCSI's Common Stock
by: (i) beneficial owners of more than five percent of any class
of such stock; and (ii) all KCSI officers and directors as a
group. KCSI is not aware of any beneficial owner of more than
five percent of the Preferred Stock. Beneficial ownership is
generally defined to mean either the sole or shared power to vote
or dispose of the shares. The percentage ownership is based on
the number of shares outstanding as of the Record Date. Except
as otherwise noted, the holders have sole voting and dispositive
power.
<TABLE>
<CAPTION>
Name and Address Common Stock<F1> Percent of Class
<S> <C> <C>
The Employee Stock 3,759,098<F2> 9.2%
Ownership Plan<F2>
UMB Bank, N.A., as 3,777,258<F2> 9.2%
co-trustee of The
Employee Stock
Ownership Plan and
other fiduciary
accounts<F2>
Southeastern Asset 3,055,100<F3> 7.5%
Management,
Inc.<F3>
All Officers and 2,109,698<F4> 5.2%
Directors as a
group (17 Persons)
<FN>
<F1>
See footnote 1 to the table under the heading "Stock Owned
Beneficially by Directors and Certain Officers" below.
<F2>
Based on information reported in Amendment No. 8 to Schedule 13G,
dated February 13, 1996, jointly filed by UMB Financial
Corporation ("UMBFC"), its wholly owned subsidiary UMB Bank, N.A.
("UMB") and The Employee Stock Ownership Plan (the "ESOP").
Shares held by UMB include the shares held as co-trustee of the
ESOP. Voting and dispositive power over the shares held by the
ESOP that are allocated to participant accounts are vested in the
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). Any unallocated shares are to
be voted by the trustees in the same proportion as the allocated
shares. Mercantile Bank of Kansas City is co-trustee of the ESOP
only for purposes of voting. Beneficial ownership is disclaimed
by UMB and the ESOP all of which are allocated to participants'
accounts under the ESOP. Amount shown for UMB does not include
1,301,857 shares held by UMB in custody accounts for which UMB
does not have voting or dispositive power. UMBFC reports that it
does not beneficially own any shares of KCSI stock because UMBFC
is prohibited by law from directing voting or disposition of such
shares and therefore excludes the 5,079,115 shares held by UMB in
various capacities. The address for UMB Financial Corporation,
UMB Bank, N.A. and The Employee Stock Ownership Plan is 1010
Grand, Kansas City, Missouri 64106. Amount does not reflect a
sale of 225,000 shares of Common Stock on March 15, 1996
<F3>
Based upon information set forth in a Schedule 13G dated February
5, 1996, Southeastern Asset Management, Inc. ("Southeastern") is
a registered investment advisor, and holds all such shares for
its clients. The Schedule 13G provides that it is not to be
construed as an admission that Southeastern is the beneficial
owner. The Schedule 13G is filed jointly with Mr. O. Mason
Hawkins, who is Chairman of the Board and Chief Executive Officer
of Southeastern. Mr. Hawkins disclaims beneficial ownership of
the shares. The address for Southeastern is 6075 Poplar Avenue,
Suite 900, Memphis, Tennessee 38119.
<F4>
See footnote 13 to the table under the heading "Stock Owned
Beneficially by Directors and Certain Officers" below.
</FN>
</TABLE>
<PAGE>
STOCK OWNED BENEFICIALLY BY DIRECTORS, NOMINEES
AND CERTAIN OFFICERS
The following table sets forth information, as of the Record
Date, concerning the Board of Directors', Nominee's and certain
executive officers' beneficial ownership of KCSI's Voting Stock.
No officer or director of KCSI owns any equity securities of any
subsidiary of KCSI, except that Thomas H. Bailey owns 1,200,000
(12%) of the outstanding common stock of Janus Capital
Corporation.
<TABLE>
<CAPTION>
Name and Relationship Common Stock <F1> Preferred Stock<F1>
<S> <C> <C>
A. Edward Allinson 20,800*<F2> ---
Director
Thomas H. Bailey 8,054*<F3> ---
Chairman of the Board,
Chief Executive Officer
and President of Janus
Capital Corporation
Paul F. Balser 20,000*<F4> ---
Director
James E. Barnes 23,000*<F5> ---
Director
Thomas S. Carter 332,134*<F6> 400*
Director
Michael G. Fitt 21,200*<F7> ---
Director
Michael R. Haverty 23,827*<F8> ---
Director, Executive
Vice President
Paul H. Henson 195,953*<F9> ---
Chairman of the Board
Joseph D. Monello 102,272*<F10>
Vice President and
Chief Financial Officer
Landon H. Rowland 1,027,842<F11> ---
Director, President, 2.5%
Chief Executive Officer
Jose F. Serrano -0- ---
Nominee for Director
Morton I. Sosland 105,188<F12> ---
Director
All Directors and 2,109,698<F13> 400(*)
Officers as a 5.2%
Group (17 Persons)
* Less than 1% of the shares outstanding of the class
<FN>
<F1>
Share amounts calculated 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 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 ESOP.
Percentage ownership is based on the number of shares outstanding
as of the Record Date as well as exercisable options pursuant to
Rule 13d-3. 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 ESOP, the holders have sole voting and dispositive power.
<F2>
Includes 18,800 shares that may be acquired through option
exercises and 800 shares held in Keogh Plan.
<F3>
Includes 6,722 shares allocated to his account under the ESOP.
<F4>
Includes 20,000 shares that may be acquired through option
exercises.
<F5>
Includes 20,000 shares that may be acquired through option
exercises and 3,000 shares held jointly with his wife.
<F6>
Includes 16,000 shares that may be acquired through option
exercises.
<F7>
Includes 18,000 shares that may be acquired through option
exercises.
<F8>
Includes 777 shares allocated to his account in the ESOP and 50
shares held by his children.
<F9>
Includes 8,075 shares allocated to his account under the ESOP.
<F10>
Includes 10,770 shares allocated to his account in the ESOP and
71,000 shares that may be acquired through option exercises.
<F11>
Includes 768,000 shares that may be acquired through option
exercises, 19,660 shares allocated to his account under the ESOP
and 159 shares in the KCSI Profit Sharing Plan.
<F12>
Includes 20,000 shares which may be acquired through option
exercises and 1,600 shares held in trust over which he has sole
voting and dispositive power as trustee. Also includes the
following shares over which he has shared voting and/or
dispositive power, but as to which beneficial ownership is
disclaimed: 12,000 shares held by certain companies of which he
is a director; 38,100 shares held as co-trustee of certain
testamentary trusts; 15,800 shares in a charitable foundation of
which he is a director; and 4,000 shares held by his wife.
<F13>
Includes 1,042,050 shares which may be acquired through option
exercises and 94,906 shares allocated to the accounts of officers
under the ESOP. The list of executive officers of KCSI is
included in KCSI's Annual Report on Form 10-K. See the last page
of this proxy statement for instructions on how to obtain a copy
of the Form 10-K.
</FN>
</TABLE>
<PAGE>
PROPOSAL (1) - ELECTION OF TWO DIRECTORS
The Board of Directors of KCSI is divided into three
classes. The members of each class serve staggered three year
terms of office so that one class stands for election at each
annual meeting of stockholders. The term of one of the current
members of the Board of Directors expires at the Annual Meeting
or when his successor is elected and qualified. The term of
office for the directors elected at the Annual Meeting will
expire in 1999 or when their successors are elected and
qualified.
Two people have been nominated by management for election as
directors. One of these nominees is presently a director of
KCSI, both have indicated that they are willing and able to serve
as directors if elected, and both have consented to being named
as nominees in this Proxy Statement. If any nominee should
become unable or unwilling to serve, the Proxy Committee intends
to vote for one or more substitute nominees chosen by them in
their sole discretion.
KCSI's Bylaws provide that from and after January 19, 1990,
no person who has attained the age of 72 shall be eligible to be
nominated or to serve as a member of the Board of Directors, but
any person who shall attain the age of 72 during the term of
directorship to which he was elected shall be eligible to serve
the remainder of such term. KCSI's Certificate of Incorporation
and Bylaws do not provide any other eligibility requirements for
directors.
As explained further under "General Information and Voting,"
nominees for Director are elected by the affirmative vote of the
plurality of the shares of Voting Stock present at the Annual
Meeting that are entitled to vote on the election of directors,
assuming a quorum.
NOMINEES FOR DIRECTORS TO SERVE UNTIL THE ANNUAL MEETING OF
STOCKHOLDERS IN 1999
JAMES E. BARNES, age 62, has been a director of KCSI since 1986.
He is Chairman of the Board, President and Chief Executive
Officer of MAPCO Inc., Tulsa, Oklahoma, and has served in this
capacity since September 1995. He was Chairman of the Board and
Chief Executive Officer from December 1991 to September 1995 and
Chairman of the Board, President and Chief Executive Officer from
May 1986 to December 1991. MAPCO owns, develops, produces and
transports coal, petroleum and gas products. Mr. Barnes is also
a director of BOK Financial Corporation, Tulsa, Oklahoma, SBC
Communications Inc., San Antonio, Texas and MAPCO Inc., Tulsa,
Oklahoma.
JOSE F. SERRANO, age 55, is not a director or officer of KCSI.
Since 1990, he has been Chairman and Chief Executive Officer of
Transportacion Maritima Mexicana, S.A. de C.V. ("TMM"). TMM is
the largest maritime shipping company in Mexico and one of the
leading companies among the world's maritime carriers serving
Mexican ports. TMM also transports cargo to other ports around
the world and has trucking operations in Mexico. TMM and KCSI
jointly own the Texas Mexican Railway Company ("Tex Mex") as a
result of KCSI's purchase of 49 percent of the Tex Mex stock from
TMM during 1995. TMM and KCSI have also agreed to form a joint
venture to bid upon certain concessions to operate Mexico's
railroad lines that may become available in connection with the
anticipated privatization of such lines. In furtherance of joint
operations, Mr. Serrano agreed to serve on the Board of KCSI, if
elected, and Mr. Rowland has agreed to serve on the Board of TMM.
YOUR BOARD RECOMMENDS THAT YOU VOTE
"FOR"
THE ELECTION OF MANAGEMENT'S NOMINEES
THE BOARD OF DIRECTORS
The Board of Directors met eight times in 1995. It meets
regularly to review significant developments affecting KCSI and
to act on matters requiring Board approval. The Board reserves
certain powers and functions to itself; in addition, it has
requested that the Chief Executive Officer refer certain matters
to it. All directors attended at least seventy-five percent of
the meetings of the Board in 1995.
DIRECTORS SERVING UNTIL THE ANNUAL MEETING OF STOCKHOLDERS IN
1997
MICHAEL G. FITT, age 64, has been a director of KCSI since August
1986. 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 and is
now retired. Employers Reinsurance Corporation is a subsidiary
of General Electric Capital Services, Inc. He is also a director
of DST Systems, Inc., Kansas City, Missouri, NAC RE Corp.,
Greenwich, Connecticut and Boatmen's National Bank of Kansas
City, Kansas City, Missouri.
MORTON I. SOSLAND, age 70, has been a director of KCSI since
1976. He has been Chairman of the Sosland Companies, Inc. (the
"Sosland Companies"), Kansas City, Missouri, since January 1993
and was President from July 1968 through December 1992. The
Sosland Companies are publishers and venture capital investors.
He is also a director of Brown Group, Inc., St. Louis, Missouri
and H & R Block, Inc., Kansas City, Missouri.
MICHAEL R. HAVERTY, age 51, has been a director and Executive
Vice President of KCSI and President and Chief Executive Officer
of The Kansas City Southern Railway Company ("KCSR") since May
1995. He previously served as Chairman and Chief Executive
Officer of Haverty Corporation from 1993 to May 1995, acted as an
independent executive transportation adviser from 1991 to 1993
and was President and Chief Operating Officer of the Atchison,
Topeka and Santa Fe Railway Company from 1989 to 1991. He is
also a director of Wisconsin Central Ltd. and Gateway Western
Railroads.
DIRECTORS SERVING UNTIL THE ANNUAL MEETING OF STOCKHOLDERS IN
1998
A. EDWARD ALLINSON, age 61, has been a director of KCSI since
1990. He has been an Executive Vice President of State Street
Bank and Trust Company, Chairman of the Board of Directors of
Boston Financial Data Services, Inc. ("BFDS") and Executive Vice
President of State Street Boston Corporation since March 1990.
He served as Chief Executive Officer of BFDS from March 1990
until August 1992. BFDS provides full service share owner
accounting and recordkeeping services to mutual funds, selected
services to certain retirement plans and certain securities
transfer services. He is a director of DST Systems, Inc., Kansas
City, Missouri.
PAUL F. BALSER, age 54, has been a director of KCSI since 1990.
He has been a Partner in Generation Partners, New York, New York
since August 1995. Generation Partners is an investment firm
specializing in privately negotiated equity and venture capital
investments. He was a partner with Centre Partners, New York,
New York from September 1986 through July 1995. He serves as a
director of Carbide/Graphite Group, Inc., Pittsburgh,
Pennsylvania and Scientific Games, Inc., Atlanta, Georgia.
PAUL H. HENSON, age 70, has been a director and Chairman of the
Board of KCSI since May 1990 and had previously served as a
director of KCSI from 1966 through 1980. He serves as a director
of Armco, Inc., Parsippany, New Jersey and Duke Power Company,
Charlotte, North Carolina.
LANDON H. ROWLAND, age 58, has been a director of KCSI since
1983. He has been President of KCSI since July 1983 and Chief
Executive Officer of KCSI since January 1987, and he was Chief
Operating Officer from July 1983 through December 1986. He has
been Chairman of the Board of KCSR since May 1990 and a director
of that Company since May 1982, and was Chairman of the Board and
a director of DST Systems, Inc. from June 1983 to September 1995.
He is also a director of Janus Capital Corporation and Berger
Associates, Inc.
INFORMATION ABOUT COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established the following
standing committees: Executive Committee (which also nominates
individuals to serve as directors of KCSI), Audit Committee,
Compensation and Organization Committee and Finance and Strategy
Committee. During 1995, there were five meetings of the
Executive Committee, four meetings of the Audit Committee, seven
meetings of the Compensation and Organization Committee, and one
meeting of the Finance and Strategy Committee. All directors
attended at least 75 percent of the total of all meetings of all
committees on which they served during 1995, other than Mr.
Henson, who attended five of the seven meetings of the
Compensation and Organization Committee, and Mr. Fitt, who
attended three of the five meetings of the Executive Committee.
THE 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 of the
Board in the management of KCSI in all cases in which specific
direction has not been reserved by the full Board.
The Executive Committee also serves as the Board's
nominating committee and recommends to the Board suitable
nominees for election to the Board of Directors or to fill newly
created directorships or vacancies on 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.
The members of the Executive Committee are: A. Edward
Allinson, Thomas S. Carter, Michael G. Fitt, Paul H. Henson and
Landon H. Rowland.
THE 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 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 fee arrangements with independent
accountants for audit functions and for advisory and other
consulting services.
The members of the Audit Committee are: A. Edward Allinson,
Thomas S. Carter and Michael G. Fitt.
THE COMPENSATION AND ORGANIZATION COMMITTEE
The Compensation and Organization Committee (the
"Compensation Committee") consists of outside directors elected
by the Board to serve one-year terms. The Compensation Committee
authorizes all salaries for KCSI and subsidiary company officers
and supervisory employees (other than officers and supervisory
employees of Janus Capital Corporation) at salary grade 35 and
above (commencing at $95,200). The Committee also administers
the incentive compensation plans of KCSI and KCSR and its
subsidiaries 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 Compensation Committee also has the authority to review
the consolidated earnings of KCSI and to make recommendations to
the Board concerning the allocation of funds to KCSI's Profit
Sharing Plan. The Compensation Committee also reviews the
results of the investment program of the Profit Sharing Plan and
reports to the Board.
The Compensation Committee 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
Bylaws, the terms of the plans and the applicable laws. The
Compensation Committee is also responsible for an annual update
of succession plans and major organizational changes.
The members of the Compensation and Organization Committee
are: Paul F. Balser, James E. Barnes, Thomas S. Carter and
Morton I. Sosland.
The Committee's report on executive compensation is set
forth in the section on Management Compensation.
COMPENSATION AND ORGANIZATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
Thomas S. Carter, who was a member of the Compensation and
Organization Committee during 1995, was an officer of KCSR and
the Louisiana and Arkansas Railway Company, a subsidiary of KCSR,
until his retirement in 1990.
Until July 1995, Mr. Balser was a partner of Centre Partners
which may be deemed to indirectly control over 83 percent of
Jungle Jim's Playground, Inc. ("Jungle Jim's") and Mr. Balser is
a director of Jungle Jim's. At December 31, 1995, Jungle Jim's
was indebted to Southern Credit Corporation, a subsidiary of
KCSI, for a total of $1,548,765. The indebtedness is evidenced
by several notes at various fixed rates, which were determined at
the time of borrowing, and is secured by certain equipment of
Jungle Jim's. Jungle Jim's paid a total of $193,666 in interest
to Southern Credit Corporation in 1995.
Messrs. Balser and Carter hold limited partnership interests
for themselves or members of their immediate family in certain
limited partnerships of which a subsidiary of DST Systems, Inc.
("DST"), National Realty Partners, Inc. ("NRP"), serves as
general partner (until November 1995, DST was a wholly owned
subsidiary of KCSI). During 1995, management fees of $25,000 and
$10,000 were paid to NRP by Elgin Investors, L.P. and Inwood
Towers, L.P. ("Towers"), respectively. NRP and DST Realty, Inc.
("Realty"), a DST subsidiary, advanced $190,044 to another such
limited partnership, Trails Investors, L.P. ("Trails"). At
December 31, 1995, Trails was indebted to NRP and Realty in the
amount of $1,203,804.
THE 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 making recommendations
with regard to such reviews to the Board.
The members of the Finance and Strategy Committee are: Paul
F. Balser, James E. Barnes, Michael G. Fitt, Paul H. Henson and
Morton I. Sosland.
COMPENSATION OF DIRECTORS
Directors who are officers or employees of KCSI and its
subsidiaries do not receive any fees or other compensation for
service on the Board or its committees. During 1995, directors,
who were not officers or employees of KCSI and its subsidiaries
or affiliates, received a $21,000 annual retainer, payable
quarterly, and $2,000 plus expenses for each KCSI Board meeting
attended or $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. No
fees were paid during 1995 to any director or officer for service
on any Board of Directors of any subsidiary of KCSI other than
Janus Capital Corporation.
Directors of KCSI and certain subsidiaries are permitted to
defer receipt of directors fees under unfunded directors'
deferred fee plans adopted by the respective board of directors
of each such corporation, and either to receive interest on such
fees until they have been paid to them or, in the case of KCSI's
directors, 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 one percent. Distributions under the plans are allowed in
certain instances as approved by the respective Boards of
Directors. The KCSI and KCSR deferred fee plans also allow the
respective directors to elect to receive deferred amounts in
installments payable over several years.
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 percent to 55 percent
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 percent level and directors serving from nine to
fifteen years will receive benefits at a 50 percent level for a
period equal to the number of months served, whereas directors
serving over fifteen years will receive benefits at a 55 percent
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.
CHANGES TO COMPENSATION OF DIRECTORS
In February 1996, the Board of Directors unanimously
approved changes to the compensation of KCSI's outside directors
in order to implement the same strategy used to compensate KCSI's
executive officers. The revised compensation package, which is
to be effective as of the Annual Meeting, is as follows.
No retainers will be paid for Board membership or for
service as a Chair of a committee.
Fees for attendance at a Board meeting will be $4,000 per
meeting ($2,000 for participation by telephone).
Fees for attendance at a Committee meeting will be $2,000
per meeting ($1,000 for participation by telephone). The
Chair of the Committee will receive an extra $500 for each
Committee meeting.
Directors will receive options to buy 3,000 shares of KCSI
stock at the time of each annual meeting, plus a one-time
grant of an option to purchase 6,000 shares of KCSI stock
when a Director first joins the Board.
The Directors Retirement Plan will be frozen and there will
be no retirement benefit for new Directors. The present
value of accrued benefits under the existing Retirement Plan
for those Directors who will continue service on the Board
following the Annual Meeting will be transferred to separate
accounts in the Directors' Deferred Fee Plan and earn a
return based upon a hypothetical investment in KCSI Common
Stock.
CURRENT COMPENSATION COMPARED TO REVISED COMPENSATION
The following table shows all components of director
compensation and compares the current director compensation
packages with the revised packages, assuming stockholders approve
the amendment to the 1991 Stock Option and Performance Award Plan
reinstating automatic grants to the outside directors.
<TABLE>
<CAPTION>
Compensation Current Revised
<S> <C> <C>
Annual Board Retainer -
Cash Component $21,000 None
Stock Component -
Options For 4,000 shares<F1> 3,000 shares<F2>
Board Meeting Attendance
Fee -
In Person $ 2,000<F3> $4,000<F3>
By Telephone $ 1,000 $2,000
Annual Committee Chairman
Retainer $ 3,000 None
Committee Meeting
Attendance Fee -
In Person $ 1,000 $2,000<F3><F4>
By Telephone $ 1,000 $1,000
Service on Subsidiary None None
Boards
Retirement Plan See above<F5> None<F6>
Deferred Fee Plan See above<F5> No Change
<FN>
<F1>
Options to purchase shares of Common Stock granted automatically
at the annual meeting of stockholders under 1993 Directors' Stock
Option Plan in 1995. No more automatic grants are provided for
in that plan after the 1995 grant.
<F2>
Options to purchase shares of Common Stock granted automatically
at the annual meeting of stockholders. Amount shown does not
reflect one time grant for new members of the Board of an option
to purchase 6,000 shares of Common Stock. These options are
granted at market price on date of grant. The terms of these
options are discussed in more detail under Proposal (3) in this
Proxy Statement.
<F3>
Plus expenses.
<F4>
The Chair of the committee will receive an extra $500 for each
committee meeting.
<F5>
The Directors' Retirement Plan and Directors Deferred Fee Plan
are discussed under the heading "Compensation of Directors"
above.
<F6>
Existing balances will remain in the plan as explained above
under the heading "Compensation of Directors."
</FN>
</TABLE>
BACKGROUND OF AMENDMENTS TO KCSI'S RESTATED 1991 STOCK OPTION
AND PERFORMANCE AWARD PLAN, AS AMENDED AND
RESTATED IN 1996
In 1996, the Board of Directors adopted certain amendments
to and restated KCSI's 1991 Stock Option and Performance Award
Plan, as amended and restated in 1993 (the "1991 Plan"), subject
to stockholder approval as required under the Plan. The Board
is, therefore, seeking stockholder approval of certain of the
changes to the 1991 Plan as set forth in the proposals below.
The implementation of any of the amendments to the 1991 Plan
proposed herein that are subject to stockholder approval is not
contingent upon stockholder approval of any of the other such
amendments.
Each of the amendments for which stockholder approval is
sought is explained further below. Following that is a summary
of the 1991 Plan as amended and restated in 1996. This
discussion of the 1991 Plan is qualified in its entirety by
reference to the complete 1991 Plan, a copy of which is attached
hereto as Appendix A.
The Board is submitting the proposals concerning the 1991
Plan to stockholders for their approval in order to comply with
Section 162(m) ("Section 162(m)") of the Internal Revenue Code of
1986, as amended (the "Code"), Section 422 of the Code and
Section 16(b) of the Securities Exchange Act of 1934, as amended
("Section 16(b)"). Under Section 162(m), public companies cannot
deduct for federal income tax purposes annual compensation (which
includes compensation arising from the exercise of stock options
or other awards under the 1991 Plan), in excess of $1 million if
that compensation is paid to any of its officers whose
compensation is reported in the company's proxy statement.
However, compensation that is paid pursuant to the terms of a
plan or other arrangement that is "performanced based" in
accordance with the requirements of Section 162(m) is not subject
to the $1 million limitation which, among other things, requires
stockholder approval of the plan. KCSI could incur compensation
expense in connection with awards granted under the 1991 Plan.
Section 422 of the Code requires stockholder approval of certain
amendments of a plan under which incentive stock options
("ISO's") may be issued in order to preserve the federal income
tax treatment of the ISO's.
The Board is submitting the amendments to the 1991 Plan for
stockholder approval in accordance with Section 16(b) so that the
granting of awards under the 1991 Plan will not subject certain
plan participants to potential forfeiture of all or a portion of
such awards or other assets of the participant. Such awards
under the 1991 Plan can be exempt from Section 16(b) if the plan
complies with Section 16(b), which, among other things, also
requires that the plan be approved by the KCSI's stockholders.
KCSI believes that the Plan meets the other requirements of
Sections 162(m) and 422 of the Code and Section 16(b).
PROPOSAL (2) - APPROVAL OF AN INCREASE IN THE NUMBER OF SHARES
AUTHORIZED FOR ISSUANCE UNDER KCSI'S AMENDED AND RESTATED 1991
STOCK OPTION AND PERFORMANCE AWARD PLAN
At KCSI's 1993 Annual Meeting of Stockholders, stockholders
approved a 3,400,000 share increase in the number of shares of
Common Stock that were authorized for issuance in connection with
awards under the 1991 Stock Option and Performance Award Plan
(the "1991 Plan") to a total of 7,400,000 shares (after taking
into account the 2 for 1 stock dividends in 1992 and 1993). To
date, awards have been issued for 4,326,544 of the total shares
authorized for issuance under the 1991 Plan.
The Board has approved an amendment, subject to stockholder
approval, to increase the number of authorized shares by one
million. Based on the closing price of the Common Stock on March
19, 1996 of $47 1/4, the aggregate market value of the one
million shares to be renewed under the 1991 Plan is $47,250,000.
If approved, the 1991 Plan, as amended and restated, would
provide for the availability of a total of 8,400,000 shares of
Common Stock for the granting of options, stock appreciation
rights, limited rights, performance shares, performance units,
dividend equivalents, or any other right, interest or option
relating to shares of Common Stock granted pursuant to the
provisions of the Plan (collectively "Awards") to certain
eligible employees ("Participants") and Outside Directors (as
defined in the 1991 Plan). Therefore, the maximum number of
authorized shares that could be issued in the future in
connection with awards under the 1991 Plan, if the amendment is
approved by the stockholders, would be 4,073,456 shares (not
including forfeitures, if any), representing approximately 10.6
percent of KCSI's common stock outstanding on the record date.
Beginning in 1991, KCSI determined to shift the emphasis of
its incentive compensation practices to stock-based awards in
lieu of cash payments. Although KCSI will continue to award cash
payments as incentive compensation to certain groups of
employees, the Board anticipates that senior management's
incentive compensation will include a larger component of stock
option grants and other stock-based awards. Since the ultimate
value of such awards will necessarily be determined by KCSI's
performance, KCSI believes that stock-based awards provide more
incentive for management to enhance KCSI's value to its
stockholders. In addition, the shift in emphasis is intended to
encourage management to acquire a more significant percent of
ownership of KCSI. By increasing the number of shares available
for grants under the 1991 Plan, KCSI and the Compensation and
Organization Committee will have more flexibility in granting
such awards.
As explained further under "General Information and Voting,"
approval of this proposal requires the affirmative vote of a
majority of the shares of Voting Stock present at the Annual
Meeting that are entitled to vote on the proposal, assuming a
quorum.
YOUR BOARD RECOMMENDS THAT YOU VOTE "FOR"
APPROVAL OF THE AMENDMENT
TO INCREASE THE NUMBER OF SHARES AUTHORIZED FOR ISSUANCE
UNDER KCSI'S RESTATED 1991 STOCK OPTION AND PERFORMANCE AWARD
PLAN
PROPOSAL (3) - APPROVAL OF THE REINSTATEMENT OF AUTOMATIC
GRANTS OF STOCK OPTIONS
TO KCSI'S OUTSIDE DIRECTORS
UNDER KCSI'S RESTATED 1991 STOCK OPTION AND
PERFORMANCE AWARD PLAN
The 1991 Plan, as originally adopted, provided for an
automatic grant to each Outside Director (as defined in the 1991
Plan) on the date of the annual meeting of stockholders of an
option to purchase 8,000 shares of Common Stock. Those automatic
grants were eliminated in 1993 because KCSI stockholders approved
a separate stock option plan (the "1993 Directors' Plan") for
KCSI's Outside Directors (as defined in the 1993 Directors'
Plan), which also provided for an automatic grant to each Outside
Director on the date of the annual meeting of stockholders held
in 1993, 1994 and 1995 of an option to purchase 4,000 shares of
Common Stock. Since KCSI's 1995 annual meeting of stockholders,
no additional stock options have been automatically granted under
the terms of the 1993 Directors' Plan. Nonetheless, the options
that are outstanding under that plan will remain outstanding and
such options are or will become exercisable or will terminate in
accordance with the terms of the 1993 Directors' Plan and the
related award agreements.
Consistent with the foregoing and the Board's and the
Compensation and Organization Committee's overall strategy of
emphasizing stock based incentive compensation for KCSI's senior
management, the Board has amended the 1991 Plan, subject to
stockholder approval, to provide that, after February 26, 1996,
at the time an Outside Director first becomes a member of the
Board the Outside Director shall automatically be granted an
option to purchase 6,000 shares of KCSI's Common Stock. On the
date each annual stockholders' meeting of KCSI is actually held
in each of the ten years beginning in 1996, each Outside Director
shall automatically be granted an option to purchase 3,000
shares; provided, however, that an Outside Director shall not be
granted any such option if he will not continue to serve as an
Outside Director immediately following such stockholders'
meeting. An Outside Director who first takes a position on the
Board at the annual stockholders' meeting, will be entitled to
receive a 6,000 share initial service option plus the 3,000 share
option granted at that stockholders' meeting to each Outside
Director. All such options shall be non-qualified stock options.
The price at which each share covered by such options may be
purchased shall be one hundred percent (100%) of the fair market
value of a share (as defined in the 1991 Plan) on the date the
option is granted.
Subject to certain limited exceptions, an option granted to
an Outside Director will become exercisable only after one year
from the date of grant of the option, and no option shall be
exercisable more than ten (10) years after the date of grant.
Options may be exercised by an Outside Director during the period
he remains an Outside Director and for a period of five years
after ceasing to be a member of the Board by reason of death or
retirement (as defined in the 1991 Plan), or for a period of one
(1) year after ceasing to be a member of the Board for reasons
other than retirement or death. Only those options exercisable
at the date the Outside Director ceases to be a member of the
Board shall remain exercisable and in no event shall the options
be exercisable more than ten (10) years after the date of grant.
All Options generally will become immediately exercisable in the
event of a Change in Control (as defined in the 1991 Plan).
The options granted to Outside Directors will have certain
other terms and conditions as set forth in the 1991 Plan attached
hereto as Appendix A.
As explained further under "General Information and Voting,"
approval of this proposal requires the affirmative vote of a
majority of the shares of Voting Stock present at the Annual
Meeting that are entitled to vote on the proposal, assuming a
quorum.
YOUR BOARD RECOMMENDS THAT YOU VOTE "FOR"
APPROVAL OF THE REINSTATEMENT OF AUTOMATIC GRANTS
OF STOCK OPTIONS TO
KCSI'S OUTSIDE DIRECTORS
PROPOSAL (4) - APPROVAL OF EXTENSION
OF THE TERM OF KCSI'S RESTATED 1991 STOCK OPTION AND
PERFORMANCE AWARD PLAN THROUGH FEBRUARY 25, 2006
The 1991 Plan, as originally adopted, provided that no
additional Awards (as defined in the 1991 Plan) may be granted
after May 31, 1996, but that any Award theretofore granted may
extend beyond that date. The Board has amended that provision,
subject to stockholder approval, to extend the term of the 1991
Plan through February 25, 2006, which is ten years from the date
the Board approved the amended and restated 1991 Plan. The Board
extended the term of the Plan in order for the Compensation and
Organization Committee (the "Committee") to have available stock
related Awards to further the compensation philosophy of KCSI as
discussed in the Committee's Report on Executive Compensation set
forth elsewhere herein. The extension also avoids the increase
in certain expenses associated with the adoption of a new plan.
The amendment will not affect the terms of any awards currently
outstanding.
As explained further under "General Information and Voting,"
approval of this proposal requires the affirmative vote of a
majority of the shares of Voting Stock present at the Annual
Meeting that are entitled to vote on the proposal, assuming a
quorum.
YOUR BOARD RECOMMENDS THAT YOU VOTE "FOR"
EXTENSION OF THE TERM OF KCSI'S RESTATED 1991 STOCK OPTION
AND PERFORMANCE AWARD PLAN
PROPOSAL (5) - APPROVAL OF THE CHANGE IN THE VESTING
PROVISIONS OF KCSI'S RESTATED 1991 STOCK
OPTION AND PERFORMANCE AWARD PLAN
Under the express terms of the 1991 Plan, as originally
enacted, all options granted under Section 6 could not be
exercisable during the first year following their grant (other
than in the case of a change of control). The Board has
eliminated that requirement in the 1991 Plan as amended and
restated in 1996 for outstanding options and for options that may
be granted in the future. The purpose of the change was to give
the Compensation and Organization Committee greater flexibility
in setting the terms of the options granted to participants in
the 1991 Plan.
As explained further under "General Information and Voting,"
approval of this proposal requires the affirmative vote of a
majority of the shares of Voting Stock present at the Annual
Meeting that are entitled to vote on the proposal, assuming a
quorum.
YOUR BOARD RECOMMENDS THAT YOU VOTE "FOR"
APPROVAL OF THE CHANGE IN THE VESTING PROVISIONS
OF KCSI'S RESTATED 1991 STOCK
OPTION AND PERFORMANCE AWARD PLAN
PROPOSAL (6) - APPROVAL OF KCSI'S RESTATED 1991 STOCK
OPTION AND PERFORMANCE AWARD PLAN FOR PURPOSES
OF SECTIONS 162(M) AND 422 OF THE INTERNAL REVENUE CODE
The Internal Revenue Code was amended, effective in 1994, to
add Section 162(m), which limits the deduction for federal income
tax purposes by publicly held corporations of compensation in
excess of $1 million dollars paid to the executive officers
listed in the corporation's summary compensation table, unless
such excess compensation is "performance based" (as defined) or
the compensation expense arises from a plan or agreement in
effect on or prior to February 17, 1993 that has not been
materially modified. The Internal Revenue Service issued final
rules interpreting Section 162(m) in December 1995. One of the
requirements of Section 162(m) is that any plan must be approved
by the Company's stockholders in order for the compensation paid
under such plan to be "performanced based."
Section 422 of the Code requires stockholder approval of
certain amendments of a plan under which incentive stock options
("ISO's") may be issued in order to preserve the federal income
tax treatment of the ISO's. The Board is, therefore, soliciting
approval of the stockholders of the Restated 1991 Stock Option
and Performance Award Plan. The Summary of the 1991 Plan is set
forth below.
As explained further under "General Information and Voting,"
approval of this proposal requires the affirmative vote of a
majority of the shares of Voting Stock present at the Annual
Meeting that are entitled to vote on the proposal, assuming a
quorum.
YOUR BOARD RECOMMENDS THAT YOU VOTE "FOR" THE
APPROVAL OF KCSI'S RESTATED 1991 STOCK OPTION AND
PERFORMANCE AWARD PLAN FOR PURPOSES OF
SECTIONS 162(M) AND 422 OF THE INTERNAL REVENUE CODE
SUMMARY OF KCSI'S RESTATED 1991 STOCK OPTION
AND PERFORMANCE AWARD PLAN,
AS AMENDED AND RESTATED IN 1996
The following summary of the 1991 Plan, as amended and
restated in 1996, is qualified, in its entirety, by reference to
the copy of the 1991 Plan attached as Appendix A to this Proxy
Statement.
The purposes of the 1991 Plan are to generate an increased
incentive for employees of KCSI to contribute to its future
success, to secure for KCSI and its stockholders the benefits
inherent in equity ownership by employees of KCSI, to enhance the
ability of KCSI and its affiliates to attract and retain
exceptionally qualified employees upon whom, in large measure,
the sustained progress, growth and profitability of KCSI depend,
to more closely align the interests of KCSI's employees,
management and stockholders, and to motivate employees of KCSI to
enhance the value of KCSI for the benefit of all its
stockholders. There are approximately 580 employees and Outside
Directors eligible for participation in the 1991 Plan.
Under the 1991 Plan, Participants (other than the Outside
Directors) may receive either incentive stock options, non-
qualified stock options or a combination thereof. The option
exercise price must be at least equal to the fair market value of
the underlying shares on the date of the grant. A stock
appreciation right may be granted to Participants either alone or
in addition to other Awards granted under the 1991 Plan and need
not relate to a specific option granted. Subject to the terms of
the 1991 Plan, a Participant receiving a stock appreciation right
shall have the right to receive upon exercise thereof, an amount
equal to the excess of the fair market value of one share of
Common Stock on the date of exercise, or at any time during a
specified period before or after the date of exercise as
determined by the Compensation and Organization Committee (the
"Committee"), over the grant price of the right as specified by
the Committee, which shall not be less than the fair market value
of one share of Common Stock on the date of grant of the right,
multiplied by the number of shares of Common Stock as to which
the Participant is exercising the right. Limited rights,
however, may be granted to Participants only with respect to an
option granted under the 1991 Plan. Subject to the terms of the
1991 Plan, a Participant receiving a limited right granted under
the 1991 Plan shall have the right to receive upon exercise
thereof, an amount equal to the excess of the fair market value
of one share of Common Stock on the date of exercise or, if
greater, and only with respect to any limited right related to an
option other than an incentive stock option, the highest price
per share of Common Stock paid in connection with any change in
control of KCSI, over the option price of the related option,
multiplied by the number of shares of Common Stock as to which
the recipient is exercising the right. However, no Participant
may be granted in any one year, options, limited rights or stock
appreciation rights that together with all other such Awards
exceeds 500,000 shares. Performance Awards under the 1991 Plan
may be paid in cash, shares of Common Stock, other property or
any combination thereof, in the sole discretion of the Committee
at the time of payment.
Under the 1991 Plan, when an Outside Director first takes a
position on the Board, such Outside Director shall automatically
receive an option to purchase 6,000 shares of Common Stock, and
on the date of each annual meeting of KCSI's stockholders, each
Outside Director shall automatically be granted an option to
purchase 3,000 shares of Common Stock if such Outside Director
will continue to serve in such capacity immediately following
such annual stockholders meeting. Except as otherwise set forth
in the 1991 Plan, all shares of Common Stock subject to an option
granted to an Outside Director shall become exercisable only
after one year from the date of grant; provided, however, all
such options shall immediately become exercisable in the event of
a change in control of KCSI subject to certain restrictions under
the federal securities laws.
Except for the options granted to the Outside Directors, the
Committee will administer the 1991 Plan, designate the recipient
of Awards, the type or types of Awards to be granted to each such
recipient, the term of such Awards, the consideration to be
received by KCSI for such Awards and the number of shares subject
to such Awards. All determinations of the Committee shall be
made by a majority of its members. The Committee may not grant
Awards under the 1991 Plan after February 25, 2006. The term of
Awards granted under the 1991 Plan may be set at any length the
Committee determines and may extend beyond February 25, 2006;
however, the term of any options granted to the Outside Directors
in stock options or other Awards related thereto may not extend
beyond ten years from the date of grant.
In the event of a change of control of KCSI, Awards will be
automatically accelerated and all performance Awards standards
shall be deemed satisfactorily completed without any action
required by the Committee so that such Award may be exercised or
realized in full on or before a date fixed by the Committee
subject to certain restrictions under the federal securities
laws. The Committee may, in its discretion, include such further
provisions and limitations in any agreement documenting such
Awards as it may deem equitable and in the best interests of
KCSI.
The Board may amend, suspend or discontinue the 1991 Plan,
but no such action that would impair the rights of a holder of an
Award can be made without such holder's consent, and no amendment
of the 1991 Plan is effective unless approved by stockholders to
the extent required by Section 16(b) and Section 162(m) if that
amendment would: (i) materially increase the total number of
shares available for awards under the plan; (ii) materially
increase benefits accruing to participants under the 1991 Plan;
(iii) materially modify the requirements as to eligibility for
participation in the 1991 Plan; (iv) change in any way options
that may be granted to Outside Directors (other than reduce the
number of shares for which an option that is to be automatically
granted is exercisable); or (v) be required in order for the 1991
Plan to continue to comply with Section 162(m). Amendments to
the 1991 Plan provisions concerning the timing of grants, and the
number and exercise price of options for Outside Directors, may
not be made more frequently than every six months except to
comport to changes in the Code, the Employee Retirement Income
Security Act of 1974, as amended, or regulations thereunder.
The Committee, however, has authority (but is not required), in
the case of changes affecting the securities of KCSI or other
unusual events (as the Committee determines), to make certain
adjustments in the 1991 Plan or in Awards in order to prevent
dilution or enlargement of the benefits or potential benefits
intended to be made available under the 1991 Plan.
New Plan Benefits. KCSI cannot determine the number of
Awards that will be granted under the 1991 Plan, as amended and
restated in 1996 (the "Plan"), to the executive officers named in
the Summary Compensation Table herein, the executive officers as
a group, and employees who are not executive officers as a group.
Under the terms of the Plan, the number of Awards to be granted
is within the discretion of the Committee. KCSI also cannot
determine the number of options to be granted under the Plan to
the non-employee directors as a group because such number is
dependent upon how long such directors remain on the Board and
whether any new directors are appointed or elected to the Board.
Therefore, assuming the Committee did not exercise its discretion
to grant Awards, that Awards which would have been automatically
granted under the Plan if it had been in effect in 1995 would
have been as follows.
<TABLE>
<CAPTION>
NEW PLAN BENEFITS
Name and Position Number of Options
<S> <C>
Paul H. Henson -0-
Chairman of the Board
Landon H. Rowland -0-
President and Chief Executive
Officer
Michael R. Haverty -0-
Executive Vice President
Thomas H. Bailey -0-
Chairman of the Board, Chief
Executive Officer of Janus
Capital Corporation
Joseph D. Monello -0-
Vice President and Chief
Financial Officer
Thomas A. McDonnell -0-
George W. Edwards, Jr. -0-
Executive Officers as a Group -0-
Non-Employee Director Group (6 18,000
persons)
Non-Executive Officer Employee -0-
Group
</TABLE>
Under the 1991 Plan, before amendment and restatement in
1996, the following options (together with related limited
rights) for the purchase of Common Stock have been granted at
various times since the approval of the 1991 Plan by KCSI's
stockholders in 1991 to the following individuals and groups.
The exercise price of the options was set at the fair market
value (as defined in the 1991 Plan) of KCSI Common Stock at the
date of the grant and other terms of the options (including the
expiration date and other material conditions to exercise) were
set by the Committee in accordance with the terms of the 1991
Plan. The options were granted in consideration of the recipient
service to KCSI. No options or other Awards have been granted to
the current nominee for director or the associates of the Outside
Directors, the named executive officers or the nominee, and no
other Awards have been granted under the 1991 Plan. Some of
these options have been exercised.
<TABLE>
<CAPTION>
<S> <C>
Name and Position Number of Options
Paul H. Henson -0-
Chairman of the Board
Landon H. Rowland 648,000
President and Chief Executive
Officer
Michael R. Haverty 295,000
Executive Vice President
Thomas H. Bailey -0-
Chairman of the Board, Chief
Executive Officer of Janus
Capital Corporation
Joseph D. Monello 127,904
Vice President and Chief
Financial Officer
Thomas A. McDonnell 660,000
George W. Edwards, Jr. 648,000
Current Executive Officers as 1,325,164
a Group (17 persons)
Current Non-Employee Director 48,000
Group (6 persons)
Current Non-Executive Officer 1,721,080
Employee Group
</TABLE>
FEDERAL INCOME TAX CONSEQUENCES OF THE 1991 PLAN
The following summary discussion is based on the federal
income tax laws in effect as of the date hereof. The summary is
not intended to constitute tax advice and, among other things,
does not address possible state, local or foreign tax
consequences.
An optionee who is granted a non-qualified stock option
under the plan generally will not recognize taxable income at the
time the option is granted. Upon exercise of the non-qualified
stock option to acquire unrestricted shares, the optionee
generally will be taxed at ordinary income tax rates on an amount
equal to the difference between the fair market value of the
shares on the date of exercise and the option exercise price. If
the optionee is subject to Section 16(b) of the Securities
Exchange Act of 1934 and a sale of the shares acquired would
subject the optionee to a suit for profits under Section 16(b),
special tax rules may apply.
KCSI will receive a deduction with respect to the exercise
of a non-qualified stock option in the taxable year within which
the optionee recognizes the corresponding taxable income
(assuming KCSI complies with tax reporting requirements and the
total compensation paid to the optionee in such taxable year is
reasonable, subject to any restrictions imposed by Section 162(m)
of the Code). The optionee's basis in the shares acquired for
cash upon exercise of a non-qualified stock option will be equal
to the option price plus the amount of ordinary income recognized
by the optionee on such exercise. Upon subsequent disposition of
the shares, the optionee will realize long-term or short-term
capital gain or loss depending on the applicable holding period,
providing the optionee holds the shares as a capital asset. A
capital gain or loss is long-term if the optionee holds the stock
for more than one year and short-term if the optionee holds the
stock for one year or less.
Under current rulings of the Internal Revenue Service (the
"IRS"), an optionee who pays the exercise price upon exercise of
a non-qualified stock option with Common Stock does not recognize
gain or loss with respect to the disposition of the shares
transferred in payment of the option price. However, the
optionee normally will recognize ordinary income upon the
exercise of a non-qualified option in the manner discussed above.
An optionee's basis in the number of shares received that is
equal to the number of shares surrendered will be the same as the
optionee's basis in the surrendered shares; the optionee's basis
in any additional shares received will be equal to the amount of
income the optionee recognizes upon exercise of the option.
An optionee who is granted an incentive stock option under
the plan will not recognize taxable income at the time the option
is granted or at the time the option is exercised. The optionee's
basis in the shares acquired for cash upon exercise of an
incentive stock option will be equal to the option price.
However, the exercise of an incentive stock option will be an
adjustment for purposes of the alternative minimum tax. For
alternative minimum tax purposes, the exercise of an incentive
stock option generally is treated the same way as the exercise of
a non-qualified stock option.
If an optionee disposes of shares acquired pursuant to the
exercise of an incentive stock option prior to meeting the
required holding period (i.e., the disposition occurs within two
years from the date of grant or one year from the date the shares
were transferred to the optionee), the difference between the
fair market value of the shares at the time of exercise (or the
amount realized on disposition, if lower) and the option price
will be taxable to the optionee as ordinary income and, assuming
compliance by KCSI with tax reporting requirements and that the
total compensation to such optionee is reasonable, deductible as
compensation by KCSI in the year in which such disposition occurs
(subject to any restrictions imposed by Section 162(m) of the
Code). The balance of any gain, or any loss on such disposition,
will be treated as capital gain or loss, provided the optionee
holds the shares as a capital asset. If an optionee disposes of
the shares after the required holding period, the optionee would
realize long-term capital gain or loss (provided the optionee
holds the shares as a capital asset), and KCSI would not be
entitled to any income tax deduction either on the date of grant,
the date of exercise or the date of disposition of the shares. A
capital gain or loss is long-term if the optionee holds the stock
for more than one year and short-term if the optionee holds the
stock for one year or less.
Under current rulings of the IRS, an optionee who pays the
exercise price with common stock upon exercise of an incentive
stock option, will not recognize gain or loss with respect to the
shares of stock transferred in payment of the option price. The
optionee's basis in the number of shares of stock received equal
to the number of shares surrendered will be the same as the
optionee's basis in the surrendered shares. The optionee's basis
in any additional shares of stock received will be zero.
If, however, an optionee exercises an incentive stock option
by transferring shares of Common Stock acquired pursuant to the
exercise of an option under an incentive stock option plan or
other statutory stock option plan and the applicable holding
period requirements are not met before the transfer, the transfer
of such shares will be a "disposition" resulting in the
recognition of taxable income to the optionee to the same extent
as if the optionee had sold the transferred shares on the date of
the transfer.
Generally, a participant who is granted a Stock Appreciation
Right, Performance Award or other Awards will be taxed in
accordance with Section 83 of the Code. The tax consequences
applicable to any such award depend upon the particular terms and
conditions of such awards.
Generally, Section 83 of the Code provides that if the
property received is not subject to a substantial risk of
forfeiture, the transfer of property to a participant in
connection with the performance of services will be taxable at
the time of transfer. If the property is subject to a
substantial risk of forfeiture at the time of transfer, the
transfer will not be taxable until the property is not subject to
a substantial risk of forfeiture. The participant will be taxed
on the fair market value of the property (determined without
regard to any restriction other than a restriction which by its
terms will never lapse) at the first time the property is not
subject to a substantial risk of forfeiture over the amount (if
any) paid for the property. KCSI will receive a deduction in the
taxable year within which a participant recognizes the
corresponding taxable income assuming KCSI complies with tax
reporting requirements and the total compensation paid to the
participant in such taxable year was reasonable (subject to any
restrictions imposed by Section 162(m) of the Code).
Although property is subject to a substantial risk of
forfeiture, a participant may elect under Section 83(b) of the
Code to pay tax at the time of the transfer of the property to
the participant, but the value of the property is not reduced by
reason of the substantial risk of forfeiture, and no tax
deduction is allowed if the property is subsequently forfeited.
Any election under Section 83(b) must be made not later than
thirty days after the date of the transfer of the property to the
participant.
PROPOSAL (7) - 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 LLP as
independent accountants to examine the consolidated financial
statements of KCSI for the year 1996. No relationship exists
between KCSI and Price Waterhouse LLP other than that of
independent accountant and client.
Price Waterhouse LLP served as KCSI's independent
accountants for 1995. As such, Price Waterhouse LLP 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 and
review of reports filed with the Securities and Exchange
Commission. In addition, Price Waterhouse LLP provided
consulting services to KCSI and certain of its subsidiaries
during 1995.
One or more representatives of Price Waterhouse LLP will be
present at the Annual Meeting and will have the opportunity to
make a statement, if desired and to respond to appropriate
questions by stockholders.
As explained further under "General Information and Voting,"
approval of this proposal requires the affirmative vote of a
majority of the shares of Voting Stock present at the Annual
Meeting that are entitled to vote on the proposal, assuming a
quorum.
YOUR BOARD RECOMMENDS THAT YOU VOTE "FOR"
RATIFICATION OF THE BOARD OF DIRECTORS'
SELECTION OF PRICE WATERHOUSE LLP
MANAGEMENT COMPENSATION
COMPENSATION AND ORGANIZATION COMMITTEE REPORT ON EXECUTIVE
COMPENSATION
Introduction
The Board of Directors believes that increasing the value of
KCSI to its stockholders is the Board's most important objective.
The Board has charged the Compensation and Organization Committee
(the "Committee") with the responsibility of designing
compensation packages for KCSI's executives, other than Mr.
Bailey, that are consistent with that objective while still
allowing KCSI to attract and retain exceptionally qualified
executives upon whom, in large measure, the sustained progress,
growth and profitability of KCSI depends. So that this
responsibility may be impartially administered, the Board
requires that the Committee consist of directors who are not
officers of or otherwise employed by KCSI and who are not
eligible to participate in any discretionary part of the
compensation plans administered by the Committee. To assist the
Committee with its responsibilities, the Committee has, from time
to time, utilized and intends in the future to utilize the
expertise of independent compensation consultants.
The Committee designs and administers the executives'
compensation packages based on the principles that executive
compensation packages should be structured to provide fair,
reasonable and competitive base salaries and to provide the
opportunity to earn additional compensation if the stockholders
of KCSI experience long-term changes in the value of their stock.
The Committee believes that the best approach to promoting the
financial success of KCSI is to strive to align the interests of
KCSI's executives with its stockholders and that this is best
done through a compensation strategy that links the executives'
compensation with changes in stockholders' value and emphasizes
long-term stock ownership. The Committee also believes that the
executives of KCSI should have a significant equity interest in
KCSI, but that the executives should only have the opportunity to
acquire that interest from KCSI after its stockholders have
experienced an increase in the value of their investment in KCSI.
In determining the amount of stock incentives to be awarded to an
executive, the Committee may also consider 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.
The Committee has been implementing the strategy of
emphasizing long-term stock ownership during the past several
years by restructuring the executives' compensation packages to
reduce the proportion of short-term cash compensation and
increase the proportion of long-term compensation tied to
improvements in KCSI's earnings and financial position, which the
Committee believes should ultimately be reflected in the value of
KCSI's stock.
The executives' compensation packages, other than certain of
the highest level executives, consisted of three components: base
salary, annual cash incentives and stock compensation. The level
of the base salaries was set annually generally at the median of
the range of salaries that were shown in surveys that were
reviewed by the Committee, but the Committee annually adjusted
the salaries as a result of an individual's performance, level of
responsibility and experience as well as business results and
general economic factors. The annual cash incentive program
utilized a system of corporate and personal minimum, target and
maximum goals, which if met, would result in cash payments equal
to a percentage of the executive's base salary. The percentage,
which was tied to the executive's salary grade, varied depending
on which goals were met. The stock compensation consisted of
primarily stock options and restricted stock.
The Committee implemented its strategy differently with
respect to the compensation of KCSI's Chief Executive Officer and
the Chief Executive Officers of KCSR and DST Systems, Inc. For
those executives, salaries were frozen for a three-year period,
there was no participation in the annual cash incentive program
and they were granted stock options that only became exercisable
if KCSI's stock price reached certain threshold levels and
remained at or above those levels for thirty consecutive trading
days or if the executive remained employed with KCSI for a
prescribed period.
In each instance, the number of stock related awards was
based upon a competitive total compensation target for the
particular executive as indicated in the surveys utilized by the
Committee. Through the application of option pricing models and
other valuation analysis provided by the compensation
consultants, the Committee determined the number of stock related
awards. Each of these components of the prior compensation
strategy is discussed further in the Committee's prior reports on
executive compensation, and stockholders should refer to those
reports for further information.
Mr. Bailey's compensation for 1995 was determined by Janus
Capital Corporation's management committee, with the assistance
of an outside compensation consultant. The Board of Directors of
Janus Capital Corporation ratifies salary determinations of the
management committee.
1995 REVISION OF EXECUTIVES' COMPENSATION PACKAGES
At the end of 1995, the Committee further restructured the
executives' compensation packages. In this restructuring, the
Committee increased the emphasis on stock ownership by expanding
the use of the compensation package structure that was previously
used only in connection with the Chief Executive Officer and the
Chief Executive Officers of KCSR and DST Systems, Inc. to cover a
group consisting of the 28 highest level executives. Effective
January 1996, for those officers, as well as the Chief Executive
Officer of KCSR (DST Systems, Inc. is no longer a wholly owned
subsidiary), the compensation packages have been limited for a
three-year period to a fixed base salary and stock compensation.
The result is that a significant portion of these compensation
packages is based upon at-risk components.
The Committee has designed these packages to result in total
compensation for the executives above competitive levels for
superior stockholder returns and below competitive levels for
average or lesser returns. The Committee utilized several
surveys in developing these compensation packages. The surveys
were prepared or otherwise obtained by outside compensation
consultants retained by the Committee and focused on U. S. based
companies of similar revenue size as well as companies in the
U.S. railroad industry. While some of the surveys included
companies that make up the Dow Jones Transportation Average peer
group (which is the industry group used for comparing share
investment performance in the Stock Performance Graph below)
other companies were included in the surveys because the
Committee believes the compensation practices of a broader group
of companies is more relevant and more accurately reflects the
market for executive talent. The economic performance of the
companies analyzed in the compensation surveys was not considered
in connection with determining the competitive ranges of base
salary and total compensation for KCSI executives. Each of the
components of the compensation packages is discussed further
below.
COMPENSATION PACKAGE COMPONENTS
Base Salary. The Committee determines the level of base
salaries for all of the executives, other than Mr. Rowland, based
on competitive market practices and individual contribution and
performance. No weighting was given any of these factors by the
Committee. Based upon the compensation surveys, the Committee
was able to determine the competitive range of base salaries for
1995 for a particular position. The Committee targeted the
seventy-fifth percentile of the range for setting base salary
levels for the executives, but adjusted the salaries as a result
of an individual's performance, level of responsibility and
experience. The Committee chose such levels based upon its
overall strategy of compensating such executives primarily
through stock-based incentives and based upon the fact that the
salaries are fixed for the three-year term of the agreements with
the executives.
Stock Compensation. The key component of the Committee's
strategy is to make stock incentives a significant portion of the
executive's compensation package. Generally, the number of
options that an executive was awarded is tied to the compensation
targets for that individual during the period covered by the
grant. The compensation targets for a particular individual were
based upon the competitive range of total compensation indicated
in the surveys utilized, adjusted for the individual's
performance and experience. No weighting was given to any of
these factors by the Committee. 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 above), the Committee was able to
determine a range of numbers of stock incentives to be awarded.
The Committee also considered the risk adjusted present value of
annual cash incentives that these executives would have been
eligible to earn over the three-year term of their employment
agreements had they participated in such programs. The Committee
did consider the number of stock incentives previously awarded by
KCSI in establishing the total compensation targets.
In addition, the options awarded were structured to require
substantial appreciation in the market price of KCSI Common Stock
in order for the total compensation of the executives 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 executives, the Committee structured
the awards of stock option incentives under the current
compensation packages 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 was established by assuming
appreciation in the market price for KCSI Common Stock from the
date of grant at a rate that was above the average customary
return on similar investments. By structuring the options this
way, the executives would not be rewarded unless the stockholders
of KCSI first received an above average market return.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Rowland's compensation package is also based upon the
principles discussed above. However, Mr. Rowland's compensation
package was one of the first to further emphasize the link
between his compensation and changes in stockholders' value, and
to provide incentive compensation primarily in the form of grants
of restricted stock and stock options. Effective January 1992,
Mr. Rowland entered into an employment agreement with KCSI that
fixed his base salary for five years at $500,000 annually. The
Committee set his base salary at a level that was between the
median and seventy-fifth percentile levels indicated in the
surveys then being utilized. The Committee chose such level
based upon its overall strategy of compensating him primarily
through stock-based incentives and the fact that the salary was
to be set for the five-year term of the agreement.
The Committee follows the same approach discussed above in
determining the amount of stock related compensation to award Mr.
Rowland. Generally, the number of options and shares of
restricted stock that were awarded under Mr. Rowland's 1992
employment agreement was tied to the compensation targets for him
during the period covered by the agreement. In determining the
amount of stock incentives to be awarded to Mr. Rowland, the
Committee also considered previous awards, whether he had
exercised, to the extent possible, options previously awarded,
whether the shares of KCSI Common Stock acquired thereby or
shares of restricted stock previously awarded have been retained
and the risk-adjusted present value of annual cash incentives
that Mr. Rowland might have earned over the five-year term of his
employment agreement had he 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 Mr. Rowland to equal or exceed
the estimated amount of total compensation that he would have
received under the prior compensation structure.
To provide additional incentives to Mr. Rowland, the
Committee structured the awards of stock option incentives in
1991 and 1992 to reward him when KCSI's market value reached
certain predetermined levels and remained at or above those
levels for thirty consecutive trading days or if he remained
employed with KCSI over a prescribed period. Each of these
predetermined levels was 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, Mr. Rowland would not
be rewarded unless the stockholders of KCSI first received an
above average market return. All of these levels were reached in
1992.
In order to help ensure that KCSI's compensation strategy is
implemented, as part of Mr. Rowland's employment agreement, he
has agreed to retain ownership in himself or the members of his
immediate family of at least 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 the agreement.
Mr. Rowland's employment agreement terminates in January
1997. During 1995, the Committee took no further action with
regard to Mr. Rowland's compensation package, and no additional
compensation was awarded Mr. Rowland.
DEDUCTIBILITY OF COMPENSATION
The Internal Revenue Code was amended effective in 1994 to
add Section 162(m), which limits the deduction for federal income
tax purposes by publicly held corporations of compensation in
excess of $1 million dollars paid to the executive officers
listed in the corporation's summary compensation table unless
such excess compensation is "performance based" as defined in
Section 162(m) or the compensation expense arises from a plan or
agreement in effect on or prior to February 17, 1993 that has not
been materially modified. The Internal Revenue Service issued
final rules interpreting Section 162(m) in December 1995.
The Committee believes that it should design compensation
packages so that related expenses incurred by KCSI are deductible
for federal income tax purposes and has, therefore, sought the
advice of counsel in reference to Section 162(m). The highest
base salary to be paid under the current arrangements is less
than $600,000, which is under the $1 million limit, and the
executives will not participate in KCSI's annual cash incentive
program. Therefore, there is no risk that any portion of this
component of the executive compensation packages effective
January 1996will not bedeductible for federal incometax purposes.
KCSI can also incur compensation expense as a result of the
exercise of options by the executive officers. As discussed
under Proposal 2 herein, the Board is submitting to the
stockholders for their approval the amended and restated 1991
Stock Option and Performance Award Plan in part to qualify any
compensation expense arising from awards granted under that plan
as performance based compensation for purposes of Section 162(m)
and therefore deductible for federal income tax purposes.
This report was presented to and approved by the Board of
Directors.
The Compensation and Organization Committee
Paul F. Balser
James E. Barnes, Chairman
Thomas S. Carter
Morton I. Sosland
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph shows the changes in value over the past
five years since December 31, 1990 of an assumed investment of
$100 in: (i) KCSI's Common Stock; (ii) the stocks that comprise
the S&P 500 index<F1>; (iii) the stocks that comprise the Fortune
50 Transportation Companies<F2>; and (iv) the stocks that
comprise the Dow Jones Transportation Average<F3>. The table
following the graph shows the value of those investments as of
December 31, for the years indicated. The value for the assumed
investments depicted on the graph and in the table has been
calculated, assuming that cash dividends are reinvested at the
end of each quarter during the fiscal year paid, 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 year.
KANSAS CITY SOUTHERN INDUSTRIES, INC.
RELATIVE MARKET PERFORMANCE
TOTAL RETURN 1991 - 1995
[INSERTED IN PAPER FORMAT]
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Year Ended 1990 1991 1992 1993 1994 1995
December 31,
KCSI Total $100 $173.96 $288.50 $611.25 $369.25 $551.20
Return
Fortune 50 $100 $152.09 $169.24 $212.19 $177.14 $240.92
Transporta-
tion Total
Return
Dow Jones $100 $150.94 $167.60 $202.74 $162.99 $224.14
Transporta-
tion Average
Total Return
S&P 500 $100 $130.47 $140.41 $154.56 $156.60 $215.45
Index Total
Return
<FN>
<F1>
The S&P 500 is an index prepared by Standard 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. In total, the stocks of these
companies represent approximately 80 percent of the market value
of all the stock listed on these exchanges.
<F2>
This index is based upon the 1994 Fortune 50 Transportation
Companies (the "Transportation Group") as published by Time,
Inc., an independent company, in Fortune Magazine. The list is
comprised of the 50 largest transportation companies for which
public records are available, and 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") for the entire five-year period covered
by the graph.
<F3>
Time, Inc. stopped publishing the Fortune 50 Transportation
Companies in 1994. Therefore, KCSI has adopted the Dow Jones
Transportation Average as its new index. The Dow Jones
Transportation Average is published by Dow Jones & Co., Inc., an
independent company. 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.
</FN>
</TABLE>
<PAGE>
SUMMARY COMPENSATION TABLE
The Summary Compensation table shows certain information
concerning the compensation paid by KCSI to the Chief Executive
Officer of KCSI and certain of the most highly compensated
executive officers during 1995 (based upon the total salary and
bonus paid during 1995).
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
Securities All Other
Name Underlying Compen-
and Options/SARs sation
Principal (#) ($)
Position Year Salary Bonus
<S> <C> <C> <C> <C> <C>
Paul H. 1995 260,004 --- --- 45,988<F2>
Henson 1994 260,004 --- --- 26,108
Chairman of 1993 260,004 --- --- 25,046
the Board
Landon H. 1995 500,004 --- --- 202,998<F3>
Rowland 1994 500,004 --- --- 81,842
President and 1993 500,004 --- --- 182,673
Chief
Executive
Officer
Michael R. 1995<F4> 310,486<F4> 250,000 112,142<F5>
Haverty
Executive
Vice
President
Thomas H. 1995 590,000<F6> --- -0- 13,994<F7>
Bailey 1994 553,750<F6> --- --- 22,284
Chairman of 1993 556,492<F6> --- --- 25,942
the Board,
Chief
Executive
Officer of
Janus Capital
Corporation
Joseph D. 1995 198,900 198,900 105,000 32,820<F8>
Monello 1994 187,008 93,504 10,000 26,294
Vice 1993 160,008 160,008 8,000 48,183
President and
Chief
Financial
Officer
Thomas A. 1995 416,670 --- --- 306,274<F10>
McDonnell<F9> 1994 500,004 --- --- 97,139
1993 500,004 --- --- 226,206
George W. 1995 500,004 --- --- 626,994<F11>
Edwards, 1994 500,004 --- --- 81,846
Jr.<F9> 1993 500,004 --- --- 182,332
<FN>
<F1>
Except as otherwise indicated, bonuses paid to the named
executives represent cash awards under KCSI's incentive
compensation programs.
<F2>
All other compensation for Mr. Henson for 1995 is comprised of:
(i) a contribution to his account under the ESOP of $13,994; and
(ii) an amount estimated to be 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) of $31,994. As of December 31, 1995, Mr. Henson held no
shares of restricted stock.
<F3>
All other compensation for Mr. Rowland for 1995 is comprised of:
(i) contributions to his account under the ESOP of $13,994; (ii)
amount estimated to be credited to his account under the
Executive Plan of $187,221; and (iii) interest on deferred
director's fees of $1,783. As of December 31, 1995, Mr. Rowland
held 16,000 shares of restricted stock, which shares had a market
value at that time of $745,000.
<F4>
Mr. Haverty has been employed by KCSI since May 1995. His annual
salary is $500,004.
<F5>
All other compensation for Mr. Haverty for 1995 is comprised of:
(i) a contribution to his account under the ESOP of $13,994; and
(ii) an amount estimated to be credited to his account under the
Executive Plan of $98,148. As of December 31, 1995, Mr. Haverty
held no shares of restricted stock.
<F6>
Includes directors' fees for 1993, 1994 and 1995 of $4,000,
$6,250 and $6,250, respectively, paid to Mr. Bailey in his
capacity as director of Janus Capital Corporation and $22,500,
$40,000 and $49,000 for the years 1993, 1994 and 1995 for fees in
his capacity as a director of the Janus Funds.
<F7>
All other compensation for Mr. Bailey for 1995 is comprised of a
contribution to his account under the ESOP. As of December 31,
1995, Mr. Bailey held no shares of restricted stock.
<F8>
All other compensation for Mr. Monello for 1995 is comprised of:
(i) a contribution to his account under the ESOP of $13,994; and
(ii) an amount estimated to be credited to his account under the
Executive Plan of $18,826. As of December 31, 1995, Mr. Monello
held 2,000 shares of restricted stock, which shares had a market
value at that time of $93,125.
<F9>
Mr. McDonnell and Mr. Edwards resigned as executive officers of
KCSI and its subsidiaries in November and May 1995, respectively.
<F10>
All other compensation for Mr. McDonnell for 1995 is comprised
of: (i) a contribution to his account under the ESOP of $13,994;
and (ii) an amount estimated to be contributed to his account
under the Executive Plan of $292,280. As of December 31, 1995,
Mr. McDonnell held 16,000 shares of restricted stock, which
shares had a market value at that time of $745,000.
<F11>
All other compensation for Mr. Edwards for 1995 is comprised of:
(i) a contribution to his account under the ESOP of $13,994; and
(ii) acceleration of vesting of restricted stock (calculated at
market value on the date of acceleration) of $613,000. As of
December 31, 1995, Mr. Edwards held no shares of restricted
stock.
</FN>
</TABLE>
<PAGE>
FISCAL YEAR 1995 OPTION GRANTS TABLE
The following table sets forth information with respect to
the options granted by KCSI during 1995 to the named Executive
Officers.
<TABLE>
<CAPTION>
% of
Total
Number of Options/ Exercise
Securities SARs or Base
Underlying Granted to Price Grant
Options/ Employees (per Date
SARs in Fiscal share)<F3> Expiration Value<F4>
Name granted(#)<F1> Year<F2> ($) Date ($)
<S> <C> <C> <C> <C> <C>
Paul H. Henson -0- N/A N/A N/A N/A
Landon H. Rowland -0- N/A N/A N/A N/A
Michael R. Haverty 100,000 7.1% $38.3125 5/14/2005 1,931,000
150,000 10.7% $46.00 11/5/2005 3,469,500
Thomas H. Bailey -0- N/A N/A N/A N/A
Joseph D. Monello 5,000 0.4% $33.6875 1/18/2005 87,300
100,000 7.1% $46.00 11/5/2005 2,313,000
Thomas A. McDonnell -0- N/A N/A N/A N/A
George W. Edwards, -0- N/A N/A N/A N/A
Jr.
</TABLE>
[FN]
<F1>
The options granted Mr. Monello that expire in January 2005
become exercisable one year from the date of grant. The options
granted Messrs. Haverty and Monello that expire in May and
November 2005 become exercisable in installments when the stock
price of KCSI's common stock reaches certain specified levels and
remains at or above such levels for 30 consecutive trading days
as follows.
<TABLE>
<CAPTION>
Expiration Options Exercisable
Date
<S> <C> <C> <C> <C> <C> <C> <C>
Stock $ 50 $ 55 $ 60 $ 65 $ 70 $ 75
Price
Haverty May 2005 33,333 33,333 33,334
Haverty November 2005 50,000 50,000 50,000
Monello November 2005 33,333 33,333 33,334
</TABLE>
Once exercisable, the options are exercisable for the ten
year period beginning on the date of grant of the option.
Alternatively, if Mr. Haverty or Mr. Monello remain an
employee of the Company through December 31, 1998, then all
the options not then exercisable become exercisable for a
period of 30 calendar days and then expire. 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. All of the options
become exercisable prior to that time if there is a change
of control of KCSI (as defined in the stock option plan),
and all of the options are subject to voluntary tax
withholding rights.
<F2>
Total options granted to eligible employees, excluding directors,
in 1995 were 1,408,000.
<F3>
Average of the high and low prices of the Common Stock on the
date of grant as reported on the New York Stock Exchange.
<F4>
In accordance with Securities and Exchange Commission rules, the
Black-Scholes option pricing model was chosen to estimate the
Grant Date Present Value of the option grants set forth in this
table. KCSI's use of this model should not be construed as an
endorsement of its accuracy at valuing options. All stock option
models require assumptions about the future movement of the
stock price. The following assumptions were made for purposes of
calculating Grant Date Present Value for the options that expire
on January 18, 2005: market price of stock $33.6875; exercise
price of option $33.6875; stock volatility* 30.84%; annualized
risk-free interest rate 7.87%; option term (in years) 10; stock's
dividend** yield 1.19%; for the options that expire on May 14,
2005: market price of stock $38.3125; exercise price of options
$38.3125; stock volatility* 31.55%; annualized risk-free interest
rate 6.76%; option term (in years) 10; stock's dividend yield**
1.04%; for the options that expire on November 6, 2005; market
price of stock $46.00; exercise price of option $46.00; stock
volatility* 31.97%; annualized risk-free interest rate 6.12%;
option term (in years) 10; stock's dividend yield** .87%; (*Stock
volatility is based on three-year monthly data. **Dividend yield
is calculated by annualizing the most recent dividend paid and
dividing by the market price of stock on the date of grant.) The
real value of the options granted to any participant in the plan,
including those shown in this table depends upon the actual
performance of KCSI's Common Stock during the applicable period
and upon when the options are exercised.
[/FN]
[/TABLE]
<PAGE>
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE
TABLE
The following table sets forth information with respect to
the aggregate option exercises during 1995 by the named Executive
Officers and the number and value of options held by such
officers as of December 29, 1995 (the last trading day of the
year).
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options/SARs
Options/SARs at FY-End
at FY-End ($)
(#)
Shares Value
Acquired Realized<F1> Exercisable/ Exercisable/
Name on Exercise ($) Unexercisable Unexercisable<F1>
(#)
<S> <C> <C> <C> <C>
Paul H. -0- N/A -0-/-0- N/A
Henson
Landon H. 180,952 4,806,537 768,000/-0- 25,472,368/-0-
Rowland
Michael R. -0- N/A -0-/250,000 -0-/909,375
Haverty
Thomas H. -0- N/A -0-/-0- N/A
Bailey
Joseph D. -0- N/A 71,000/100,000 1,670,154/56,250
Monello
Thomas A. 20,000 479,374 60,000/-0- 1,434,372/-0-
McDonnell
George W. -0- N/A 120,000/60,000 4,284,372/2,142,186
Edwards,
Jr.
<FN>
<F1>
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 29, 1995 (the last
trading day of 1995), respectively, times the number of options
exercised or held at year end.
</FN>
</TABLE>
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN
CONTROL ARRANGEMENTS WITH NAMED EXECUTIVE OFFICERS
EMPLOYMENT AGREEMENTS WITH THE NAMED EXECUTIVE OFFICERS
Mr. Rowland. KCSI entered into an employment agreement with
Mr. Rowland effective January 1, 1992, which provides for Mr.
Rowland's continued employment as President and Chief Executive
Officer of KCSI. KCSI also agreed to use its best efforts to
enable Mr. Rowland to continue in various other director and
officer positions with KCSI. The employment agreement with Mr.
Rowland was 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.
Mr. Rowland's employment agreement is effective for a term
of five years expiring on January 2, 1997 subject to earlier
termination under certain circumstances. Pursuant to the
Employment Agreement, Mr. Rowland receives a fixed annual base
salary of $500,000 over the term of the Agreement, he is not
entitled to participate in the KCSI Incentive Compensation Plan,
but continues to participate in other benefit plans or programs
of KCSI generally available to executive employees and is
provided with certain disability insurance coverage and life
insurance payable to beneficiaries designated by him. The
employment agreement provides that the value of Mr. Rowland's
annual compensation is fixed at $875,000 for purposes of cash
compensation based benefit plans. The employment agreement
provides for twenty four months of severance pay at an annual
rate equal to Mr. Rowland's base salary and for certain health,
disability and life insurance benefits in the event of the
termination of his employment without cause unless such benefits
are provided by another employer.
In conjunction with the employment agreement and in lieu of
participation in the KCSI Incentive Compensation Plan, the
Company granted options to purchase 568,000 shares (after stock
splits) of KCSI Common Stock to Mr. Rowland under an existing
stock option plan. The stock options exercise price is equal to
the fair market value of the shares on the date of grant and were
to first become exercisable on January 1, 1997 or at such earlier
times if the trading price of KCSI's Common Stock were equal to
certain threshold prices for a period of at least thirty
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 the date of
grant.
Mr. Rowland was also awarded shares of KCSI Common Stock
("Restricted Stock") that are subject to forfeiture in the event
his employment is terminated for cause by KCSI or by him
voluntarily. 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 death, disability or retirement to which the
Board consents. 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, Mr. Rowland
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 agreement) during the term of the Agreement, Mr.
Rowland's employment, executive capacity, salary and benefits
would be continued for a three-year term at levels in effect on
the control change date (as defined in the employment agreement).
In addition, he would be eligible to participate in any incentive
compensation plan and be entitled to immediately exercise all
outstanding stock options. Moreover, the shares of Restricted
Stock held by Mr. Rowland would become fully vested and no longer
be subject to forfeiture. With respect to unfunded employer
obligations under the benefit plans, Mr. Rowland would be
entitled to a discounted cash payment of amounts to which he is
entitled. Mr. Rowland's employment may be terminated after the
control change date, but where it is other than "for cause" (as
defined in the employment agreement) he would be 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. Mr. Rowland is
also permitted to resign employment after a change in control
upon "good reason" (as defined in the employment agreement) and
advance written notice, and to receive the same payments and
benefits as if his employment had been terminated by KCSI. Mr.
Rowland's employment agreement also provides for payments to him
necessary to relieve him of certain adverse federal income tax
consequences if amounts received under the Agreement involve
"parachute payments" under Section 4999 of the Internal Revenue
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. Rowland in connection with disputes arising with
respect to the employment agreement.
Messrs. Haverty and Monello. KCSI and KCSR have entered
into employment agreements with Messrs. Haverty and Monello
effective January 1, 1996 which provide, respectively, for Mr.
Haverty's continued employment as President and Chief Executive
Officer of KCSR and Mr. Monello's continued employment as Vice
President & Chief Financial Officer of KCSI. KCSI also agreed to
continue to cause Mr. Haverty to be elected and retained as
Executive Vice President of KCSI and Director of KCSR and to use
its best efforts to enable Mr. Haverty to continue to be elected
as a director of KCSI. The employment agreements are subject to
termination under certain circumstances.
Pursuant to his employment agreement, Mr. Haverty is to
receive a base salary of $500,000 per year that shall not be
increased prior to January 1, 1999 and shall not be reduced
except as agreed to by the parties or as part of a general salary
reduction by KCSR applicable to all officers of KCSR. During
1996, 1997 and 1998, Mr. Haverty is not entitled to participate
in any KCSI or KCSR incentive compensation plans, but is eligible
to participate in other benefit plans or programs generally
available to executive employees of KCSR. The employment
agreement provides that the value of Mr. Haverty's annual
compensation is fixed at $875,000 for purposes of cash
compensation based benefit plans. In connection with his initial
employment, Mr. Haverty was granted an option to purchase 100,000
shares of KCSI Common Stock, and in lieu of participation in any
incentive compensation plans of KCSI or KCSR, Mr. Haverty was
granted options to purchase 195,000 shares of KCSI Common Stock.
Pursuant to his employment agreement, Mr. Monello receives
as compensation for his services an annual base salary as
determined by the Board of Directors of KCSI. Such salary shall
not be increased prior to January 1, 1999 and shall not be
reduced except as agreed to by the parties or as part of a
general salary reduction by KCSI applicable to all officers of
KCSI. Under the employment agreement, Mr. Monello is not
entitled to participate in any KCSI or KCSR incentive
compensation plans during 1996, 1997 or 1998, but is eligible to
participate in other benefit plans or programs generally
available to executive employees of KCSI. Mr. Monello was also
awarded shares of KCSI Common Stock ("Restricted Stock") that are
subject to forfeiture in the event his employment is terminated
for cause by KCSI or by him voluntarily. The number of shares
subject to forfeiture decreases by 500 shares on March 31 of each
year through 1997 and the shares are no longer subject to
forfeiture following termination due to death, disability or
retirement to which the Board consents. Shares of Restricted
Stock subject to forfeiture are not transferable other than to
KCSI without the prior approval of KCSI's Board of Directors.
The employment agreement provides that the value of Mr. Monello's
annual compensation is fixed at one-hundred and seventy-five
percent of his base salary for purposes of cash compensation
benefit plans.
In the event of termination without cause by KCSI, the
officers would be entitled to twelve months of severance pay at
an annual rate equal to their base salary and for reimbursement
for the costs of continuing or obtaining comparable health and
life insurance benefits unless such benefits are provided by
another employer. After termination, officers shall not be
entitled to accrue or receive benefits under any other employee
benefit plan, except the officers will be entitled to participate
in the KCSI Profit Sharing Plan, the KCSI portion of The Employee
Stock Ownership Plan and the KCSI 401(k) Plan in the year of
termination if such officer meets the requirements for
participation in such termination year.
If there is a change in control of KCSI (as defined in the
employment agreements) during the term of the employment
agreements, the officers' employment, executive capacity, salary
and benefits would be continued for a three-year period at levels
in effect on the control change date (as that term is defined in
the employment agreements). The officers also would be eligible
to participate in any KCSI incentive compensation plan and would
be entitled to immediately exercise all outstanding stock
options. With respect to unfunded employer obligations under
benefit plans, the officers would be entitled to a discounted
cash payment of amounts to which they are entitled. The
officers' employment may be terminated after the control change
date, but where it is other than "for cause" (as defined in the
employment agreements) they would be entitled to payment of their
base salary through termination plus a discounted cash severance
payment based on their salary for the remainder of the three-year
period and for continuation or payment of benefits to the end of
that period. The officers are also permitted to resign
employment after a change in control upon "good reason" (as that
term is defined in the employment agreements) and advance written
notice, and to receive the same payments and benefits as if their
employment had been terminated. The employment agreements also
provide for payments to such officers necessary to relieve them
of certain adverse federal income tax consequences if amounts
received under the Agreements involve "parachute payments" under
Section 4999 of the Internal Revenue 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 expense of the officers
in connection with disputes arising with respect to the
employment agreements.
If there is a change of ownership of KCSI or KCSR (as that
term is defined in the employment agreements) during the term of
the agreements and the officers' employment is terminated other
than for cause (as that term is defined in the employment
agreements) and the officers do not receive "similar employment"
(as that term is defined in the employment agreements) or such
similar employment is terminated other than for cause within
three years of such change of ownership, then for the remainder
of the three-year period, or for a period of one year, whichever
is longer, the officers would be entitled to monthly severance
pay equal to one-twelfth of their annual base salary on the date
of the change of ownership and for continuation or payment of
certain health and life insurance benefits unless such benefits
are provided by another employer. In addition, the officers
would be able to immediately exercise all outstanding stock
options except to the extent permitted by the pertinent stock
option agreement and except that no such options shall be
exercisable earlier than one year after the date such options are
granted. For any options not exercisable, the officers are to be
paid the aggregate difference between the option exercise price
and the fair market value of KCSI Common Stock on the date of
termination. If a change in control of KCSI occurs prior or
simultaneously with a change of ownership in KCSI or KCSR, the
officers would be entitled only to those benefits provided for
upon a change in control.
Mr. Edwards. KCSI and KCSR have entered into an Agreement
with Mr. Edwards dated May 15, 1995 terminating the employment
agreement between the parties and whereby Mr. Edwards agreed to
retire as President and Chief Executive Officer and Board member
of KCSR and as Executive Vice President and Board member of KCSI.
The agreement provided that Mr. Edwards will continue as an
employee of KCSR, advising management in the areas of energy and
utilities, assisting in the orderly transition of his successor
and performing such additional services as may be requested by
KCSR until the expiration of his employment on January 2, 1997.
As compensation for these duties, Mr. Edwards will receive his
full base salary of $500,000 per year and certain life, health
and disability insurance benefits through the end of the
employment period. In addition, all Restricted Shares of KCSI
Common Stock granted to him under the employment agreement are
deemed fully vested by virtue of Mr. Edwards retirement and
consent of the Board of Directors. Moreover, the benefits
accrued by Mr. Edwards under the KCSI Executive Plan are to be
distributed to him in a lump sum payment as soon as practicable,
and his performance of duties prior to the agreement and his
efforts during the transition in management are deemed to qualify
him for the 1995 employer contributions under the KCSI portion of
the ESOP and Profit Sharing Plan.
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 of ownership of
KCSI to receive a payment equal to his prior year's current and
deferred compensation.
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 "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 Bylaws will
continue to be available regardless of, among other things, an
amendment to the Bylaws 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.
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, 1998, unless the trusts are extended prior to such
date.
KCSR has established similar trusts relating to its
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
KCSR trust are tied to failures by the respective companies to
honor their obligations to their respective Beneficiaries
following a change in control of KCSI.
TERMINATION OF EMPLOYMENT
Under the terms of the employment agreements with Messrs.
Rowland, Haverty and Monello, in the event of termination of
their employment, other than by them (whether voluntary or by
death or disability) or by KCSI for cause, Mr. Rowland will
continue for a period of twenty-four months, and Messrs. Haverty
and Monello for a period of twelve 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.
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 would be
eligible to 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, 1995.
THE EMPLOYEE STOCK OWNERSHIP PLAN
The Employee Stock Ownership Plan (the "ESOP") is designed
to be a qualified employee stock ownership plan under the
Internal Revenue Code of 1986, as amended (the "Code").
Employees of KCSI and certain of its subsidiaries, including
Janus Capital Corporation, participate in the KCSI portion of the
ESOP.
By its terms, the 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 portion of the ESOP on January 1 or
July 1 coincident with or immediately following commencement of
their employment. As of December 31, 1995, approximately 1,358
employees of KCSI and certain of its subsidiaries, including all
of KCSI's executive officers, were eligible to participate in the
KCSI portion of the ESOP.
The KCSI portion of the ESOP is designed to invest primarily
in shares of KCSI Common Stock. KCSI will provide funding for
the 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 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
portion of the 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 portion
of the ESOP, subject to Code maximum allocation limitations.
Forfeitures are similarly allocated. For this purpose,
compensation includes only compensation received during the
period the individual was actually a participant in the 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 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 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 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 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 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 in
the KCSI portion of the ESOP 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 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 ESOP; or (iii) used by the ESOP to pay
interest or principal on indebtedness incurred to acquire the
shares on which the dividends are paid.
Pursuant to the ESOP, a trust fund has been established to
hold contributions thereto and the proceeds from investments for
the benefit of ESOP participants. Mercantile Bank of Kansas City
serves as co-trustee for the sole purpose of jointly voting with
UMB Bank, N.A. the KCSI stock held by the ESOP. The KCSI portion
of the 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. As trustee, UMB
Bank, N.A. has the power to invest the ESOP's funds, to sell the
securities and other properties of the ESOP, and to change the
ESOP's investments from time to time. The KCSI portion of the
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 ESOP.
As of December 31, 1995, the ESOP held 3,759,098 shares of
KCSI's Common Stock, all of which are allocated to participants'
accounts. The shares allocated to participants' accounts do not
reflect allocations made subsequent to December 31, 1995, that
for purposes of the ESOP are allocated to participants' accounts
as of December 31, 1995. 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. The debt was fully repaid in
August 1995. The debt was paid through contributions by KCSI and
participating subsidiaries to the ESOP and a portion of the
dividends paid on the ESOP shares.
In connection with the initial public offering of DST
Systems, Inc.'s common stock on October 31, 1995, the ESOP was
amended to consist of two portions: a KCSI portion and a DST
portion. The account balances in the ESOP attributable to DST
employees have become the DST portion of the ESOP. The DST
portion initially was invested in KCSI stock. Approximately one-
half of the value of the account balances of DST employees has
been converted into DST common stock through an exchange with
KCSI of KCSI stock held by the ESOP for shares of DST's common
stock. The exchange ratio was calculated using a formula having
as its basis the fair market values of KCSI stock and DST common
stock at the time of the exchange. The approximately one-half of
the value of the account balances of DST employees not vested in
DST common stock remains invested in KCSI common stock. It is
contemplated that over a period of time consistent with the
fiduciary duty to the participants, the KCSI stock will be sold
(to KCSI or in other privately negotiated or public market
transactions) and the proceeds (whether cash or shares of DST
common stock) will be transferred to the DST Profit Sharing Plan
(if cash) or remain in the DST portion of the ESOP (if DST common
stock). DST has ceased to be a participating employer in the
KCSI portion of the ESOP, and DST employees have become
participants in the DST portion of the ESOP.
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. As of January 1, 1996, the
requirement of one year of service was eliminated. 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 allocation
limits under the Internal Revenue Code of 1986, as amended (the
"Code"). No minimum contribution is required. Subject to Code
maximum allocation 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.
Prior to January 1, 1996, vesting occurs under the plan at the
rate of 10 percent for each year of service for the first four
years and thereafter at the rate of 20 percent until the
participant is fully vested. As of January 1, 1996, the vesting
schedule was changed to a rate of 25 percent at three years of
service, 50 percent at four years of service and 100 percent at
five years of service. 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. 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 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.
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, Haverty and Monello has been fixed at $875,000,
$875,000 and 175 percent of his base salary, respectively, 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 age 55 with the consent of the KCSI Compensation and
Organization Committee), 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 (or age 55 with the
consent of the KCSI Compensation and Organization Committee), 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.
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 Janus 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. Effective as of
January 1, 1996, the requirement of one year of service was
eliminated. 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 percent after three years of service, 50
percent after four years of service, and 100 percent after five
years of service. A participant's interest also becomes fully
vested at retirement age, death or disability.
TRANSACTIONS WITH MANAGEMENT
Messrs. Rowland, 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 subsidiary of DST Systems, Inc. (formerly a wholly
owned subsidiary of KCSI), National Realty Partners, Inc.
("NRP"), serves as general partner. During 1995, management fees
of $25,000 and $10,000 were paid to NRP by Elgin Investors, L.P.
and Inwood Towers, L.P. ("Towers"), respectively. NRP and DST
Realty, Inc. ("Realty"), a DST subsidiary, advanced $190,044 to
another such limited partnership, Trails Investors, L.P.
("Trails"). At December 31, 1995, Trails was indebted to NRP and
Realty in the amount of $1,203,804.
In January of 1995, KCSI and its subsidiaries purchased a
portion of Mr. Bailey's holdings in Janus Capital Corporation for
$7,182,289 in cash.
A. Edward Allinson is the Chairman of the Board of Boston
Financial Data Services, Inc. ("BFDS"), a joint venture between
DST and State Street Bank and Trust Company, which each have a 50
percent interest in the venture. He is paid an annual salary of
$100,000 by BFDS.
On January 31, 1995, DST together with Kemper Financial
Services, Inc., ("Kemper") completed the sale of all of the
outstanding capital stock of IFTC Holdings Inc. ("Holdings"), to
State Street Boston Corporation ("State Street"). DST and Kemper
each owned 50 percent of Holdings, which wholly owns Investors
Fiduciary Trust Company. Under the agreement, DST received
2,986,111 shares of State Street common stock. A. Edward
Allinson is an Executive Vice President of State Street Bank and
Trust Company, a wholly owned subsidiary of State Street, and of
State Street.
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 Bylaws 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 KCSI
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 KCSI 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 the signed consent of each
such nominee to serve as a director of KCSI, 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 KCSI 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.
1997 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 26, 1996. Such proposal must be made in accordance with
the applicable laws and 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.
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,
legal or natural, who own more than 10 percent of KCSI's Common
Stock or Preferred Stock (collectively "Reporting Persons"), to
file reports of such ownership with the NYSE and KCSI. Based
solely on the review of the copies of such reports furnished to
KCSI, and written representations relative to the filing of
certain forms, no Reporting Person was late in filing such
reports for fiscal year 1995.
OTHER MATTERS
The Board of Directors knows of no other matters that are
expected to be presented for consideration at the Annual Meeting.
KCSI's Bylaws 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 less
than 45 days and no more than 90 days prior to the annual meeting
held on the date specified in KCSI's Bylaws 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.
By Order of the Board of Directors
Richard P. Bruening, Esq.
Vice President, General Counsel
and Corporate Secretary
Kansas City, Missouri
March 25, 1996.
A COPY OF KCSI'S ANNUAL REPORT ON FORM 10-K (NOT INCLUDING
EXHIBITS) AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
FOR 1995 WILL BE FURNISHED TO STOCKHOLDERS WITHOUT CHARGE, UPON
REQUEST DIRECTED TO THE CORPORATE SECRETARY OF KCSI, 114 WEST
11TH STREET, KANSAS CITY, MISSOURI 64105-1804.
<PAGE>
APPENDIX A
KANSAS CITY SOUTHERN INDUSTRIES, INC.
1991 STOCK OPTION AND
PERFORMANCE AWARD PLAN
(as amended and restated February 26, 1996)
Section 1. Purpose.
The purposes of the Kansas City Southern Industries, Inc. 1991
Stock Option and Performance Award Plan (the "Plan") are to
generate an increased incentive for Employees of the Company to
contribute to the Company's future success, to secure for the
Company and its stockholders the benefits inherent in equity
ownership by Employees of the Company and to enhance the ability
of the Company and its Affiliates to attract and retain
exceptionally qualified Employees upon whom, in large measure,
the sustained progress, growth and profitability of the Company
depend. By encouraging Employees of the Company and its
Affiliates to acquire a proprietary interest in the Company's
growth and performance, the Company intends to more closely align
the interests of the Company's Employees, management and
stockholders and motivate Employees to enhance the value of the
Company for the benefit of all stockholders.
Section 2. Definitions.
As used in the Plan, the following terms shall have the
meanings set forth below:
(a) "Affiliate" means (i) any Person that directly, or
through one (1) or more intermediaries, controls, or is
controlled by, or is under common control with, the
Company, (ii) any entity in which the Company has an
equity interest of at least fifty percent (50%), and
(iii) any entity in which the Company has any other
significant equity interest, as determined by the
Committee.
(b) "Award" means any Option, Stock Appreciation Right,
Limited Right, Performance Share, Performance Unit,
Dividend Equivalent, or any other right, interest, or
option relating to Shares granted pursuant to the
provisions of the Plan.
(c) "Award Agreement" means any written agreement,
contract, or other instrument or document evidencing
any Award granted hereunder and signed by both the
Company and the Participant or by both the Company and
an Outside Director.
(d) "Board" means the Board of Directors of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
(f) "Committee" means the Compensation and Organization
Committee of the Board, or such other committee
designated by the Board, authorized to administer the
Plan under Section 3 hereof. The Committee shall
consist of at least that number of directors required
by Rule 16b-3 and/or Code Section 162(m), each of whom
is a disinterested director within the meaning of Rule
16b-3 and an outside director within the meaning of
Code Section 162(m).
(g) "Company" means Kansas City Southern Industries, Inc.,
a Delaware corporation.
(h) "Dividend Equivalent" means any right granted pursuant
to Section 13(f) hereof.
(i) "Employee" means any non-union employee of the Company
or of any Affiliate, as determined by the Committee,
regularly employed for more than twenty (20) hours per
week and more than five (5) months per year.
(j) "Exchange Act" means the Securities Exchange Act of
1934, or any successors thereto, and the rules and
regulations promulgated thereunder, all as shall be
amended from time to time.
(k) "Fair Market Value" means, with respect to any
property, the market value of such property determined
by such methods or procedures as shall be established
from time to time by the Committee.
(l) "Incentive Stock Option" means an Option granted under
Section 6 hereof that is intended to meet the
requirements of Section 422 of the Code or any
successor provision thereto.
(m) "Limited Right" means any right granted to a
Participant pursuant to Section 7(b) hereof.
(n) "Non-Qualified Stock Option" means an Option granted
under Section 6 hereof that is not intended to be an
Incentive Stock Option, and an Option granted to an
Outside Director pursuant to Section 9 hereof.
(o) "Option" means an Incentive Stock Option or Non-
Qualified Stock Option.
(p) "Outside Director" means a member of the Board who is
not an Employee of the Company or of any Affiliate.
(q) "Participant" means an Employee who is selected to
receive an Award under the Plan.
(r) "Performance Award" means any Award of Performance
Shares or Performance Units pursuant to Section 8
hereof.
(s) "Performance Period" means that period established by
the Committee at the time any Performance Award is
granted or at any time thereafter during which any
performance goals specified by the Committee with
respect to such Award are to be measured.
(t) "Performance Share" means any grant pursuant to Section
8 hereof of Shares or any unit valued by reference to a
designated number of Shares.
(u) "Performance Unit" means any grant pursuant to Section
8 hereof of a unit valued by reference to a designated
amount of property other than Shares.
(v) "Person" means any individual, corporation,
partnership, association, joint-stock company, trust,
unincorporated organization, or government or political
subdivision thereof.
(w) "Rule 16b-3" means Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Exchange
Act or any successor rule or regulation thereto.
(x) "Shares" means shares of the common stock of the
Company, one cent ($.01) par value.
(y) "Stock Appreciation Right" means any right granted to a
Participant pursuant to Section 7(a) hereof.
(z) "Stockholders Meeting" means the annual meeting of
stockholders of the Company in each year.
Section 3. Administration.
The Plan shall be administered by the Committee. Subject to
applicable law and the terms of the Plan, the Committee shall
have full power and authority to: (i) designate Participants;
(ii) determine the type or types of Awards to be granted to each
Participant hereunder; (iii) determine the number of Shares to be
covered by (or with respect to which payments, rights, or other
matters are to be calculated in connection with) each Award; (iv)
determine the terms and conditions of any Award and to amend,
waive or otherwise change such terms and conditions; (v)
determine whether, to what extent, and under what circumstances
Awards may be settled or exercised in cash, Shares, other
securities, other Awards, or other property, or canceled,
forfeited, or suspended, and the method or methods by which
Awards may be settled, exercised, canceled, forfeited, or
suspended; (vi) determine whether, to what extent and under what
circumstances cash, Shares, other securities, other Awards, other
property and other amounts payable with respect to an Award under
this Plan shall be deferred either automatically or at the
election of the Participant or the Committee; (vii) interpret and
administer the Plan and any instrument or agreement relating to,
or Award made under, the Plan; (viii) establish, amend, suspend
or waive such rules and regulations and appoint such agents as it
shall deem appropriate for the proper administration of the Plan;
and (ix) make any other determination and take any other action
that the Committee deems necessary or desirable for
administration of the Plan. Subject to the terms of the Plan
(including without limitation Section 11 hereof), the Committee
shall also have the authority to grant Awards in replacement of
Awards previously granted under this Plan or any other
compensation plan of the Company or an Affiliate. Unless
otherwise expressly provided in the Plan, all determinations,
designations, interpretations, and other decisions of the
Committee shall be final, conclusive and binding upon all
Persons, including the Company, any Participant, any stockholder,
and any Employee of the Company or of any Affiliate. All
determinations of the Committee shall be made by a majority of
its members. The Committee, in its discretion, may delegate its
authority and duties under the Plan to the Chief Executive
Officer and/or to other officers of the Company under such
conditions and/or limitations as the Committee may establish;
provided, however, that only the Committee may select and grant
Awards, or otherwise take any action with respect to Awards, to
Participants who are (i) officers or directors of the Company for
purposes of Section 16 of the Exchange Act; or (ii) Participants
who are "covered employees" under Section 162(m) of the Code.
Notwithstanding the above, the Committee shall not have any
discretion with respect to the Options granted to Outside
Directors pursuant to Section 9 hereof.
Section 4. Shares Subject to the Plan.
(a) Subject to adjustment as provided in Section 4(c), a
total of Eight Million Four Hundred Thousand
(8,400,000) Shares shall be available for the grant of
Awards under the Plan. Any Shares issued hereunder may
consist, in whole or in part, of authorized and
unissued shares or treasury shares. If any Shares
subject to any Award granted hereunder are forfeited or
such Award otherwise terminates without the issuance of
such Shares or of other consideration in lieu of such
Shares, the Shares subject to such Award, to the extent
of any such forfeiture or termination, shall again be
available for grant under the Plan. In addition, to
the extent permitted by Section 422 of the Code, any
Shares issued by, and any Awards granted by or that
become obligations of, the Company through or as the
result of the assumption of outstanding grants or the
substitution of Shares under outstanding grants of an
acquired company shall not reduce the Shares available
for grants under the Plan (except in the case of Awards
granted to Participants who are officers or directors
of the Company to the extent required by Section 16 of
the Exchange Act).
(b) For purposes of this Section 4,
(i) If an Award (other than a Dividend Equivalent) is
denominated in Shares, the number of Shares
covered by such Award, or to which such Award
relates, shall be counted on the date of grant of
such Award against the aggregate number of Shares
available for granting Awards under the Plan;
(ii) Dividend Equivalents and Awards not denominated in
Shares shall be counted against the aggregate
number of Shares available for granting Awards
under the Plan in such amount and at such time as
the Committee shall determine under procedures
adopted by the Committee consistent with the
purposes of the Plan; and
(iii) Awards that operate in tandem with (whether
granted simultaneously with or at a different time
from), or that are substituted for, other Awards
or awards under other Company plans may be counted
or not counted under procedures adopted by the
Committee in order to avoid double counting.
(c) In the event that the Committee shall determine that
any dividend or other distribution (whether in the form
of cash, Shares, or other securities or property),
stock split, reverse stock split, merger, reorgan-
ization, consolidation, recapitalization, split-up,
spin-off, repurchase, exchange of shares, issuance of
warrants or other rights to purchase Shares or other
securities of the Company, or other transaction or
event affects the Shares such that an adjustment is
determined by the Committee to be appropriate in order
to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under
the Plan, then the Committee may: (i) make adjustments
in the aggregate number and class of shares or property
which may be delivered under the Plan and may
substitute other shares or property for delivery under
the Plan, including shares of another entity which is a
party to any such merger, reorganization, consolidation
or exchange of shares; and (ii) make adjustments in the
number, class and option price of shares or property
subject to outstanding Awards and Options granted under
the Plan, and may substitute other shares or property
for delivery under outstanding Awards and Options,
including shares of another entity which is a party to
any such merger, reorganization, consolidation or
exchange of shares, as may be determined to be
appropriate by the Committee in its sole discretion,
provided that the number of Shares subject to any Award
or Option shall always be a whole number. The
preceding sentence shall not limit the actions which
may be taken by the Committee under Section 10 of the
Plan. No adjustment shall be made with respect to
Awards of Incentive Stock Options that would cause the
Plan to violate Section 422 of the Code, and the number
and price of shares subject to outstanding Options
granted to Outside Directors pursuant to Section 9
hereof shall be subject to adjustment only as set forth
in Section 9.
Section 5. Eligibility.
Any Employee shall be eligible to be selected as a
Participant. Notwithstanding any other provision of the Plan to
the contrary, no Participant may be granted an Option, Limited
Right or Stock Appreciation Right in any one (1) calendar year,
which, when added to any other Option, Limited Right or Stock
Appreciation Right granted hereunder in the same year, shall
exceed Five Hundred Thousand (500,000) Shares. If an Option,
Limited Right or Stock Appreciation Right is canceled, the
canceled Option, Limited Right or Stock Appreciation Right
continues to count against the maximum number of Shares for which
an Option, Limited Right or Stock Appreciation Right may be
granted to a Participant in any year. All Shares specified in
this Section 5 shall be adjusted to the extent necessary to
reflect adjustments to Shares required by Section 4(c) hereof.
Section 6. Stock Options.
Options may be granted hereunder to Participants either
alone or in addition to other Awards granted under the Plan.
Options may be Incentive Stock Options within the meaning of
Section 422 of the Code or Non-Qualified Stock Options (i.e.,
stock options which are not Incentive Stock Options), or a
combination thereof. Any Option granted to a Participant under
the Plan shall be evidenced by an Award Agreement in such form as
the Committee may from time to time approve. Any such Option
shall be subject to the following terms and conditions and to
such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee shall deem desirable:
(a) Option Price. The purchase price per Share purchasable
under an Option shall be determined by the Committee;
provided, however, that such purchase price shall not
be less than one hundred percent (100%) of the Fair
Market Value of the Share on the effective date of the
grant of the Option (or, if the Committee so
determines, in the case of any Option retroactively
granted in tandem with or in substitution for another
Award or any outstanding Award granted under any other
plan of the Company, on the effective date of grant of
such other Award or award under another Company plan).
(b) Option Term. The term of each Option shall be fixed by
the Committee in its sole discretion, except as
provided below for Incentive Stock Options.
(c) Exercisability. Except as otherwise provided in
Section 10(a), Options shall be exercisable at such
time or times as determined by the Committee at or
subsequent to grant.
(d) Method of Exercise. Subject to the other provisions of
the Plan and any applicable Award Agreement, any Option
may be exercised by the Participant in whole or in part
at such time or times, and the Participant may make
payment of the option price in such form or forms as
the Committee shall determine, including, without
limitation, payment by delivery of cash, Shares or
other consideration (including, where permitted by law
and the Committee, Awards) having a Fair Market Value
on the exercise date equal to the total option price,
or by any combination of cash, Shares and other
consideration as the Committee may specify in the
applicable Award Agreement.
(e) Incentive Stock Options. In accordance with rules and
procedures established by the Committee, the aggregate
Fair Market Value (determined as of the time of grant)
of the Shares with respect to which Incentive Stock
Options held by any Participant are exercisable for the
first time by such Participant during any calendar year
under the Plan (and under any other benefit plans of
the Company or of any parent or subsidiary corporation
of the Company as defined in Section 424 of the Code)
shall not exceed One Hundred Thousand Dollars
($100,000) or, if different, the maximum limitation in
effect at the time of grant under Section 422 of the
Code, or any successor provision, and any regulations
promulgated thereunder. The option price per Share
purchasable under an Incentive Stock Option shall not
be less than one hundred percent (100%) of the Fair
Market Value of the Share on the date of grant of the
Option. No incentive stock option may be granted after
ten (10) years from the date of adoption of this plan,
and each Incentive Stock Option shall expire not later
than ten (10) years from its date of grant. No
Incentive Stock Option shall be granted to any
Participant if at the time the Option is granted such
Participant owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes
of stock of the Company, its parent or its subsidiaries
unless (i) the option price per Share is at least one
hundred and ten percent (110%) of the Fair Market Value
of the Share on the date of grant, and (ii) such Option
by its terms is not exercisable after the expiration of
five (5) years from the date such Option is granted.
The terms of any Incentive Stock Option granted
hereunder shall comply in all respects with the
provisions of Section 422 of the Code, or any successor
provision, and any regulations promulgated thereunder.
(f) Form of Settlement. In its sole discretion, the
Committee may provide at the time of grant that the
Shares to be issued upon an Option's exercise shall be
in the form of Shares subject to restrictions as the
Committee may determine, or other similar securities,
or may reserve the right so to provide after the time
of grant.
Section 7. Stock Appreciation and Limited Rights.
(a) Stock Appreciation Rights may be granted hereunder to
Participants either alone or in addition to other
Awards granted under the Plan and may, but need not,
relate to a specific Option granted under Section 6.
The provisions of Stock Appreciation Rights need not be
the same with respect to each recipient. Any Stock
Appreciation Right related to a Non-Qualified Stock
Option may be granted at the same time such Option is
granted or at any time thereafter before exercise or
expiration of such Option. Any Stock Appreciation
Right related to an Incentive Stock Option must be
granted at the same time such Option is granted and
must have a grant price equal to the option price of
such Option. In the case of any Stock Appreciation
Right related to any Option, the Stock Appreciation
Right or applicable portion thereof shall terminate and
no longer be exercisable upon the termination or
exercise of the related Option, except that a Stock
Appreciation Right granted with respect to less than
the full number of Shares covered by a related Option
shall not be reduced until the exercise or termination
of the related Option exceeds the number of Shares not
covered by the Stock Appreciation Right. Any Option
related to any Stock Appreciation Right shall no longer
be exercisable to the extent the related Stock
Appreciation Right has been exercised. Any Stock
Appreciation Right related to an Option shall be
exercisable to the extent, and only to the extent, that
the related Option is exercisable. The Committee may
impose such other conditions or restrictions on the
exercise of any Stock Appreciation Right as it shall
deem appropriate. Subject to the terms of the Plan and
any applicable Award Agreement, a Stock Appreciation
Right granted under the Plan shall confer on the holder
thereof a right to receive, upon exercise thereof, the
excess of (i) the Fair Market Value of one (1) Share on
the date of exercise or with respect to any right
related to an Option other than an Incentive Stock
Option, at any time during a specified period before or
after the date of exercise as determined by the
Committee over (ii) the grant price of the right as
specified by the Committee, which shall not be less
than the Fair Market Value of one (1) Share on the date
of grant of the Stock Appreciation Right (or, if the
Committee so determines, in the case of any Stock
Appreciation Right retroactively granted in tandem with
or in substitution for another Award or any outstanding
award granted under any other plan of the Company, on
the date of grant of such other Award or award),
multiplied by the number of Shares as to which the
holder is exercising the Stock Appreciation Right.
Subject to the terms of the Plan and any applicable
Award Agreement, the terms and conditions of any Stock
Appreciation Right shall be as determined by the
Committee. The Committee may impose such conditions or
restrictions on the exercise of any Stock Appreciation
Right as it may deem appropriate.
(b) Limited Rights may be granted hereunder to Participants
only with respect to an Option granted under Section 6
hereof or a stock option granted under another plan of
the Company. The provisions of Limited Rights need not
be the same with respect to each recipient. Any
Limited Right related to a Non-Qualified Stock Option
may be granted at the same time such Option is granted
or at any time thereafter before exercise or expiration
of such Option. Any Limited Right related to an
Incentive Stock Option must be granted at the same time
such Option is granted. A Limited Right shall
terminate and no longer be exercisable upon termination
or exercise of the related Option, except that a
Limited Right granted with respect to less than the
full number of Shares covered by a related Option shall
not be reduced until the exercise or termination of the
related Option exceeds the number of Shares not covered
by the Limited Right. Any Option related to any
Limited Right shall no longer be exercisable to the
extent the related Limited Right has been exercised.
Any Limited Right shall be exercisable to the extent,
and only to the extent, the related Option is
exercisable and only during the three (3) month period
immediately following a Change in Control of the
Company (as defined in Section 10 hereof). The
Committee may impose such other conditions or
restrictions on the exercise of any Limited Right as it
shall deem appropriate. Subject to the terms of the
Plan and any applicable Award Agreement, a Limited
Right granted under the Plan shall confer on the holder
thereof a right to receive, upon exercise thereof, an
amount equal to the excess of (i) the Fair Market Value
of one (1) Share on the date of exercise or if greater
and only with respect to any Limited Right related to
an Option other than an Incentive Stock Option, the
highest price per Share paid in connection with any
Change in Control of the Company, over (ii) the option
price of the related Option, multiplied by the number
of Shares as to which the holder is exercising the
Limited Right. The amount payable to the holder shall
be paid by the Company in cash. Subject to the terms
of the Plan and any applicable Award Agreement, the
terms and conditions of any Limited Right shall be as
determined by the Committee. The Committee may impose
such conditions or restrictions on the exercise of any
Limited Right as it may deem appropriate.
Section 8. Performance Awards.
Performance Awards may be issued hereunder to Participants
in the form of Performance Shares or Performance Units, for no
cash consideration or for such minimum consideration as may be
required by applicable law, either alone or in addition to other
Awards granted under the Plan. The value represented by a
Performance Share or Unit shall be payable to, or upon the
exercise by, the Participant holding such Award, in whole or in
part, following achievement of such performance goals during such
Performance Period as determined by the Committee. Except as
provided in Section 10, Performance Awards will be paid only
after the end of the relevant Performance Period. Performance
Awards may be paid in cash, Shares, other property or any
combination thereof, in the sole discretion of the Committee at
the time of payment. The length of the Performance Period, the
performance criteria or levels to be achieved for each
Performance Period, and the amount of the Award to be distributed
shall be conclusively determined by the Committee. Performance
Awards may be paid in a lump sum or in installments following the
close of the Performance Period or, in accordance with procedures
established by the Committee, on a deferred basis. An Award of
Performance Shares may consist of or include a grant of Shares
which may be subject to such restrictions, conditions and
contingencies as determined by the Committee. As to any such
grant of Shares, the value represented by the Award and the
payment of the Award may consist solely of the value of any right
to the Shares or such other form of value and payment as
determined by the Committee. To the greatest extent possible
when making Performance Awards the Committee shall adopt
performance goals, certify completion of such goals and comply
with any other Code requirements necessary to be in compliance
with the performance-based compensation requirements of Code
Section 162(m).
Section 9. Outside Directors' Options.
(a) Grant of Options. At the time an outside Director
first becomes a member of the Board after February 26,
1996, the Outside Director shall automatically be
granted an option to purchase 6,000 Shares. On the
date each Stockholders Meeting is actually held in each
of the years beginning with 1996 and through 2005, each
Outside Director shall automatically be granted an
Option to purchase 3,000 Shares; provided, however,
that an Outside Director shall not be entitled to
receive and shall not be granted any such Option on the
date of any particular Stockholders Meeting if he will
not continue to serve as an Outside Director
immediately following such Stockholders Meeting. An
Outside Director who first takes a position on the
Board at the Annual Stockholders Meeting, shall be
entitled to receive the 6,000 Share initial service
option plus the 3,000 Share Option granted at that
Stockholder s Meeting to each Outside Director. All
such Options shall be Non-Qualified Stock Options. The
price at which each Share covered by such Options may
be purchased shall be one hundred percent (100%) of the
fair market value of a share on the date the Option is
granted. Fair market value for the purposes of this
Section 9 shall be deemed to be the average of the high
and low prices of the Shares as reported on the New
York Stock Exchange Composite Transactions tape for the
date the Option is granted or, if no sale of Shares
shall have been made on that date, the next preceding
date on which there was a sale of Shares.
(b) Exercise of Options. Except as set forth in this
Section 9, an Option granted to an Outside Director
shall become exercisable only after one year from the
date of grant of the Option. No Option shall be
exercisable more than ten (10) years after the date of
grant. Options may be exercised by an Outside Director
during the period he remains an Outside Director and
for a period of five (5) years after ceasing to be a
member of the Board by reason of death or retirement,
or for a period of one (1) year after ceasing to be a
member of the Board for reasons other than retirement
or death; however, only those Options exercisable at
the date the Outside Director ceases to be a member of
the Board shall remain exercisable and in no event
shall the Options be exercisable more than ten (10)
years after the date of grant. For purposes of this
Section 9, retirement shall mean discontinuance of
service as a director after the director has reached
age fifty-five (55) and has at least five (5) years or
more of service on the Board. All Options shall
immediately become exercisable in the event of a Change
in Control, as hereinafter defined, except that Options
shall not be exercisable earlier than six (6) months
from the date of grant to the extent required by
Section 16 of the Exchange Act.
If a former Outside Director shall die holding an
Option that has not expired and has not been fully
exercised, the Option shall remain exercisable until
the later of one (1) year after the date of death or
the end of the period in which the former Outside
Director could have exercised the Option had he not
died, but in no event shall the Option be exercisable
more than ten (10) years after the date of grant. In
the event of the death of an Outside Director or former
Outside Director, his Options shall be exercisable only
to the extent that they were exercisable at his date of
death and only by the executor or administrator of the
Outside Director's estate, by the person or persons to
whom the Outside Director's rights under the Option
shall pass under the Outside Director's will or the
laws of descent and distribution, or by a beneficiary
designated in writing in accordance with Section 13(a)
hereof.
(c) Payment. An Option granted to an Outside Director
shall be exercisable upon payment to the Company of the
full purchase price of the Shares with respect to which
the Option is being exercised. Payment for the Shares
shall be in United States dollars, payable in cash or
by check, or by delivery of Shares having a Fair Market
Value on the exercise date equal to the total Option
price, or by any combination of cash and Shares.
(d) Adjustment of Options. In the event there shall be a
merger, reorganization, consolidation,
recapitalization, stock split, reverse stock split,
stock dividend or other change in corporate structure
such that the Shares of the Company are changed into or
become exchangeable for a larger or smaller number of
Shares or shares of a different class of stock,
thereafter the number of Shares subject to outstanding
Options and the number of Shares available for the
grant of Options under this Plan shall be increased or
decreased, as the case may be, in direct proportion to
the increase or decrease in the number of Shares of the
Company by reason of such change in corporate
structure; and the shares of any such other class of
stock shall be treated as Shares for purposes of this
Plan; provided, that the number of Shares shall always
be a whole number, and the purchase price per share of
any outstanding Options shall, in the case of an
increase in the number of Shares, be proportionately
reduced, and in the case of a decrease in the number of
Shares, shall be proportionately increased.
(e) No Obligation. Nothing in this Plan shall be deemed to
create an obligation on the part of the Board or a
committee thereof to nominate any Outside Director for
reelection by the Company s Stockholders, nor confer
upon any Outside Director the right to remain a member
of the Board for any period of time, or at any
particular rate of compensation.
Section 10. Change in Control.
(a) In order to maintain the Participants' rights in the
event of any Change in Control of the Company, as
hereinafter defined, the Committee, as constituted
before such Change in Control, may, in its sole
discretion, as to any Award (except Options granted
pursuant to Section 9), either at the time an Award is
made hereunder or any time thereafter, take any one (1)
or more of the following actions: (i) provide for the
purchase by the Company of any such Award, upon the
Participant's request, for an amount of cash equal to
the amount that could have been attained upon the
exercise of such Award or realization of the
Participant's rights had such Award been currently
exercisable or payable; (ii) make such adjustment to
any such Award then outstanding as the Committee deems
appropriate to reflect such Change in Control; or (iii)
cause any such Award then outstanding to be assumed, or
new rights substituted therefor, by the acquiring or
surviving corporation after such Change in Control. In
the event of a Change of Control, there shall be an
automatic acceleration of any time periods relating to
the exercise or realization of any such Award and all
performance award standards shall be deemed
satisfactorily completed without any action required by
the Committee so that such Award may be exercised or
realized in full on or before a date fixed by the
Committee, except no Award shall be exercisable earlier
than six (6) months after the date of grant to the
extent required by Section 16 of the Exchange Act. The
Committee may, in its discretion, include such further
provisions and limitations in any agreement documenting
such Awards as it may deem equitable and in the best
interests of the Company.
(b) For purposes of this Plan, a "Change in Control" shall
be deemed to have occurred if (i) for any reason at any
time less than seventy-five percent (75%) of the
members of the Board shall be individuals who fall into
any of the following categories: (A) individuals who
were members of such Board on February 26, 1996; or (B)
individuals whose election, or nomination for election
by the Company's stockholders, was approved by a vote
of at least seventy-five percent (75%) of the members
of the Board then still in office who were members of
such Board on February 26, 1996; or (C) individuals
whose election, or nomination for election by the
Company's stockholders was approved by a vote of at
least seventy-five percent (75%) of the members of the
Board then still in office who were elected in the
manner described in (A) or (B) above, or (ii) any
"person" (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) shall have become,
according to a public announcement or filing, without
the prior approval of the Board of Directors of the
Company, the "beneficial owner" (as defined in Rule
13(d)-3 under the Exchange Act) directly or indirectly,
of securities of the Company representing forty percent
(40%) or more (calculated in accordance with Rule
13(d)-3) of the combined voting power of the Company's
then outstanding voting securities (such "person"
hereafter referred to as a "Major Stockholder"); or
(iii) the stockholders of the Company shall have
approved a merger, consolidation or dissolution of the
Company or a sale, lease, exchange or disposition of
all or substantially all of the Company's assets, or a
Major Stockholder shall have proposed any such
transaction, unless such merger, consolidation,
dissolution, sale, lease, exchange or disposition shall
have been approved by at least seventy-five percent
(75%) of the members of the Board of Directors of the
Company who are individuals falling into any
combination of the following categories: (A)
individuals who were members of such Board of Directors
on February 26, 1996, or (B) individuals whose election
or nomination for election by the Company's
stockholders was approved by at least seventy-five
percent (75%) of the members of the Board of Directors
then still in office who are members of the Board of
Directors on February 26, 1996, or (C) individuals
whose election, or nomination for election by the
Company's stockholders was approved by a vote of at
least seventy-five percent (75%) of the members of the
Board then still in office who were elected in manner
described in (A) or (B) above.
Section 11. Amendments and Termination.
The Board may amend, alter, suspend, discontinue, or
terminate the Plan, but no amendment, alteration, suspension,
discontinuation, or termination shall be made that would impair
the rights of an Optionee or Participant under an Award
theretofore granted, without the Optionee's or Participant's
consent. In addition, no amendment shall be effective without
the approval of stockholders as may be required by Section 16 of
the Exchange Act or Section 162(m) of the Code as the case may
be, including to:
(a) materially increase the total number of Shares
available for Awards under the Plan, except as is
provided in Section 4(c) of the Plan;
(b) materially increase benefits accruing to Participants
under the Plan;
(c) materially modify the requirements as to eligibility
for participation in the Plan;
(d) change in any way the Options provided for in Section 9
of the Plan (other than reduce the number of shares for
which an Option that is to be automatically granted is
exercisable); or
(e) cause the Plan not to comply with Section 162(m) of the
Code.
However, in no event, shall the provisions relating to the
timing, amount, exercise price or designated recipients of
Options provided for in Section 9 of the Plan be amended more
than once every six (6) months, other than to comport with
changes in the Code, the Employee Retirement Income Security Act
of 1974, as amended, or the rules thereunder.
The Committee may amend the terms of any Award theretofore
granted (except Options granted pursuant to Section 9 hereof),
prospectively or retroactively, and may also substitute new
Awards for Awards previously granted under this Plan or for
awards granted under any other compensation plan of the Company
or an Affiliate to Participants, including without limitation
previously granted Options having higher option prices, but no
such amendment or substitution shall impair the rights of any
Participant without his consent.
The Committee shall be authorized, without the Participant's
consent, to make adjustments in Performance Award criteria or in
the terms and conditions of other Awards in recognition of events
that it deems in its sole discretion to be unusual or
nonrecurring that affect the Company or any Affiliate or the
financial statements of the Company or any Affiliate, or in
recognition of changes in applicable laws, regulations or
accounting principles, whenever the Committee determines that
such adjustments are appropriate in order to prevent the dilution
or enlargement of benefits or potential benefits under the Plan.
The Committee may correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any Award in the
manner and to the extent it shall deem desirable to carry it into
effect. In the event the Company shall assume outstanding
employee benefit awards or the right or obligation to make future
such awards in connection with the acquisition of another
corporation or business entity, the Committee may, in its
discretion, make such adjustments in the terms of Awards under
the Plan as it shall deem appropriate. Notwithstanding the
above, the Committee shall not have the right to make any
adjustments in the terms or conditions of outstanding Options
granted pursuant to Section 9.
Section 12. Termination of Employment and Noncompetition.
The Committee shall have full power and authority to
determine whether, to what extent and under what circumstances
any Award (other than an Option granted pursuant to Section 9)
shall be canceled or suspended and shall promulgate rules and
regulations to (i) determine what events constitute disability,
retirement, termination for an approved reason and termination
for cause for purposes of the Plan, and (ii) determine the
treatment of a Participant under the Plan in the event of his
death, disability, retirement, or termination for an approved
reason. If a Participant's employment with the Company or an
Affiliate is terminated for cause, all unexercised, unearned,
and/or unpaid Awards, including, but not by way of limitation,
Awards earned, but not yet paid, all unpaid dividends and
dividend equivalents, and all interest accrued on the foregoing
shall be canceled or forfeited, as the case may be, unless the
Participant's Award Agreement provides otherwise. In addition,
but without limitation, all outstanding Awards to any Participant
shall be canceled if the Participant, without the consent of the
Committee, while employed by the Company or after termination of
such employment, becomes associated with, employed by, renders
services to, or owns any interest in (other than any
nonsubstantial interest, as determined by the Committee), any
business that is in competition with the Company or any
Affiliate, or with any business in which the Company or any
Affiliate has a substantial interest as determined by the
Committee or such officers or committee of senior officers to
whom the authority to make such determination is delegated by the
Committee.
Section 13. General Provisions.
(a) Nonassignability. No Award shall be assignable or
transferable by a Participant or an Outside Director
otherwise than by will or by the laws of descent and
distribution; provided, however, that a Participant or
Outside Director may, pursuant to a written designation
of beneficiary filed with the Committee prior to his
death, designate a beneficiary to exercise the rights
of the Participant with respect to any Award upon the
death of the Participant or Outside Director. Each
Award shall be exercisable during the lifetime of the
Participant or the Outside Director, only by the
Participant or the Outside Director or, if permissible
under applicable law, by the guardian or legal
representative of the Participant or Outside Director.
(b) Terms. Except for Options granted pursuant to Section
9, the term of each Award shall be for such period of
months or years from the date of its grant as may be
determined by the Committee; provided, however, that in
no event shall the term of any Incentive Stock Option
or any Stock Appreciation or Limited Right related to
any Incentive Stock Option exceed a period of ten (10)
years from the date of its grant.
(c) Rights to Awards. No Employee, Participant or other
Person shall have any claim to be granted any Award
under the Plan, and there is no obligation for
uniformity of treatment of Employees, Participants, or
holders or beneficiaries of Awards under the Plan.
(d) No Cash Consideration for Awards. Awards shall be
granted for no cash consideration or for such minimal
cash consideration as may be required by applicable
law.
(e) Restrictions. All certificates for Shares delivered
under the Plan pursuant to any Award shall be subject
to such stock-transfer orders and other restrictions as
the Committee may deem advisable under the rules,
regulations, and other requirements of the Securities
and Exchange Commission, any stock exchange upon which
the Shares are then listed, and any applicable Federal
or state securities law, and the Committee may cause a
legend or legends to be placed on any such certificates
to make appropriate reference to such restrictions.
(f) Dividend Equivalents. Subject to the provisions of
this Plan and any Award Agreement, the recipient of an
Award (including, without limitation, any deferred
Award, but excluding Options granted pursuant to
Section 9) may, if so determined by the Committee, be
entitled to receive, currently or on a deferred basis,
interest or dividends, or interest or dividend
equivalents, with respect to the number of Shares
covered by the Award, as determined by the Committee,
in its sole discretion, and the Committee may provide
that such amounts (if any) shall be deemed to have been
reinvested in additional Shares or otherwise
reinvested.
(g) Withholding. The Company shall be authorized to
withhold from any Award granted, payment due or shares
or other property transferred under the Plan the amount
of income, withholding and payroll taxes due and
payable in respect of an Award, payment or shares or
other property transferred hereunder and to take such
other action as may be necessary in the opinion of the
Company to satisfy all obligations for the payment of
such taxes. The Company may require the Participant or
Outside Director to pay to it such tax prior to and as
a condition of the making of such payment or transfer
of Shares or property under the Plan. In accordance
with any applicable administrative guidelines it
establishes, the Committee may allow or may require
participants to pay the amount of taxes due or payable
in respect of an Award by withholding from any payment
of Shares due as a result of such Award, or by
permitting the Participant to deliver to the Company,
Shares having a fair market value, as determined by the
Committee, equal to the amount of such taxes.
(h) Deferral of Awards. At the discretion of the
Committee, payment of a Performance Dividend Equivalent
or any portion thereof may be deferred by a Participant
until such time as the Committee may establish. All
such deferrals shall be accomplished by the delivery on
a form provided by the Company of a written,
irrevocable election by the Participant prior to such
time payment would otherwise be made. Further, all
deferrals shall be made in accordance with
administrative guidelines established by the Committee
to ensure that such deferrals comply with all
applicable requirements of the Code and its
regulations. Deferred payments shall be paid in a lump
sum or installments, as determined by the Committee.
The Committee may also credit interest, at such rates
to be determined by the Committee, on cash payments
that are deferred and credit Dividend Equivalents on
deferred payments denominated in the form of Shares.
(i) No Limit on Other Compensation Arrangements. Nothing
contained in this Plan shall prevent the Company or any
Affiliate from adopting other or additional
compensation arrangements, subject to stockholder
approval if such approval is required, and such
arrangements may be either generally applicable or
applicable only in specific cases.
(j) Governing Law. The validity, construction, and effect
of the Plan and any rules and regulations relating to
the Plan shall be determined in accordance with the
laws of the State of Delaware and applicable Federal
law.
(k) Severability. If any provision of this Plan or any
Award is or becomes or is deemed to be invalid, illegal
or unenforceable in any jurisdiction, or as to any
Person or Award, or would disqualify the Plan or any
Award under any law deemed applicable by the Committee,
such provision shall be construed or deemed amended to
conform to applicable laws, or if it cannot be
construed or deemed amended without, in the
determination of the Committee, materially altering the
intent of the Plan or the Award, it shall be stricken
and the remainder of the Plan and any such Award shall
remain in full force and effect.
(l) No Right to Employment. The grant of an Award shall
not be construed as giving a Participant the right to
be retained in the employ of the Company or any
Affiliate. Further, the Company or an Affiliate may at
any time terminate the employment of a Participant,
free from any liability, or any claim under the Plan,
unless otherwise expressly provided in the Plan or in
any Award Agreement.
(m) No Trust or Fund Created. Neither the Plan nor any
Award shall create or be construed to create a trust or
separate fund of any kind or a fiduciary relationship
between the Company or any Affiliate and a Participant
or any other Person. To the extent that any Person
acquires a right to receive payments from the Company
or any Affiliate pursuant to an Award, such right shall
be no greater than the right of any unsecured general
creditor of the Company or any Affiliate.
(n) No Fractional Shares. No fractional Shares shall be
issued or delivered pursuant to the Plan or any Award,
and the Committee shall determine whether cash, other
securities, or other property shall be paid or
transferred in lieu of any fractional Shares, or
whether such fractional Shares or any rights thereto
shall be canceled, terminated, or otherwise eliminated.
(o) Headings. Headings are given to the Sections and
subsections of the Plan solely as a convenience to
facilitate reference. Such headings shall not be
deemed in any way material or relevant to the
construction or interpretation of the Plan or any
provision thereof.
(p) With respect to persons subject to Section 16 of the
Exchange Act, transactions under this Plan are intended
to comply with all applicable conditions of Rule 16b-3.
To the extent any provision of this Plan or action by
the Committee fails to so comply, the Committee may
deem, for such persons, such provision or action null
and void to the extent permitted by law. Should any
provision of this Plan be unnecessary to comply with
the requirements of Section 16 of the Exchange Act, the
Committee may waive such provision.
Section 14. Effective Date of Plan.
The Plan shall be effective as of May 7, 1991, subject to
approval of the Plan by the Company's stockholders.
Section 15. Term of Plan.
No Award shall be granted pursuant to the Plan after
February 25, 2006, but any Award theretofore granted may extend
beyond that date.
<PAGE>
APPENDIX B
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 proxy
statement:
PHOTOGRAPHS OF EACH DIRECTOR
The proxy statement includes photographs of each director.
A photograph of a director is place in the proxy statement next
to the discussion of the director's principal occupations in the
sections entitled "PROPOSAL (1) - ELECTION OF TWO DIRECTORS"
and "THE BOARD OF DIRECTORS."
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.
<PAGE>
APPENDIX C
FORM OF PROXIES
KANSAS CITY SOUTHERN INDUSTRIES, INC.
114 West 11th Street
Kansas City, Missouri 64105-1804
March 25, 1996
Dear Stockholder:
You are cordially invited to join us at the 1996 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 Thursday May 2, 1996. 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 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 attached proxy card in the
envelope provided to assure that your shares will be represented.
Sincerely,
Paul H. Hanson
Chairman of the Board
Landon H. Rowland
President and Chief Executive
Officer
PLEASE SEE REVERSE SIDE FOR PROPOSALS TO BE VOTED
(Date, sign and return promptly in the prepaid envelope enclosed)
(Tear Here)
KANSAS CITY SOUTHERN INDUSTRIES, INC. PROXY
This proxy confers discretionary authority as described and
may be revoked in the manner described in the proxy statement
dated March 25, 1996, receipt of which is hereby acknowledged.
Signature_______________ Date ___________,
1996
Signature_______________ Date ___________,
1996
Please sign exactly as name(s) appear. All
joint owners should sign. Executors,
administrators, trustees, guardians,
attorneys-in-fact, and officers of corporate
stockholders should indicate the capacity in
which they are signing. Please indicate
whether you plan to attend the Annual
Meeting:
(Continued on other side)
[ ] Will attend [ ] Will not attend
<PAGE>
(Continued, and to be signed on reverse side)
(Tear Here)
KANSAS CITY SOUTHERN INDUSTRIES, INC. PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS, Paul H.
Henson, Landon H. Rowland, and Michael R. Haverty, or any one of
them, are hereby authorized, with full power of substitution, to
vote the shares of stock of Kansas City Southern Industries, Inc.
entitled to vote for the stockholder(s) signing this proxy at the
Annual Meeting of Stockholders to be held on May 2, 1996, or any
adjournment thereof as specified herein and in their discretion
on all other matters that are properly brought before the Annual
Meeting. IF NO CHOICE IS SPECIFIED, SUCH PROXIES WILL VOTE "FOR"
THE NOMINEES NAMED HEREON AND "FOR" PROPOSALS, 2, 3, 4, 5, 6 AND
7.
1. Election of two directors: Nominees: James E. Barnes &
Jose F. Serrano
[ ] FOR all nominees except those indicated below:
[ ] WITHHOLD AUTHORITY to vote for all nominees.
2. Approval of amendment to 1991 Stock Option and Performance
Award Plan to increase number of shares authorized.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of amendment to 1991 Stock Option and Performance
Award Plan to allow automatic grants to outside directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Approval of amendment to 1991 Stock Option and Performance
Award Plan to extend the term of the Plan through February
25, 2006.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. Approval of amendment to 1991 Stock Option and Performance
Award Plan to change vesting provisions.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. Approval of amendment to 1991 Stock Option and Performance
Award Plan for purposes of Sections 162(m) and 422 of the
Internal Revenue Code.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
7. Ratification of the Board of Directors' selection of Price
Waterhouse LLP as KCSI's independent accountants for 1996.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Unless authority to vote for any nominee is withheld,
authority to vote cumulatively for such nominee will be
deemed granted, and if other persons are nominated, this
proxy may be voted for less than all the nominees named
above, in the proxy holder's discretion, to elect the
maximum number of management nominees.
<PAGE>
KANSAS CITY SOUTHERN INDUSTRIES, INC.
114 West 11th Street
Kansas City, Missouri 64105-1804
March 25, 1996
Dear ESOP Participant:
Enclosed is your voting instruction card to UMB Bank, N.A.
and Mercantile Bank of Kansas City as Trustees for shares
allocated to your account under the Employee Stock Ownership Plan
(ESOP).
Please do not deliver this card to the Company, as your vote
is confidential. Your card should be returned directly to the
Trustees, UMB Bank, N.A. Securities Transfer Division, P. O. Box
410064, Kansas City, MO 64179-0013, in the enclosed postage-paid
return envelope at your earliest convenience.
If you have questions about the allocation of these shares,
you may call one of the following individuals for further
information:
KCS employee contact: Jack Mock 816-556-0308
DST employee contact: Becky Bremerkamp 816-435-8609 or
Amy Thompson 816-435-8628 or
1-800-438-2320
JANUS employee Greg Fisher 303-336-4062
contact:
Thank you,
/s/ Richard P. Bruening
Vice President, General Counsel &
Corporate Secretary
PLEASE SEE REVERSE SIDE FOR PROPOSALS TO BE VOTED
(Date, sign and return promptly in the prepaid envelope
enclosed.)
(Tear Here)
CONFIDENTIAL VOTING INSTRUCTIONS TO UMB BANK, N.A. AND MERCANTILE
BANK OF KANSAS CITY AS TRUSTEES UNDER THE KANSAS CITY SOUTHERN
INDUSTRIES, INC. EMPLOYEE STOCK OWNERSHIP PLAN
Signature
Date: , 1996
Please sign exactly as name appears.
(Continued on other side)
<PAGE>
(Continued, and to be signed on reverse side)
(Tear Here)
THIS VOTING INSTRUCTION CARD IS SOLICITED BY THE TRUSTEES. I
hereby direct that the voting rights pertaining to shares of
stock of Kansas City Southern Industries, Inc. held by the
Trustees and allocated to my account shall be exercised at the
Annual Meeting of Stockholders to be held on May 2, 1996, or any
adjournment thereof as specified hereon and in their discretion
on all other matters that are properly brought before the Annual
Meeting.
1. Election of two directors: Nominees: James E. Barnes &
Jose F. Serrano
[ ] FOR all nominees except those indicated below:
[ ] WITHHOLD AUTHORITY to vote for all nominees.
2. Approval of amendment to 1991 Stock Option and Performance
Award Plan to increase number of shares authorized.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of amendment to 1991 Stock Option and Performance
Award Plan to allow automatic grants to outside directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Approval of amendment to 1991 Stock Option and Performance
Award Plan to extend the term of the Plan through February
25, 2006.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. Approval of amendment to 1991 Stock Option and Performance
Award Plan to change vesting provisions.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. Approval of amendment to 1991 Stock Option and Performance
Award Plan for purposes of Sections 162(m) and 422 of the
Internal Revenue Code.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
7. Ratification of the Board of Directors' selection of Price
Waterhouse LLP as KCSI's independent accountants for 1996.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
IF NO CHOICE IS SPECIFIED, THE SHARES HELD IN YOUR ESOP ACCOUNT
WILL BE VOTED IN THE SAME PROPORTION AS THE SHARED HELD BY THE
ESOP FOR WHICH THE TRUSTEES RECEIVE VOTING INSTRUCTIONS.
