SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [XX]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[XX] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
KANSAS CITY SOUTHERN INDUSTRIES, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[XX] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1. Title of each class of securities to which transaction
applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] 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:
<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 1, 1997
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, the accompanying enclosed
Proxy, and the accompanying Notice and the 1996 Annual Report,
commenced on or about March 27, 1997.
<PAGE>
KANSAS CITY SOUTHERN INDUSTRIES, INC.
114 WEST 11TH STREET
KANSAS CITY, MISSOURI 64105-1804
March 27, 1997
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., on Thursday, May 1,
1997. 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,
/s/ Paul H. Henson
Chairman of the Board
/s/ 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 1, 1997
___________
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. on Thursday, May 1, 1997, to consider
and vote upon the:
(1) Election of Three Directors;
(2) Approval of a Performance-Based Compensation Plan for the
Chief Executive Officer of Janus Capital Corporation;
(3) Ratification of the Board of Directors' Selection of Price
Waterhouse LLP as KCSI's independent accountants for 1997;
and
(4) 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 3,
1997, are entitled to notice of and to vote at this meeting or any
adjournment thereof.
By Order of the Board of Directors,
/s/ Richard P. Bruening
Vice President, General Counsel
and Corporate Secretary
The date of this Notice is March 27, 1997.
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
VOTING
PRINCIPAL STOCKHOLDERS
STOCK OWNED BENEFICIALLY BY DIRECTORS AND CERTAIN EXECUTIVE
OFFICERS
PROPOSAL 1 - ELECTION OF THREE DIRECTORS
THE BOARD OF DIRECTORS
PROPOSAL 2 - APPROVAL OF A PERFORMANCE-BASED COMPENSATION PLAN
FOR THE CHIEF EXECUTIVE OFFICER OF JANUS CAPITAL
CORPORATION
PROPOSAL 3 - RATIFICATION OF THE BOARD OF DIRECTORS' SELECTION OF
INDEPENDENT ACCOUNTANTS
MANAGEMENT COMPENSATION
TRANSACTIONS WITH MANAGEMENT
STOCKHOLDER PROPOSALS
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
OTHER MATTERS
<PAGE>
GENERAL INFORMATION
This Proxy Statement is being mailed on or about March 27, 1997
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 1,
1997, at 10:00 a.m. and any adjournment thereof (the "Annual
Meeting"). The Notice of Annual Meeting of Stockholders, KCSI's 1996
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) 983-1237. To provide KCSI sufficient time to arrange for
reasonable assistance please submit all requests by April 27, 1997.
KCSI will bear the cost of the Annual Meeting, including the cost
of mailing the proxy materials and any supplemental 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.
VOTING
Stockholders at the Annual Meeting will consider and vote upon:
(1) the election of three directors; (2) Approval of a Performance-
Based Compensation Plan for the Chief Executive Officer of Janus
Capital Corporation; (3) ratification of the Board of Directors'
selection of Price Waterhouse LLP as KCSI's independent accountants
for 1997; and (4) 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 these
matters. Each of these matters has been proposed by the Board of
Directors and none of them is related to or contingent on the other.
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 3, 1997 (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 36,032,136 shares of Common Stock, (excluding 12,370,056
shares held in treasury) for a total of 36,274,306 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. Voting 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) and 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 a quorum of shares of Voting
Stock present at the Annual Meeting that are entitled to vote.
Voting ceases when the chairman of the annual meeting closes the
polls. The votes are counted and certified by three inspectors
appointed by the Board of Directors of KCSI in advance of the Annual
Meeting. 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. 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 stockbroker 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 in most cases 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 the three directors of KCSI
whose names are listed on the related 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 the performance-based
compensation plan for the Chief Executive Officer of Janus Capital
Corporation, FOR ratification of the Board of Directors' selection of
Price Waterhouse LLP as KCSI's independent accountants for 1997; 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 polls for the
Annual Meeting are closed. 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. Stockholders whose shares are held by a
broker will have to contact the broker to determine how to revoke a
proxy solicited through the broker.
DIVIDEND REINVESTMENT PLAN PARTICIPANTS
If a stockholder participates in KCSI's Dividend Reinvestment
Plan (the "DRIP"), the proxy card will represent the number of shares
(including fractional shares) held on behalf of the stockholder in the
DRIP on the record date, as well as shares registered in the
stockholder's name.
EMPLOYEE STOCK OWNERSHIP PLAN PARTICIPANTS
Participants in KCSI's employee stock ownership plan (the "KCSI
ESOP") are provided a separate voting instruction card (accompanying
this Proxy Statement) to instruct the trustee of the KCSI ESOP how to
vote the shares of Common Stock held on behalf of such participant.
The KCSI ESOP trustee is required under the trust agreement to vote
the shares in accordance with the instructions indicated on the voting
instruction card. If the voting instruction card is not returned, the
trustee is required under the applicable trust agreement to vote such
shares, as well as any unallocated shares, in the same proportions as
the shares for which voting instruction cards were received from the
plan participants. The voting instruction card should be returned to
the trustee in the envelope provided and should not be returned to
KCSI. The mailing address of the trustee is UMB Bank, N.A.,
Securities Transfer Division, P.O. Box 410064, Kansas City, Missouri
64179-0013, Attention: Kansas City Southern Industries Employee Stock
Ownership Plan. KCSI ESOP participants who wish to revoke a voting
instruction card will need to contact the trustee and follow its
procedures.
Confidentiality of Voting of KCSI ESOP Participants. Under the
terms of the KCSI ESOP trust agreement, the trustee is required to
establish procedures to ensure that the instructions received from
participants are held in confidence and not divulged, released or
otherwise utilized in a manner that might influence the participants'
free exercise of their voting rights.
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 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>
Percent
Common of
Name and Address Stock<F1> Class
<S> <C> <C>
The Employee Stock Ownership Plan<F2> 3,192,172<F2> 8.4%
UMB Bank, N.A., as trustee 3,194,772<F2> 8.4%
of The Employee Stock
Ownership Plan and other fiduciary
accounts<F2>
Southeastern Asset Management, Inc.<F3> 5,443,600<F3> 14.4%
All Directors and Executive Officers 1,743,692<F4> 4.6%
as a Group (16 Persons)
<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 or other convertible securities that are
exercisable at the Record Date or will become exercisable within 60
days of such date (the "Additional Shares"). Percentage ownership is
based on the number of shares outstanding as of the Record Date plus
the Additional Shares. The holders may disclaim beneficial ownership
of shares included under certain circumstances. Except as noted and
except for shares held by the ESOP, the holders have sole voting and
dispositive power over the shares.
<F2>
Based on information reported in Amendment No. 9 to Schedule 13G,
dated February 13, 1997, jointly filed by UMB Financial Corporation
("UMBFC"), its wholly owned subsidiary UMB Bank, N.A. ("UMB") and The
Employee Stock Ownership Plan (the "ESOP"). UMB is the trustee of the
ESOP. Shares reported as held by UMB include the shares held as
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
trustee in the same proportion as the allocated shares. All shares
have been allocated to participants' accounts. Therefore, UMB and the
ESOP disclaim beneficial ownership of all shares held in the ESOP.
The amount shown for UMB does not include 140,446 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 3,335,218 shares
held by UMB in various capacities. The address for UMBFC, UMB and the
ESOP is 1010 Grand Boulevard, Kansas City, Missouri 64106.
<F3>
Based upon information in Amendment No. 2 to Schedule 13G, dated
January 31, 1997, Southeastern Asset Management, Inc. ("Southeastern")
is a registered investment adviser, 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 Longleaf Partners Fund, an investment
company registered under the Investment Company Act. Mr. O. Mason
Hawkins, the Chairman of the Board and Chief Executive Officer of
Southeastern, disclaims beneficial ownership of the shares. The
address for Southeastern is 6075 Poplar Avenue, Suite 900, Memphis,
Tennessee 38119.
<F4>
Includes 1,053,550 shares which may be acquired through option
exercises and 89,491 shares allocated to the accounts of officers
under the ESOP. Certain directors and executive officers disclaim
beneficial ownership of 58,900 of these shares. 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>
STOCK OWNED BENEFICIALLY BY DIRECTORS
AND CERTAIN EXECUTIVE OFFICERS
The following table sets forth information, as of the Record
Date, concerning the Board of Directors' 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 Thomas H. Bailey, who owns 1,200,000 shares (or approximately
12 percent) of the outstanding common stock of Janus Capital
Corporation. None of the directors or executive officers below owns
any shares of Preferred Stock.
<TABLE>
<CAPTION>
Name and Relationship Common Stock<F1>
<S> <C>
A. Edward Allinson 23,811*<F2>
Director
Thomas H. Bailey 8,819*<F3>
Chairman of the Board, Chief
Executive Officer and President of
Janus Capital Corporation
Paul F. Balser 23,000*<F4>
Director
James E. Barnes 26,000*<F5>
Director
Michael G. Fitt 24,200*<F6>
Director
Michael R. Haverty 24,526*<F7>
Director, Executive Vice President
Paul H. Henson 168,224*<F8>
Chairman of the Board
Joseph D. Monello 100,369*<F9>
Vice President and
Chief Financial Officer
Landon H. Rowland 1,028,014<F10>
Director, President, Chief 2.7%
Executive Officer
Jose F. Serrano 9,000*<F11>
Director
Morton I. Sosland 99,588*<F12>
Director
All Directors and Executive 1,743,692<F13>
Officers as a Group (16 Persons) 4.6%
* 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 or other convertible securities that are
exercisable at the Record Date or will become exercisable within 60
days of such date (the "Additional Shares"). Percentage ownership is
based on the number of shares outstanding as of the Record Date plus
the Additional Shares. The holders may disclaim beneficial ownership
of shares included under certain circumstances. Except as noted and
except for shares held by the ESOP, the holders have sole voting and
dispositive power over the shares.
<F2>
Includes 21,800 shares that may be acquired through option exercises
and 800 shares held in a Keogh Plan.
<F3>
Includes 6,923 shares allocated to his account under the ESOP.
<F4>
Includes 23,000 shares that may be acquired through option exercises.
<F5>
Includes 23,000 shares that may be acquired through option exercises
and 3,000 shares held jointly with his wife.
<F6>
Includes 3,200 shares held in trust and 21,000 shares that may be
acquired through option exercises.
<F7>
Includes 924 shares allocated to his account in the ESOP and 50 shares
held by his minor children.
<F8>
Includes 8,288 shares allocated to his account under the ESOP.
<F9>
Includes 11,008 shares allocated to his account in the ESOP and 71,000
shares that may be acquired through option exercises.
<F10>
Includes 768,000 shares that may be acquired through option exercises,
19,980 shares allocated to his account under the ESOP and 159 shares
in the KCSI Profit Sharing Plan.
<F11>
Includes 9,000 shares that may be acquired through option exercises.
<F12>
Includes 23,000 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 4,000 shares held by his
wife and 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;
37,300 shares held as co-trustee of certain testamentary trusts; 8,000
shares in a charitable foundation of which he is a director.
<F13>
Includes 1,053,550 shares which may be acquired through option
exercises and 89,491 shares allocated to the accounts of officers
under the ESOP. Certain directors and executive officers disclaim
beneficial ownership of 58,900 of these shares. 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>
PROPOSAL 1 - ELECTION OF THREE DIRECTORS
The Board of Directors of KCSI is divided into three classes.
The members of each class serve staggered three year terms of office,
which results in one class standing for election at each annual
meeting of stockholders. The term of office for the directors elected
at the Annual Meeting will expire in 2000 or when their successors are
elected and qualified.
Three persons have been nominated by management for election as
directors. All of these nominees are presently directors of KCSI, all
have indicated that they are willing and able to serve as directors if
elected, and all 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 have
any other eligibility requirements for directors.
As explained further under "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 2000
MICHAEL G. FITT, age 65, has been a director of KCSI since 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. He is now retired.
Employers Reinsurance Corporation is a subsidiary of General Electric
Capital Services, Inc. Mr. Fitt is also a director of DST Systems,
Inc., Kansas City, Missouri and NAC RE Corp., Greenwich, Connecticut.
MICHAEL R. HAVERTY, age 52, 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 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.
MORTON I. SOSLAND, age 71, 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. He has also served as
Chairman of Sosland Publishing Company, Kansas City, Missouri, since
1984. The Sosland Companies are publishers and venture capital
investors. Mr. Sosland is also a director of CompuServe Corporation,
Columbus, Ohio and H & R Block, Inc., Kansas City, Missouri.
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 1996. The Board 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
1996.
DIRECTORS SERVING UNTIL THE ANNUAL MEETING OF STOCKHOLDERS IN 1998
A. EDWARD ALLINSON, age 62, 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. Mr. Allinson is a director of DST
Systems, Inc., Kansas City, Missouri.
PAUL F. BALSER, age 55, has been a director of KCSI since 1990. He
has been a Managing Partner of Generation Partners, L.P., 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 of Centre Partners, L.P., New York, New
York from September 1986 through July 1995. Mr. Balser is also a
director of Carbide/Graphite Group, Inc., Pittsburgh, Pennsylvania and
Scientific Games, Inc., Atlanta, Georgia, as well as a number of
private companies.
PAUL H. HENSON, age 71, has been a director and Chairman of the Board
of KCSI since 1990 and had previously served as a director of KCSI
from 1966 through 1980. Mr. Henson is also a director of Duke Power
Company, Charlotte, North Carolina.
LANDON H. ROWLAND, age 59, 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. 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. Mr. Rowland is also a director of Janus
Capital Corporation, Berger Associates, Inc. and Transportacion
Maritima Mexicana, S.A. de C.V.
DIRECTORS SERVING UNTIL THE ANNUAL MEETING OF STOCKHOLDERS IN 1999
JAMES E. BARNES, age 63, 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 processes, transports, stores, purchases and sells
petroleum and natural gas liquid 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 56, has been a director of KCSI since 1996. He
is 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
ports around the world and has trucking operations in Mexico. TMM and
KCSI jointly own the Texas Mexican Railway Company and Transportacion
Ferroviaria Mexicana, S. de R.L. de C.V.
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. The
committees are organized at the Board's annual meeting immediately
following KCSI's annual meeting of stockholders. Since May 1996,
there were four meetings of the Executive Committee, three meetings of
the Audit Committee, three meetings of the Compensation and
Organization Committee, and no meetings 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 1996.
THE EXECUTIVE COMMITTEE
The Executive Committee consists of KCSI's Chairman of the Board,
its Chief Executive Officer and two 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 direction has not been specifically
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: James E. Barnes,
Paul H. Henson, Landon H. Rowland and Morton I. Sosland.
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 appointment 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: Paul F. Balser, Michael
G. Fitt and Jose F. Serrano.
THE COMPENSATION AND ORGANIZATION COMMITTEE
The Compensation and Organization Committee (the "Compensation
Committee") consists of at least three outside directors (as defined
under applicable federal income tax and securities laws) elected by
the Board to serve one-year terms. The Compensation Committee has the
authority to:
(a) authorize all salaries for certain KCSI and subsidiary
company officers and supervisory employees (other than
officers and supervisory employees of Janus Capital
Corporation);
(b) administer the incentive compensation plans of KCSI and KCSR
and KCSR's subsidiaries in accordance with the terms of
those plans and determines any incentive allowances made to
their officers and staff;
(c) administer 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;
(d) administer KCSI's Profit Sharing Plan and 401(k) Plan and
make recommendations to the Board concerning allocations of
funds under and administer and report such matters to the
Board;
(e) act as KCSI's stock option plan committee and administer
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; and
(f) initiate, review and approve the succession plans and major
organizational changes.
The members of the Compensation and Organization Committee are:
A. Edward Allinson, James E. Barnes and Morton I. Sosland.
The Committee's report on executive compensation is set forth in
the section under "Management Compensation."
COMPENSATION AND ORGANIZATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
Thomas S. Carter, who was a member of the Compensation and
Organization Committee during part of 1996, was an officer of The
Kansas City Southern Railway Company ("KCSR") and the Louisiana &
Arkansas Railway Company, a subsidiary of KCSR, until his retirement
in 1990. Mr. Carter holds limited partnership interests for himself
or members of his 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 and at December 31,
1996 was 41% owned by KCSI and at December 31, 1996 was 41 percent
owned by KCSI). During 1996, a management fee of $10,000 was paid to
NRP Inwood Towers, L.P.
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 reviews financial
plans, major capital investments, long-term strategic plans, and
KCSI's acquisition and divestiture programs and makes 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 or its
subsidiaries do not receive any fees or other compensation for service
on the Board or its committees. No fees were paid during 1996 to any
director or officer of KCSI for service on any board of directors of
any subsidiary of KCSI other than Janus Capital Corporation.
(Although Mr. Rowland serves as a director of Janus Capital
Corporation, he does not accept any fees for such service.) From
January through April 1996, directors, who were not officers or
employees of KCSI or its subsidiaries or affiliates (the "Outside
Directors"), received a total retainer of $7,000. They also receive
$2,000 and expenses for each KCSI Board meeting attended or $1,000 for
each telephonic Board meeting in which they participated. During this
same time, such directors also received $1,000 plus expenses for each
KCSI committee meeting attended (whether in person or by telephone).
Beginning in May 1996, the Outside Directors have been
compensated as follows.
No retainers are paid for Board membership or for service as a
Chair of a committee.
Fees for attendance at a Board meeting are $4,000 per meeting
($2,000 for participation by telephone).
Fees for attendance at a Committee meeting are $2,000 per meeting
($1,000 for participation by telephone). The Chair of the
Committee receives an extra $500 for each Committee meeting.
Options to buy 3,000 shares of KCSI Common Stock will be
automatically granted immediately following each annual meeting
of KCSI's stockholders. In addition, a one-time grant of options
to purchase 6,000 shares of KCSI Common Stock is made when a
Director first joins the Board.
The Directors Retirement Plan was frozen as of May 1, 1996 and
there will be no retirement benefit for new Directors. The
present value of accrued benefits under the Directors Retirement
Plan for those Directors who continued service on the Board
following KCSI's 1996 annual meeting of stockholders was
transferred to such Directors' accounts in the Directors'
Deferred Fee Plan and earn a return based upon a hypothetical
investment in KCSI Common Stock.
Directors of KCSI are (and directors of certain KCSI subsidiaries
were) permitted to defer receipt of directors fees under unfunded
directors' deferred fee plans adopted by the respective Boards 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
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.
PROPOSAL 2 - APPROVAL OF A PERFORMANCE-BASED COMPENSATION PLAN
FOR THE CHIEF EXECUTIVE OFFICER OF JANUS CAPITAL CORPORATION
The KCSI Compensation Committee has approved a performance-based
incentive compensation plan for Thomas H. Bailey, the Chief Executive
Officer of Janus, (the "Incentive Plan") subject to stockholder
approval. The purpose of the Incentive Plan is to give Mr. Bailey the
opportunity to earn total compensation competitive with the market
based on comparative data, prepared by independent compensation
consultants, for investment management and financial services
organizations of similar size to Janus. The Incentive Plan (as well
as other incentive compensation plans that have been implemented at
Janus) is also designed to encourage and reward excellent performance,
as measured by the achievement of performance goals that are in line
with the stockholders' short and long term interests.
An important concern of the KCSI Compensation Committee in
approving the Incentive Plan is to ensure that any compensation paid
under the plan is deductible for federal income tax purposes. Under
Section 162(m) of the Internal Revenue Code, public companies cannot
deduct compensation in excess of $1 million paid to any of the
executive officers named in the company's summary compensation table
under compensation plans adopted after February 1993 unless the
compensation is "performance-based" as defined in Section 162(m).
Section 162(m) generally defines performance-based compensation as
compensation payable solely on account of the satisfaction of
preestablished performance goals determined by a committee of outside
directors, but only if the plan has been approved by the company's
stockholders. KCSI is, therefore, submitting the Incentive Plan for
stockholder approval.
As explained further under "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.
THE INCENTIVE COMPENSATION PLAN
Description. The Incentive Plan would allow Mr. Bailey to earn
incentive compensation in each calendar year payable in cash ranging
from none (if none of the minimum performance goals are reached) up to
125 percent (if all of the maximum performance goals are reached) of
his base salary for that year. If the maximum performance goals are
reached in any one year, total incentive compensation paid to Mr.
Bailey would not exceed $1.25 million for that year. The percentage
of base salary would be determined by whether the Janus attained a
threshold goal and minimum, target or maximum "stretch goals." The
threshold goal is based solely on levels of pre-tax income in
relationship to changes in revenues. The stretch goals are based on
both revenue growth and growth in pre-tax income in relationship to
revenue growth. The stretch goals do not increase Mr. Bailey's
incentive compensation unless the threshold goal is met and Janus
revenues increase. The specific threshold goal and the stretch goals
are determined by the KCSI Compensation and Organization Committee
(the "KCSI Compensation Committee") generally prior to each applicable
year.
Administration. The Incentive Plan is administered by the KCSI
Compensation Committee. If approved by stockholders, the KCSI
Compensation Committee may not vary the terms of the Incentive Plan.
Under the terms of the Incentive Plan as approved by the KCSI
Compensation Committees and in accordance with Section 162(m), Janus
cannot pay any incentive compensation unless and until the KCSI
Compensation Committee certifies in writing that the goals and any
other material conditions were, in fact, satisfied. The Incentive
Plan does not have a date certain at which the Incentive Plan
terminates.
Incentive Plan Benefits. No incentive compensation has been paid
under the Incentive Plan, and KCSI cannot determine the amount of the
awards that will be paid to Mr. Bailey under the Incentive Plan
because the payments are dependent upon the future financial
performance of Janus. Assuming that the Incentive Plan was in effect
in 1996, the following incentive compensation would have been paid to
the following individuals or groups.
<TABLE>
<CAPTION>
NEW PLAN BENEFITS
Name and Position 1996 Incentive Compensation
(assuming plan effective
in 1996)
<S> <C>
Paul H. Henson Not Eligable
Chairman of the Board
Landon H. Rowland Not Eligable
President and Chief Executive Officer
Michael R. Haverty Not Eligable
Executive Vice President
Thomas H. Bailey $731,250*
Chairman of the Board and
Chief Executive Officer of
Janus Capital Corporation
Joseph D. Monello Not Eligable
Vice President and Chief Financial
Officer
Current Executive Officers $731,250
as a Group (only Mr. Bailey
is eligible)
Current Non-Employee Directors Not Eligable
as a Group
All Current Employees including Not Eligable
Non-Executive Officers as a Group
</TABLE>
* Based on 1996 actual base salary.
FEDERAL INCOME TAX CONSEQUENCES
If KCSI stockholders approve the Incentive Plan, KCSI will, upon
accrual of the obligation to pay the compensation, incur a
compensation expense both for financial statement and federal income
tax purposes. If Mr. Bailey earns incentive compensation under the
Incentive Plan, he will recognize ordinary income when he receives the
incentive compensation.
YOUR BOARD RECOMMENDS THAT YOU VOTE
"FOR"
APPROVAL OF THE PERFORMANCE-BASED COMPENSATION PLAN FOR
THE CHIEF EXECUTIVE OFFICER OF JANUS CAPITAL CORPORATION
PROPOSAL 3 - 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 KCSI's independent
accountants to examine the consolidated financial statements of KCSI
for 1997. Price Waterhouse LLP served as KCSI's independent
accountants for 1996. No relationship exists between KCSI and Price
Waterhouse LLP other than that of independent accountant and client.
KCSI has traditionally sought its stockholders' ratification of
the Board of Directors' selection of KCSI's independent accountants
even though KCSI is not legally required to do so. If KCSI's
stockholders ratify the Board of Directors' selection, the Board of
Directors nonetheless may, in their discretion, retain another
independent accounting firm at any time during the year if the Board
of Directors feels that such change would be in the best interest of
KCSI and its stockholders. Alternatively, in the event that this
proposal is not approved by stockholders, the Audit Committee and the
Board will re-evaluate their decision.
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 "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 its most important objective. In support of
this objective, the Board charges the Compensation and Organization
Committee (the "Committee") with the responsibility of designing
compensation packages for KCSI's executives that provide substantial
incentives to increase stockholder value while enabling KCSI to
attract and retain exceptionally qualified executives. So that this
responsibility may be impartially administered, the Board requires
that the Committee consist of directors who are not officers or
employees of KCSI and who are not eligible to participate in any
discretionary part of the compensation plans administered by the
Committee. The Board emphasizes its overall objective by also
relating the outside directors' compensation to stockholder value. To
assist the Committee with its responsibilities, the Committee utilizes
the expertise of independent compensation consultants.
The Committee seeks to align the interests of KCSI executives
with the Board's overall objective through a compensation strategy
that emphasizes long-term stock ownership and closely links executive
compensation with changes in stockholders' value. In designing those
compensation packages, the Committee believes KCSI's compensation
packages should provide executives with market competitive base
salaries and the opportunity to earn additional compensation if
stockholders experience long-term increases in the value of their
stock. The Committee also believes that KCSI's executives should
maintain a significant equity interest in KCSI, but that KCSI should
provide such interest only after KCSI's stockholders have first
experienced an increase in the value of their investment.
Over the past several years, the Committee has been implementing
this strategy by restructuring the compensation packages of KCSI's top
executives (except Janus and Berger) as follows.
Freezing base salaries for three to five years.
Eliminating participation in any annual cash incentive program.
Providing stock-based incentives through awards of:
"Performance" stock options that require, for the recipient to
receive any benefits, sustained price increases in KCSI's common
stock or for the executives to remain with KCSI for an extended
period of time; and
Restricted stock, which is earned only if the executive remains
employed by KCSI for a prescribed period (use of this type of
grant has been limited to a select few executives).
Emphasizing long-term stock ownership through:
An agreement with the Chief Executive that a majority of the net
after-tax value of any stock-based awards will be maintained in
the form of KCSI stock while the executive remains employed by
KCSI; and
The Committee's consideration of the retention of past KCSI
stock-based awards in determining the levels of future stock-
based grants.
In 1992, the Committee began implementing its compensation
strategy by restructuring the compensation packages of three senior
executives, including Mr. Rowland. Base salaries for these three
executives were frozen for five years, participation in the annual
incentive program was eliminated and awards of performance stock
options and restricted stock were made.
In 1995, the Committee further implemented its compensation
strategy by entering into compensation packages modeled after the 1992
compensation packages with the twenty-eight most senior executives of
KCSI and KCSR. This group includes all executive officers (other than
Messrs. Henson and Rowland) identified as important to the long-term
success of KCSI. Base salaries were frozen for three years,
participation in the annual incentive program was eliminated and
performance stock options were awarded. The result is that a
significant portion of these compensation packages is based upon at-
risk components. The next section of this report details the
compensation program for these executives.
COMPENSATION PACKAGE COMPONENTS
Base Salary. The Committee determines the level of base salaries
for all of the executives for whom the Committee has responsibility
based on competitive market practices as indicated in surveys utilized
by the Committee, individual contribution and performance, level of
responsibility, and experience. The Committee did not give any
specific weighing to any of these factors and did not consider KCSI's
corporate performance in setting base salary levels.
The Committee targeted the 75th percentile of the observed
competitive market practice in setting base salary levels for the
executives whose compensation packages were restructured at the end of
1995, but adjusted the salaries in light of the factors mentioned
above. The Committee chose such levels based on the fact that for
three years base salaries for these executives would be frozen, such
executives would not participate in any cash-based annual incentive
plans and such executives had a higher risk (because of the use of the
stock based incentives) of not being compensated than they would if
they had participated in the annual incentive program.
The compensation surveys used to determine competitive market pay
range focused on industrial companies, including both transportation
and non-transportation companies, having the same level of revenues as
KCSI and excluded companies in dissimilar industries and financial
services. Financial services businesses were excluded because the
executives were primarily responsible for the other businesses of
KCSI. These compensation surveys include some of the companies
comprising the Dow Jones Transportation Average (the peer group used
in the stock performance graph below), as well as other companies in
other industries. The Committee believes using a broader sample of
companies better represents the market for executives than a more
narrow sample of transportation companies. Pay data from these
surveys are adjusted through regression analysis to estimate
compensation levels at companies similar in size to KCSI.
Stock Compensation. The key component of the Committee's
strategy is to make stock-based incentives a significant portion of
the executives' total compensation package, primarily through
performance stock options (grants of restricted stock were made to a
limited number of KCSI's senior executives in 1992 and 1993 and have
not been awarded since). By using primarily performance stock
options, the Committee seeks to ensure that the executives will be
compensated only after KCSI's stockholders have experienced a
sustained increase in their investment and that any such compensation
is linked directly to such increases in KCSI's stock price or if the
executive remains with KCSI for an extended period.
To determine how many options to grant in connection with the
1995 restructured compensation packages, the Committee first
considered each individual's targeted total compensation over the
three-year period of the employment agreement, absent the
restructuring, using the compensation surveys mentioned above and
estimated potential earnings under KCSI's annual incentive
compensation plan. Targeted total incentive compensation was
approximately the total of the 75th percentile of the range of
potential short term incentives foregone plus median long-term
incentive compensation shown in the observed market practices. These
amounts were then adjusted by the Committee to take into account the
individual's contribution and performance, level of responsibility,
experience and the extent to which previously awarded stock incentives
have been retained in the form of KCSI stock. The Committee did not
give any specific weighing to any of these factors and did not
consider KCSI's corporate performance in determining total target
compensation levels. An option valuation model was utilized to
calculate the risk-adjusted value of each performance stock option to
determine the number of options to be awarded. Each executive's total
option grant value is intended to cover the entire period of the
compensation package and to approximate the value of a competitive
median long-term incentive opportunity plus the value of the foregone
annual cash incentive opportunity.
In addition, the Committee structured these options so that there
had to be substantial appreciation in the market price of KCSI Common
Stock in order for 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. The performance
stock options were structured 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
executive 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, the executives would not be
rewarded unless the stockholders of KCSI first received an above
average market return.
The management committee of Janus Capital Corporation ("Janus"),
with the aid of an independent compensation consultant, set Mr.
Bailey's base salary and incentive compensation for 1996. That
compensation package was limited to a total of $1 million in order to
maintain the deductibility for federal income tax consequences. The
Board of Directors of Janus ratified the salary determinations of the
Janus management committee.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Rowland's compensation package was one of the first to be
restructured to link a significant portion of his total compensation
to changes in stockholder value. Effective January 1992, Mr. Rowland
entered into an employment agreement with KCSI that fixed his annual
base salary for five years at $500,000. This level was, at the time,
between the 50th and 75th percentile levels of the range of base
salaries indicated on the surveys utilized by the Committee in 1992.
Mr. Rowland's base salary was not adjusted since it was established in
1992 until the Company entered into a new employment agreement with
him effective in January 1997.
As part of Mr. Rowland's 1992 compensation package, he was given
incentives to increase stockholder value through a grant of
performance stock options and incentives to remain with KCSI through
grants of restricted stock. The Committee followed the same approach
discussed above in connection with the twenty-eight most senior
executives of KCSI and KCSR in determining the amount and structuring
of the performance stock awarded Mr. Rowland. In addition, Mr.
Rowland has agreed to retain ownership in himself or the members of
his immediate family of at least a majority of all restricted stock
and stock acquired through the exercise of options awarded under the
agreement (less shares forfeited or used to pay the option exercise
price or taxes). Mr. Rowland's prior compensation is discussed in
more detail in the Committee's earlier reports and stockholders should
refer to those reports for further information.
Mr. Rowland's 1992 employment agreement terminated in January
1997. During 1996, the Committee negotiated a new employment
agreement with Mr. Rowland, which was effective January 1, 1997.
Under Mr. Rowland's 1997 employment agreement, he receives a
fixed annual base salary of $750,000, which may not be increased prior
to January 1, 2000. In addition, Mr. Rowland is not entitled to
participate in any KCSI annual incentive compensation plans for the
years 1997, 1998 and 1999, but continues to participate in other
benefit plans or programs of KCSI generally available to executive
employees.
This compensation package is based upon the same compensation
strategy, and utilizes compensation surveys of the same types of
companies, used by the Committee for the other twenty-eight executives
of KCSI and KCSR discussed above. The Committee set Mr. Rowland's new
base salary in the upper quartile of the observed base salary ranges
indicated in the surveys utilized. The Committee set his salary at
that level in part because he already has a significant level of
equity interest in KCSI, which based upon the surveys utilized is
greater than a vast majority of Mr. Rowland's peers. The Committee
also considered Mr. Rowland's agreement in his new employment
agreement that if his employment with KCSI is terminated, he would not
be involved with any business that competes with KCSI or any of its
subsidiaries. The Committee did not give special weight to any of the
factors considered and did not consider the financial performance of
KCSI or its subsidiaries.
Additionally, although Mr. Rowland has a significant level of
equity interest in KCSI, and as a result the Committee has achieved
its original stock ownership goals for Mr. Rowland, the Committee
wants to continue to increase his equity interest in KCSI consistent
with the Committee's compensation strategy. Mr. Rowland was,
therefore, also granted 153,000 performance stock options in
connection with this new compensation package. The number of such
options and their structure (except as indicated below) was determined
using the same methods used for the twenty-eight other executives of
KCSI and KCSR discussed above. The Committee varied the structure of
Mr. Rowland's performance options, however, by setting the target
stock prices (at which point a portion of the options become
exercisable) using an assumed percentage rate of increase in the
market price of KCSI Common Stock that was higher than the rate used
to calculate the target prices for the performance options granted to
the other twenty-eight executives of KCSI and KCSR. The grant is
intended to cover the three year period during which Mr. Rowland does
not participate in any KCSI annual incentive compensation plan and is
designed to result in total compensation between the median and 75th
percent level of the range of total compensation indicated in the
surveys.
Consistent with the Committee's overall goal of maintaining Mr.
Rowland's equity interest in KCSI, Mr. Rowland has also agreed in his
1997 employment agreement that while he is employed by KCSI he or
members of his immediate family will retain ownership of at least a
majority of the shares of the restricted stock awarded in connection
with his 1992 employment agreement and shares of stock acquired upon
exercise of stock options granted in connection with both his 1992 and
1997 employment agreements (other than shares transferred to KCSI to
pay the exercise price of stock options or used to satisfy withholding
tax requirements in connection with such awards).
DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code limits the deduction
for federal income tax purposes of compensation in excess of $1
million dollars paid by publicly held corporations to any of the
executive officers listed in the summary compensation table unless it
is "performance-based" or arises from a plan or agreement in effect on
or prior to February 17, 1993 that has not been materially modified.
The Committee intends to qualify all compensation expense as
deductible for federal income tax purposes. Until recently, the
compensation packages of the named officers (other than Mr. Bailey)
were comprised of base salary, cash incentive compensation and stock
compensation, and the highest total base salary and incentive
compensation to be paid under those arrangements was within the $1
million limit. KCSI believes it has taken all steps necessary,
including obtaining stockholder approval, so that any compensation
expense that KCSI may incur as a result of awards under its stock
option plans qualify as performance-based compensation for purposes of
Section 162(m) so that any portion of this component of the executive
compensation packages will be deductible for federal income tax
purposes.
Mr. Bailey's 1997 compensation package has the potential to
result in total compensation in excess of the $1 million limit of
Section 162(m). KCSI is, therefore, taking the necessary steps,
including requesting stockholder approval of his incentive
compensation plan in this proxy statement (see proposal 2), to ensure
that any such compensation will be deductible for federal income tax
purposes.
This report was presented to and approved by the Board of Directors.
The Compensation and Organization Committee.
A. Edward Allinson
James E. Barnes, Chairman
Morton I. Sosland
STOCK PERFORMANCE GRAPH
The following graph shows the changes in value over the five
years ending December 31, 1996 of an assumed investment of $100 in:
(i) KCSI's Common Stock; (ii) the stocks that comprise the Dow Jones
Transportation Average Index(1); and (iii) the stocks that comprise
the S&P 500 Index(2). The table following the graph shows the value
of those investments as of December 31 of each of 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.
KANSAS CITY SOUTHERN INDUSTRIES, INC.
RELATIVE MARKET PERFORMANCE
TOTAL RETURN 1992 - 1996
[GRAPH INSERTED HERE IN PAPER FORMAT]
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Year Ended
December 31, 1991 1992 1993 1994 1995 1996
KCSI Total Return $100 $166 $352 $212 $317 $315
Dow Jones Transportation
Average Total Return $100 $108 $133 $112 $156 $179
S&P 500 Index Total Return $100 $108 $118 $120 $165 $203
<FN>
<FN1>
The Dow Jones Transportation Average is an index prepared by Dow Jones
& Co., Inc., an independent company.
<FN2>
The S&P 500 is an index prepared by Standard and Poor's Corporation,
an independent company. The S&P 500 Index reflects the change in
weighted average market value for 500 companies whose shares are
traded on the New York Stock Exchange, American Stock Exchange and in
the over the counter market. Information concerning Standard and
Poor's Corporation and the S&P 500 Index is available on the Internet
at www.stockinfo.standardpoor.com.
</FN>
</TABLE>
SUMMARY COMPENSATION TABLE
The Summary Compensation table shows certain information
concerning the compensation paid by KCSI to the Chief Executive
Officer of KCSI and certain of the most highly compensated executive
officers during 1996 (based upon the total salary and bonus paid
during 1996).
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
Other All
Name Annual Securities Other
and Compen- Underlying Compen-
Principal Salary Bonus<F1> sation Options/ sation
Position Year ($) ($) ($) SARs (#) ($)
<S> <C> <C> <C> <C> <C> <C>
Paul H. Henson 1996 260,004 --- --- --- $ 25,997<F2>
Chairman of the 1995 260,004 --- --- --- $ 45,988
Board 1994 260,004 --- --- --- $ 26,108
Landon H. 1996 500,004 --- 52,252<F3> 153,000 $ 88,816<F4>
Rowland 1995 500,004 --- --- --- $202,998
President 1994 500,004 --- --- --- $ 81,842
and Chief
Executive Officer
Michael R. 1996 500,004 --- --- 45,000 $ 87,497<F6>
Haverty 1995<F5> 310,486<F5> --- --- 250,000 $112,142
Executive Vice
President
Thomas H. Bailey 1996 585,000<F7> 400,000 --- --- $ 14,997<F8>
Chairman of the 1995 590,000<F7> --- --- --- $ 13,994
Board, Chief 1994 553,750<F7> --- --- --- $ 22,284
Executive Officer
of Janus Capital
Corporation
Joseph D. Monello 1996 250,008 --- --- --- $ 43,747<F9>
Vice President 1995 198,900 198,900 --- 105,000 $ 32,820
and Chief 1994 187,008 93,504 --- 10,000 $ 26,294
Financial Officer
<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 1996 is comprised of: (i) a
contribution to his account under the ESOP of $5,997; (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 $11,000; (iii) a contribution to
his account under KCSI's 401(k) plan of $4,500; and (iv) a contribution to
his account under KCSI's profit sharing plan of $4,500. As of December 31,
1996, Mr. Henson held no shares of restricted stock.
<F3>
Premiums on disability insurance policy.
<F4>
All other compensation for Mr. Rowland for 1996 is comprised of: (i)
contributions to his account under the ESOP of $5,997; (ii) an amount
estimated to be credited to his account under the Executive Plan of $72,500;
(iii) interest on deferred director's fees of $1,319; (iv) a contribution to
his account under KCSI's 401(k) plan of $4,500; and (v) a contribution to
his account under KCSI's profit sharing plan of $4,500. As of December 31,
1996, Mr. Rowland held 8,000 shares of restricted stock, which shares had a
market value at that time of $359,500.
<F5>
Mr. Haverty has been employed by KCSI since May 1995.
<F6>
All other compensation for Mr. Haverty for 1996 is comprised of: (i) a
contribution to his account under the ESOP of $5,997; (ii) an amount
estimated to be credited to his account under the Executive Plan of $72,500;
(iii) a contribution to his account under KCSI's 401(k) plan of $4,500; and
(iv) a contribution to his account under KCSI's profit sharing plan of
$4,500. As of December 31, 1996, Mr. Haverty held no shares of restricted
stock.
<F7>
Includes directors' fees for 1994, 1995 and 1996 of $6,250, $6,250 and
$7,750, respectively, paid to Mr. Bailey in his capacity as director of
Janus Capital Corporation and $40,000, $49,000 and $65,000 for the years
1994, 1995 and 1996 for fees in his capacity as a director of the Janus and
Aspen Funds.
<F8>
All other compensation for Mr. Bailey for 1996 is comprised of: (i) a
contribution to his account under the ESOP of $5,997; (ii) a contribution to
his account under KCSI's 401(k) plan of $4,500; and (iii) a contribution to
his account under KCSI's profit sharing plan of $4,500. As of December 31,
1996, Mr. Bailey held no shares of restricted stock.
<F9>
All other compensation for Mr. Monello for 1996 is comprised of: (i) a
contribution to his account under the ESOP of $5,997; (ii) an amount
estimated to be credited to his account under the Executive Plan of $28,750;
(iii) a contribution to his account under KCSI's 401(k) plan of $4,500; and
(iv) a contribution to his account under KCSI's profit sharing plan of
$4,500. As of December 31, 1996, Mr. Monello held 1,000 shares of
restricted stock, which shares had a market value at that time of
$44,937.50.
</FN>
</TABLE>
FISCAL YEAR 1996 OPTION GRANTS TABLE
The following table sets forth information with respect to the options
granted by KCSI during 1996 to KCSI's Executive Officers named in the
Summary Compensation Table above.
<TABLE>
<CAPTION>
% of
Total
Number of Options/ Exercise
Securities SARs or Base
Underlying Granted to Price Grant
Options/ Employees (per Date
SARs in Fiscal share)<F3> Expiration Value<F4>
Name Granted(#)<F1> Year<F2> ($) Date<F1> ($)
<S> <C> <C> <C> <C> <C>
Paul H. 0 N/A N/A N/A N/A
Henson
Landon H. 153,000 52.5% $49.6875 11/13/2006 $1,945,000
Rowland
Michael R. 45,000 15.4% $43.1875 1/24/2006 $ 493,000
Haverty
Thomas H. 0 N/A N/A N/A N/A
Bailey
Joseph D. 0 N/A N/A N/A N/A
Monello
<FN>
<F1>
The options granted Messrs. Rowland and Haverty are non-qualified. These
options become exercisable in installments when the stock price of KCSI's
common stock reaches certain specified threshold levels and remains at or
above such levels for 30 consecutive trading days as follows:
Options Exercisable
Threshold $55 $60 $65 $72.50 $75 $85
Stock Price
Haverty 15,000 15,000 15,000
Rowland 51,000 51,000 51,000
Once exercisable, the options are exercisable for a period ending ten years
after the date of grant of the option subject to earlier termination as
provided in the agreement. Alternatively, if Mr. Rowland remains an
employee of KCSI through December 31, 1999, and Mr. Haverty through December
31, 1998, then all the options not then exercisable become exercisable on
January 1 of the following year for a period of 30 calendar days and then
expire. Granted in tandem with these 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 may become exercisable (if so determined by KCSI's compensation
committee) 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>
Options granted to eligible employees, excluding non-employee directors, in
1996 covered a total of 291,390 shares.
<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 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 valuation models require assumptions about the future movement
of the underlying stock's price. The following assumptions were made for
purposes of calculating Grant Date Value for the options that expire on
November 13, 2006: market price of stock $49.6875; exercise price of the
options $49.6875; stock volatility* 30.40%; annualized risk-free interest
rate 5.80%; option term (in years) 3; stock's dividend yield** 0.81%; and
for the options that expire on January 24, 2006: market price of stock
$43.1875; exercise price of the options $43.1875; stock volatility* 31.58%;
annualized risk-free interest rate 5.27%; option term (in years) 3; stock's
dividend yield** 0.93%. (*Stock volatility is based on three-year monthly
data. **Dividend yield is calculated by annualizing the most recent
dividend paid and dividing by the market price of stock on the date of
grant.) The real value of options granted any option holder, including
those shown in this table, depends upon the actual performance of KCSI's
common stock during the applicable period and upon when the options are
exercised and the underlying securities are sold.
</FN>
</TABLE>
<PAGE>
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
The following table sets forth information with respect to the
aggregate option exercises during 1996 by the named Executive Officers and
the number and value of options held by such officers as of December 31,
1996 (the last trading day of the year).
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS/SARs
OPTIONS/SARs AT FY-END
AT FY-END ($)
(#)
Shares
Acquired
on Value
Exercise Realized<F1> Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable<F1>
<S> <C> <C> <C> <C>
Paul H. Henson -0- N/A -0-/-0- N/A
Landon H. Rowland -0- N/A 768,000/153,000 $24,224,368/-0-
Michael R. Haverty -0- N/A -0-/295,000 -0-/$741,250
Thomas H. Bailey -0- N/A -0-/-0- N/A
Joseph D. Monello -0- N/A 71,000/100,000 $1,571,028/-0-
<FN>
<F1>
<F1>
The dollar value in columns (c) and (e) is calculated by determining the
difference between the fair market value of the securities underlying the
options and the exercise price of the options on December 31, 1996 (the last
trading day of 1996), 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, 1997, which provides for Mr. Rowland's
continued employment as President and Chief Executive Officer of KCSI.
The Employment Agreement provides that Mr. Rowland is to serve at
the pleasure of KCSI's Board of Directors and does not contain a fixed
term of employment. Pursuant to the Employment Agreement, Mr. Rowland
receives a fixed annual base salary of $750,000, which is not to be
increased prior to January 1, 2000 and is not to be reduced except by
mutual agreement of KCSI and Mr. Rowland or except as part of a
general salary reduction program applicable to all officers of KCSI.
Mr. Rowland is not entitled to participate in any KCSI incentive
compensation plan for the years 1997, 1998 and 1999, 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. Under the Employment Agreement 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 (24) months of
severance pay at an annual rate equal to Mr. Rowland's base salary and
for certain health and life insurance benefits in the event of the
termination of his employment without cause, other than in connection
with a change of control or a change in ownership of KCSI (as defined
in the Employment Agreement), unless such benefits are provided by
another employer. In addition, in the year in which such a
termination occurs, Mr. Rowland will remain eligible to receive
benefits under KCSI's Incentive Compensation Plan, Executive Plan,
Profit Sharing Plan, Employee Stock Ownership Plan and Section 401(k)
plan, in accordance with the provisions of such plans.
As part of the Employment Agreement, Mr. Rowland has agreed not
to use or disclose any KCSI trade secret (as defined in the Employment
Agreement) after any termination of his employment and not to engage
in, or manage, a business in competition with any business conducted
by KCSI or its subsidiaries, in any country or jurisdiction in which
KCSI or any of its subsidiaries conduct business, for a period of
three years following Mr. Rowland's resignation or termination of his
employment for cause or due to his disability.
During the period of his employment under the Employment
Agreement, 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 (i) KCSI Common Stock ("Restricted Stock") awarded to Mr.
Rowland in connection with his previous employment agreement dated
January 1, 1992 and (ii) shares of KCSI stock acquired upon exercise
of stock options granted on or after December 12, 1991 (other than
shares transferred to KCSI to pay the purchase price upon the exercise
of stock options 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, as well as
all benefit plans made generally available to executives of his level
or to the employees of KCSI generally, and be entitled to exercise
immediately all outstanding stock options. 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.
In the event that KCSI terminates Mr. Rowland's employment other
than for cause within three years after a change of ownership of KCSI
(as defined in the Employment Agreement) and does not offer him
"similar employment" (as defined in the Employment Agreement) or
terminates such similar employment other than for cause within three
years after a change of ownership, the Employment Agreement provides
for up to twelve months of severance pay at an annual rate equal to
Mr. Rowland's base salary and for certain health and life insurance
benefits. In addition, he would be entitled to immediately exercise
all outstanding stock options and, in the year in which such a
termination occurs, Mr. Rowland would be eligible to receive benefits
under KCSI's Incentive Compensation Plan, Executive Plan, Profit
Sharing Plan, Employee Stock Ownership Plan and Section 401(k) plan,
in accordance with the provisions of such plans. Mr. Rowland is also
permitted to resign employment after a change of ownership if the
duties or the base salary of his employment have been altered from his
previous duties or base salary at the change of ownership, and to
receive the same payments and benefits as if his employment had been
terminated by KCSI.
MESSRS. HAVERTY AND MONELLO. KCSR and KCSI 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 plan 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 1,000 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
officer does 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 executive is 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. 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, 1996.
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, 1996, approximately 1,576 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 trust agreement, a trust fund has been
established to hold contributions thereto and the proceeds from
investments for the benefit of ESOP participants. 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, 1996, the ESOP held 3,192,172 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, 1996, that for purposes of
the ESOP are allocated to participants' accounts as of December 31,
1996. 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.
KCSI PROFIT SHARING PLAN
The Profit Sharing Plan is a qualified, non-contributory, defined
contribution plan. As of January 1, 1996, employees of KCSI and
certain of its subsidiaries who have met certain standards as to hours
of service are eligible to receive allocations under the plan.
Contributions to the plan are made at the discretion of the KCSI Board
of Directors in amounts not to exceed the maximum allowable deduction
for federal income tax purposes and certain allocation limits under
the Internal Revenue Code of 1986, as amended (the "Code"). No
minimum contribution is required. Subject to Code maximum allocations
limitations, each participant is allocated the same percentage of the
total contribution as the participant's compensation bears to the
total compensation of all participants. 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 participants were entitled to receive under such plans
(assuming, with respect to KCSI's 401(k) Plan, that the participant
was entitled to receive the maximum matching contribution). For
purposes of the Executive Plan, compensation includes 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 and Balser, who are directors of KCSI, hold
limited partnership interests in Elgin Investors, L.P. ("Elgin"),
Trails Investors, L.P. ("Trails") and other limited partnerships 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 1996, a management fee of
$25,000 was paid to NRP by Elgin, respectively. NRP and DST Realty,
Inc. (a DST subsidiary) have advanced funds to Trails. At December
31, 1996, Trails was indebted to NRP and DST Realty, Inc., in the
amount of $1,211,660. During 1996, in payment of that indebtedness,
NRP received $72,000, including $52,699 of interest, and DST Realty,
Inc. accrued $27,156 of interest.
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 a 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.
1998 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 28, 1997.
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.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires KCSI's directors and executive officers, and other 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 their ownership of such stock, and the changes therein, with the
Securities and Exchange Commission, the New York Stock Exchange and
KCSI (the "Section 16 Reports"). In May of 1996, the abolition of
KCSI's Directors' Retirement Plan resulted in a transfer of accounts
thereunder to the outside directors' deferred fee accounts. Later in
the year, management was informed by outside counsel that such event
was reportable as constituting grants of stock appreciation rights.
Amended Section 16 Reports were filed by each of Messrs. Allinson,
Balser, Barnes, Fitt and Sosland, which were late reports of such
grants. Based solely on the review of the Section 16 Reports
furnished to KCSI by Reporting Persons, and written representations
relating thereto, there were no other late Section 16 Reports by the
Reporting Persons.
OTHER MATTERS
The Board of Directors know of no other matters that are expected
to be presented for consideration at the Annual Meeting. KCSI's
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 more than 90 and no less than 45 days
before an 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 judgment.
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
/s/ Richard P. Bruening
Vice President, General Counsel
and Corporate Secretary
Kansas City, Missouri
March 27, 1997.
KCSI's Annual Report accompanying this proxy includes KCSI's
Annual Report on Form 10-K for the year ended December 31, 1996
(without exhibits) as filed with the Securities and Exchange
Commission (the "SEC"). The Annual Report on Form 10-K includes a
list of all exhibits thereto. KCSI will furnish copies of such
exhibits upon written request therefor and payment of KCSI's
reasonable expenses in furnishing such exhibits. Each such request
must set forth a good faith representation that, as of the Record
Date, the person making such request was a beneficial owner of Voting
Stock entitled to vote at the Annual Meeting. Such written request
should be directed to the Corporate Secretary of KCSI, 114 West 11th
Street, Kansas City, Missouri 64105-1804. The Annual Report on Form
10-K for the year ended December 31, 1996 with exhibits, as well as
other filings by KCSI with the SEC, are also available through the
SEC's Internet site at www.sec.gov.
<PAGE>
APPENDIX A
GRAPHIC AND IMAGE MATERIAL
IN
PROXY STATEMENT
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 placed in the proxy statement next to the
discussion of the director's principal occupations in the section
entitled "PROPOSAL (1) - ELECTION OF THREE 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 B
FORM OF PROXIES
KANSAS CITY SOUTHERN INDUSTRIES, INC.
114 WEST 11TH STREET
KANSAS CITY, MISSOURI 64105-1804
March 27, 1997
Dear Stockholder:
You are cordially invited to join us at the 1997 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., on Thursday, May 1,
1997. 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,
/s/ Paul H. Hanson
Chairman of the Board
/s/ 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
27, 1997, receipt of which is hereby acknowledged.
Signature Date , 1997
Signature Date , 1997
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:
[ ] Will attend [ ] Will not attend
(Continued on other side)
(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 Meting of
Stockholders to be held on May 1, 1997, 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 AND 3.
1. Election of three directors: Nominees: Michael G. Fitt, Michael
R. Haverty and Morton I. Sosland
[ ] FOR all nominees except those indicated below:
[ ] WITHHOLD AUTHORITY to vote for all nominees.
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.
2. Approval of a Performance-Based Compensation Plan for the Chief
Executive Officer of Janus Capital Corporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Ratification of the Board of Directors' selection of Price
Waterhouse LLP as KCSI's independent accountants for 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE>
KANSAS CITY SOUTHERN INDUSTRIES, INC.
114 WEST 11TH STREET
KANSAS CITY, MISSOURI 64105-1804
March 27, 1997
Dear ESOP Participant:
Enclosed is your voting instruction card to UMB Bank, N.A. as
Trustee 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 Trustee,
UMB Bank, N.A., Securities Transfer Division, P.O. Box 410064, Kansas
City, Missouri 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 816-983-1308
JANUS employee contact: Greg Fisher 303-336-4062
DST employee contact: Becky Bremerkamp 816-435-8609 or
Amy Thompson 816-435-8628 or
800-438-2320
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. AS TRUSTEE UNDER THE
KANSAS CITY SOUTHERN INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
Signature:
Date: , 1997
PLEASE SIGN EXACTLY AS NAME APPEARS.
(Continued on other side)
(Continued, and to be signed on reverse side)
(Tear Here)
THIS VOTING INSTRUCTION CARD IS SOLICITED BY THE TRUSTEE. I hereby
direct that the voting rights pertaining to shares of stock of Kansas
City Southern Industries, Inc. held by the Trustee and allocated to my
account shall be exercised at the Annual Meeting of Stockholders to be
held on May 1, 1997, 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 three directors: Nominees: Michael G. Fitt, Michael
R. Haverty and Morton I. Sosland
[ ] FOR all nominees except those indicated below:
[ ] WITHHOLD AUTHORITY to vote for all nominees.
2. Approval of a Performance-Based Compensation Plan for the Chief
Executive Officer of Janus Capital Corporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Ratification of the Board of Directors' selection of Price
Waterhouse LLP as KCSI's independent accountants for 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
IF NO CHOICE IS SPECIFIED, THE SHARES HELD IN YOUR ESOP ACCOUNT WILL
BE VOTED IN THE SAME PROPORTION AS THE SHARES HELD BY THE ESOP FOR
WHICH THE TRUSTEE RECEIVES VOTING INSTRUCTIONS.
<PAGE>
KANSAS CITY SOUTHERN INDUSTRIES, INC.
114 WEST 11TH STREET
KANSAS CITY, MISSOURI 64105-1804
March 27, 1997
Dear KCSI Profit Sharing Plan Participant With Rollover Account
Containing KCSI Shares:
Enclosed is your voting instruction card to UMB Bank, N.A., as
Trustee for shares allocated to your profit sharing plan account as a
rollover contribution.
Please do not deliver this card to the Company, as your vote is
confidential. Your card should be returned directly to the Trustee,
UMB Bank, N.A., Securities Transfer Division, P.O. Box 410064, Kansas
City, Missouri 64179-0013, in the enclosed postage-paid return
envelope at your earliest convenience.
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.
AS TRUSTEE UNDER THE KANSAS CITY SOUTHERN INDUSTRIES, INC.
PROFIT SHARING PLAN
See other side for instruction and other information.
Signature: Date: ,1997
Please Sign Exactly As Name Appears.
(Continued on other side.)
(Continued, and to be signed on reverse side)
(Tear Here)
THIS VOTING INSTRUCTION CARD IS SOLICITED BY THE TRUSTEE. I hereby
direct that the voting rights pertaining to shares of stock of Kansas
City Southern Industries, Inc. held by the Trustee and allocated to my
account shall be exercised at the Annual Meeting of Stockholders to be
held on May 1, 1997, or any adjournment thereof as specified hereon
and in their discretion on all other matters that are properly brought
before the Annual Meeting. IF NO CHOICE IS SPECIFIED, THIS VOTING
INSTRUCTION CARD WILL BE VOTED "FOR" THE NOMINEES NAMED HEREON AND
"FOR" PROPOSALS 2 AND 3.
1. Election of three directors: Nominees: Michael G. Fitt, Michael
R. Haverty and Morton I. Sosland
[ ] FOR all nominees except those indicated below:
[ ] WITHHOLD AUTHORITY to vote for all nominees.
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 VOTER INSTRUCTION CARD MAY
BE VOTED FOR LESS THAN ALL OF THE NOMINEES NAMED ABOVE, IN THE
TRUSTEE'S DISCRETION, TO ELECT THE MAXIMUM NUMBER OF MANAGEMENT
NOMINEES.
2. Approval of a Performance-Based Compensation Plan for the Chief
Executive Officer of Janus Capital Corporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Ratification of the Board of Directors' selection of Price
Waterhouse LLP as KCSI's independent accountants for 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
