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)
Not Applicable
(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)(1) 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, April 30, 1998
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 1997 Annual
Report, commenced on or about March 27, 1998.
<PAGE>
KANSAS CITY SOUTHERN INDUSTRIES, INC.
114 West 11th Street
Kansas City, Missouri 64105-1804
March 27, 1998
TO OUR STOCKHOLDERS:
You are cordially invited to attend the Annual Meeting of
Stockholders of Kansas City Southern Industries, Inc., at the Gem
Theater, 1601 East 18th Street, Kansas City, Missouri, at 10:00
a.m., on Thursday, April 30, 1998. 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 Annual 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/ Landon H. Rowland
Chairman of the Board, 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
----------------
The Annual Meeting of the Stockholders of Kansas City
Southern Industries, Inc., a Delaware corporation ("KCSI"), will
be held at the Gem Theater, 1601 East 18th Street, Kansas City,
Missouri, at 10:00 a.m. on Thursday, April 30, 1998, to consider
and vote upon:
(1) Election of Four Directors;
(2) Approval of the Berger Associates, Inc. Stock Option
Plan;
(3) Approval of a Performance-Based Incentive Compensation
Plan for the Chief Executive Officer of Janus Capital
Corporation;
(4) Ratification of the Board of Directors' Selection of
Price Waterhouse LLP as KCSI's independent accountants
for 1998; and
(5) Such other matters as may properly come
before the Annual Meeting or any adjournment
thereof.
Only stockholders of record at the close of business on
March 9, 1998, are entitled to notice of and to vote at this
meeting or any adjournment thereof.
By Order of the Board of Directors,
Richard P. Bruening
Vice President, General Counsel
and Corporate Secretary
The date of this Notice is March 27, 1998.
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 THIS NOTICE AND 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 AND STOCK OWNED BENEFICIALLY
BY DIRECTORS AND CERTAIN EXECUTIVE OFFICERS . . . . . . . .
PROPOSAL 1 - ELECTION OF FOUR DIRECTORS . . . . . . . . . .
THE BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . .
PROPOSAL 2 - APPROVAL OF THE BERGER ASSOCIATES, INC.
STOCK OPTION PLAN . . . . . . . . . . . . . . . . . . . . .
PROPOSAL 3 - APPROVAL OF A PERFORMANCE-BASED INCENTIVE
COMPENSATION PLAN FOR THE CHIEF EXECUTIVE OFFICER OF
JANUS CAPITAL CORPORATION . . . . . . . . . . . . . . . . .
PROPOSAL 4 - RATIFICATION OF THE BOARD OF DIRECTORS'
SELECTION OF INDEPENDENT ACCOUNTANTS . . . . . . . . . . . .
MANAGEMENT COMPENSATION . . . . . . . . . . . . . . . . . .
STOCKHOLDER PROPOSALS . . . . . . . . . . . . . . . . . . .
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . .
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . .
APPENDIX I . . . . . . . . . . . . . . . . . . . . . . . . .
APPENDIX II . . . . . . . . . . . . . . . . . . . . . . . .
APPENDIX III . . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
GENERAL INFORMATION
Kansas City Southern Industries, Inc., a Delaware
corporation ("KCSI"), is mailing this Proxy Statement on or about
March 27, 1998 to its stockholders of record on March 9, 1998 in
connection with KCSI's Board of Directors' solicitation of
proxies for use at the 1998 Annual Meeting of Stockholders and
any adjournment thereof (the "Annual Meeting"). The Annual
Meeting will be held at the Gem Theater, 1601 East 18th Street,
Kansas City, Missouri, on Thursday, April 30, 1998 at 10:00 a.m.
The Notice of Annual Meeting of Stockholders, KCSI's 1997 Annual
Report to Stockholders (the "Annual Report"), and the proxy card
accompany this Proxy Statement.
Only KCSI stockholders or their proxies and guests of KCSI
may attend the Annual Meeting. 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 the 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 24,
1998.
KCSI will pay for the Annual Meeting, including the cost of
mailing the proxy materials and any supplemental materials.
Directors, officers and employees of KCSI may, either in person,
by telephone or otherwise, also solicit proxy cards. They have
not been specifically engaged or compensated for that purpose,
however. Morrow & Co., Inc. has been retained to assist in the
solicitation of proxies at a cost not expected to exceed $7,500
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 this Notice and Proxy
Statement, the proxy card and the Annual Report to the beneficial
owners of KCSI's stock held of record by them, and, upon request,
KCSI will reimburse them for their reasonable expenses in
completing the mailing of such materials to such beneficial
owners.
VOTING
At the Annual Meeting, stockholders will consider and vote
upon: (1) the election of four directors; (2) approval of the
Berger Associates, Inc., Stock Option Plan; (3) approval of a
performance-based incentive compensation plan for the Chief
Executive Officer of Janus Capital Corporation; (4) ratification
of the Board of Directors' selection of Price Waterhouse LLP as
KCSI's independent accountants for 1998; and (5) 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. None of
KCSI's directors, KCSI's executive officers and their associates
has any direct or indirect material interest in proposals 2, 3,
and 4, other than Mr. Bailey who has a direct interest in
proposal 3.
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 9, 1998 (the "Record Date"), are entitled to
notice of and to vote at the Annual Meeting. On the Record Date,
KCSI had outstanding 242,170 shares of Preferred Stock (which
does not include 407,566 shares held in treasury) and 108,828,011
shares of Common Stock (which does not include 36,378,565 shares
held in treasury) for a total of 109,070,181 shares eligible to
be voted at the Annual Meeting.
The Common Stock and Preferred Stock (collectively, the
"Voting Stock") constitute KCSI's only 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.
Stockholders may vote cumulatively for the election of directors.
In other words, each stockholder has 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 the
stockholder may cast all such votes for a single nominee or
distribute the votes among the nominees as the stockholder
chooses. This Proxy Statement solicits discretionary authority
to vote cumulatively, and the accompanying form of proxy grants
such authority.
In order for a proposal that is to be considered at the
Annual Meeting to be approved (other than the election of
directors), stockholders owning at least a majority of the shares
of Voting Stock entitled to vote must be present (referred to as
a quorum) and a majority of such quorum must be affirmatively
voted for approval of that proposal. The shares of a stockholder
entitled to vote at the Annual Meeting who is present, either in
person or through a proxy, are 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 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 whether a majority of
shares 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. Abstaining will, therefore, 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.
The Voting Stock is traded on the New York Stock Exchange,
Inc. (the "NYSE"). Under the rules of 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 two
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 the
persons nominated by management, FOR approval of the Berger
Associates, Inc., Stock Option Plan, FOR approval of a
Performance-Based Incentive 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 1998; 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 who holds his or her stock in his or her name
may revoke a properly executed proxy with a later-dated, properly
executed proxy or other written revocation delivered to the
Corporate Secretary of KCSI at any time before the polls for the
Annual Meeting are closed. A stockholder who holds his or her
stock in a brokerage account will have to contact the broker and
comply with the broker's procedures if he or she wants to revoke
or change the instructions that the stockholder returned to the
broker. 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.
DIVIDEND REINVESTMENT PLAN PARTICPANTS
If a stockholder participates in KCSI's Dividend
Reinvestment Plan (the "DRIP"), the proxy card will represent
both the number of shares (including fractional shares) held on
behalf of the stockholder in the DRIP on the record date and
shares registered in the stockholder's name, if any.
EMPLOYEE STOCK OWNERSHIP PLAN PARTICIPANTS
Participants in KCSI's and DST Systems, Inc.'s employee
stock ownership plan are each provided a separate voting
instruction card (accompanying this Proxy Statement) to instruct
the trustee of these ESOP's how to vote the shares of Common
Stock held on behalf of such participant. The trustee is
required under the trust agreements 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 must 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 OR DST SYSTEMS, INC. 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 (for KCSI participants)
or Attention: DST Systems, Inc. Employee Stock Ownership Plan.
ESOP participants who wish to revoke their voting instruction
card will need to contact the trustee and follow its procedures.
Confidentiality of Voting of ESOP Participants. Under the
terms of the ESOP trust agreements, 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.
<PAGE>
PRINCIPAL STOCKHOLDERS AND STOCK OWNED BENEFICIALLY
BY DIRECTORS AND CERTAIN EXECUTIVE OFFICERS
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 that have publicly disclosed such ownership; (ii)
the members of the Board of Directors and certain executive
officers; and (iii) 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. 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. Beneficial ownership is generally either the sole
or shared power to vote or dispose of the shares. KCSI is not
aware of any arrangement the operation of which would at a
subsequent date result in a change of control of KCSI.
<TABLE>
<CAPTION>
Percent
Common of
Name and Address Stock <F1> Class <F1>
---------------- --------- ---------
<S> <C> <C>
UMB Bank, N.A., as trustee 7,561,037 <F2> 6.9%
of certain fiduciary
accounts <F2>
Southeastern Asset
Management, Inc. <F3> 14,369,500 <F3> 13.2%
Amvescap, Inc. and
certain affiliates <F4> 6,024,575 <F4> 5.5%
A. Edward Allinson 80,456 <F1><F5> *
Director
Thomas H. Bailey 28,733 <F5> *
Chairman of the Board,
President and Chief
Executive Officer of
Janus Capital Corporation
Paul F. Balser 60,000 <F1> *
Director
James E. Barnes 87,000 <F1><F6> *
Director
Danny R. Carpenter 286,490 <F1><F5> *
Vice President - Finance
Michael G. Fitt 81,600 <F1><F6> *
Director
Michael R. Haverty 947,012 <F1><F5><F6> *
Director, Executive
Vice President
James R. Jones 0 <F7> *
Director
Joseph D. Monello 562,272 <F1><F5> *
Vice President and
Chief Financial Officer
Landon H. Rowland 3,545,306 <F1><F5> 3.2%
Chairman of the Board,
President, Chief
Executive Officer
Jose F. Serrano 36,000 <F1> *
Director
Morton I. Sosland 270,343 <F1><F6> *
Director
All Directors and
Executive Officers
as a Group (17 Persons) 6,916,584 <F1><F5> 6.1%
------------------------
* Less than one percent of the outstanding shares.
<FN>
<F1> Percentage ownership is based on the number of shares
outstanding as of the Record Date plus any Additional Shares
(as defined below). The holders may disclaim beneficial
ownership of shares included under certain circumstances.
Except as noted, the holders have sole voting and
dispositive power over the shares. Under applicable law,
shares that may be acquired upon the exercise of options or
other convertible securities that are exercisable on the
Record Date or will become exercisable within 60 days of
that date (the "Additional Shares") are considered
beneficially owned. Such Additional Shares included in the
amounts shown above are as follows: Mr. Allinson, 74,400;
Mr. Balser, 60,000; Mr. Barnes, 78,000; Mr. Carpenter,
261,000; Mr. Fitt, 72,000; Mr. Haverty, 885,000; Mr.
Monello, 471,000; Mr. Rowland 2,763,000; Mr. Serrano 36,000;
Mr. Sosland, 9,000; and all directors and executive officers
as a group, 5,319,390. Certain directors and executive
officers disclaim beneficial ownership of 188,700 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.
<F2> Based on information reported in Amendment No. 10 to
Schedule 13G, dated February 13, 1998, jointly filed by UMB
Financial Corporation ("UMBFC"), its wholly owned subsidiary
UMB Bank, N.A. ("UMB") and The Employee Stock Ownership
Plan (the "KCSI ESOP") and subsequent correspondence. UMB
is the trustee of the KCSI ESOP and the DST Systems, Inc.
Employee Stock Ownership Plan, which holds some common stock
(the "DST ESOP"). Shares reported as held by UMB include
the shares held as trustee of the KCSI ESOP and DST ESOP.
Voting and dispositive power over the shares held by these
ESOP's 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,
the KCSI ESOP and the DST ESOP disclaim beneficial ownership
of all shares held in the KCSI ESOP and DST ESOP. The
amount shown for UMB does not include 347,656 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 shares held by UMB in
various capacities. The address for UMB is 1010 Grand
Boulevard, Kansas City, Missouri 64106.
<F3> Based upon information in Amendment No. 5 to Schedule 13G,
dated February 4, 1998. Southeastern Asset Management, Inc.
("Southeastern") is a registered investment adviser, and
holds all such shares for its clients. Schedule 13G
provides that it is not to be construed as an admission that
Southeastern is the beneficial owner of such shares.
Schedule 13G is filed jointly with Longleaf Partners Fund,
an investment company registered under the Investment
Company Act, and Mr. O. Mason Hawkins, who is the Chairman
of the Board and Chief Executive Officer of Southeastern.
Mr. Hawkins disclaims beneficial ownership of the shares.
The Company has been advised that as of March 27, 1998,
Southeastern Asset Management, Inc. no longer held the
shares shown in the table. The address for Southeastern is
6075 Poplar Avenue, Suite 900, Memphis, Tennessee 38119.
<F4> Based upon information in Amendment 1 to Schedule 13G filed
February 12, 1998. The address for Amvescap, Inc. is 11
Devonshire Square, London EC2M 4YR, England.
<F5> Under applicable law, shares that are held indirectly are
also considered beneficially owned. Such shares included in
the amounts shown above are as follows: Mr. Allinson owns
2,400 shares in a Keogh Plan; Mr. Bailey owns 21,418 shares
through the KCSI ESOP; Mr. Carpenter owns 8,268 shares
through the KCSI ESOP; Mr. Haverty owns 3,416 shares through
the KCSI ESOP; Mr. Monello owns 33,671 shares through the
KCSI ESOP; Mr. Rowland owns 60,614 and 477 shares through
the KCSI ESOP and KCSI's Profit Sharing Plan, respectively;
and all directors and executive officers as a group own
indirectly 249,623 shares.
<F6> Directors and Executive Officers may also be deemed to own
beneficially shares held in other capacities as follows:
Mr. Barnes, 9,000 shares held jointly with his wife; Mr.
Fitt, 9,600 shares held in trust; Mr. Haverty, 725 shares
held by his children; and Mr. Sosland, 4,800 shares held in
trust over which he has sole voting and dispositive power as
trustee, 12,000 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,
and 36,000 shares held by certain companies of which he is a
director, 111,900 shares held as co-trustee of certain
testamentary trusts, and 24,000 shares in a charitable
foundation of which he is a director. Mr. Sosland disclaims
beneficial ownership of all of these shares.
<F7> Mr. Jones currently holds options to purchase 6,000 shares
of KCSI common stock which will become exercisable November
13, 1998.
</FN>
</TABLE>
<PAGE>
PROPOSAL 1 - ELECTION OF FOUR 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 2001
or when their successors are elected and qualified.
Four 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 after January 18, 1990, no one
who is 72 years old 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 2001
A. EDWARD ALLINSON, age 63, 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 Corporation since March 1990. BFDS
provides full service share owner accounting and recordkeeping
services to mutual funds, selected services to certain retirement
plans and certain securities transfer services. DST Systems,
Inc., of which KCSI owns approximately 41 percent of the
outstanding stock, owns 50% of BFDS. Mr. Allinson is also a
director of DST Systems, Inc., Kansas City, Missouri.
PAUL F. BALSER, age 56, 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, which also specialized in privately negotiated equity
and venture capital investments. 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.
JAMES R. JONES, age 58, has been a director of KCSI since
November 1997. Mr. Jones has been President of the international
division of The Warnaco Group, Inc. since July 1997. The Warnaco
Group, Inc., and its affiliates design, manufacture and market
women's and men's apparel. Prior to that, Mr. Jones was the
United States Ambassador to Mexico from August 1993 to July 1997,
and Chairman and Chief Executive Officer of the American Stock
Exchange from October 1989 to August 1993. Mr. Jones is also a
director of Grupo Modelo, S.A. de C.V. and The Warnaco Group,
Inc., New York, New York.
LANDON H. ROWLAND, age 60, has been a director of KCSI since
1983. He has been President of KCSI since July 1983, Chief
Executive Officer of KCSI since January 1987 and Chairman of the
Board since May 1997. Mr. Rowland is also a director of Janus
Capital Corporation, Berger Associates, Inc., Transportacion
Maritima Mexicana, S.A. de C.V., and Grupo Transportacion
Ferroviaria Mexicana, S.A. de C.V.
YOUR BOARD RECOMMENDS THAT YOU VOTE
"FOR"
THE ELECTION OF MANAGEMENT'S NOMINEES
<PAGE>
THE BOARD OF DIRECTORS
The Board of Directors met five times in 1997. 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 those meetings of the Board in 1997, other than Mr.
Serrano who missed two of the meetings.
DIRECTORS SERVING UNTIL THE ANNUAL MEETING OF STOCKHOLDERS IN
1999
JAMES E. BARNES, age 64, has been a director of KCSI since 1986.
He is Chairman of the Board, President and Chief Executive
Officer of MAPCO Inc., Tulsa, Oklahoma. 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 57, has been a director of KCSI since 1996.
He is Chairman and a director of Grupo Servia, S.A. de C.V. and
Transportacion Maritima Mexicana, S.A. de C.V. ("TMM"). TMM is
the largest maritime shipping company in Mexico, and the leader
among the world's carriers in serving Mexico's ports. TMM also
has trucking operations in Mexico. TMM and KCSI jointly own The
Texas Mexican Railway Company and Groupo Transportacion
Ferroviaria Mexicana, S.A. de C.V. Mr. Serrano is also Chairman
and a director of Groupo Transportacion Ferroviaria Mexicana,
S.A. de C.V.
DIRECTORS SERVING UNTIL THE ANNUAL MEETING OF STOCKHOLDERS IN
2000
MICHAEL G. FITT, age 66, 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, a subsidiary of
General Electric Capital Services, Inc., is a reinsurance
company. Mr. Fitt is also a director of DST Systems, Inc.,
Kansas City, Missouri, and NAC RE Corp., Greenwich, Connecticut.
MICHAEL R. HAVERTY, age 53, 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 is also a director of Grupo Transportacion Ferroviaria
Mexicana, S.A. de C.V. Mr. Haverty 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 72, 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
H & R Block, Inc., Kansas City, Missouri.
COMMITTEES OF THE BOARD OF DIRECTORS
------------------------------------
The Board of Directors has established an Executive
Committee (which also nominates individuals to serve as directors
of KCSI), Audit Committee and a Compensation and Organization
Committee. The members of the committees are elected at the
Board's annual meeting immediately following KCSI's annual
meeting of stockholders. During 1997, there were six meetings
of the Executive Committee, three meetings of the Audit
Committee and, six meetings of the Compensation and Organization
Committee. All directors attended at least seventy-five percent
of the total of all meetings of all committees on which they
served during 1997, other than Mr. Serrano who missed one of the
three Audit Committee meetings.
THE EXECUTIVE COMMITTEE
The Executive Committee consists of KCSI's Chairman of the
Board 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 Chairman of
the Board 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, 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
determine 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 employee stock
ownership plan; (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 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
1997 to any director or officer of KCSI for service on any board
of directors of any subsidiary of KCSI other than Janus Capital
Corporation, which pays fees to Mr. Bailey. (Although Mr.
Rowland serves as a director of Janus Capital Corporation, he
does not accept any fees for such service.)
The Outside Directors (those directors who are not employees
of KCSI or its subsidiaries) are not paid any retainers for Board
or committee membership. The Outside Directors are paid for each
Board meeting $4,000 if attended in person or $2,000 for
participation by telephone. The Outside Directors are also paid
for each committee meeting $2,000 if attended in person or $1,000
for participation by telephone. The Chair of a committee
receives an extra $500 for each committee meeting. The Outside
Directors are also automatically granted options to buy 3,000
shares of KCSI Common Stock 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 an Outside Director first joins the Board.
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.
<PAGE>
PROPOSAL 2 - APPROVAL OF THE BERGER ASSOCIATES, INC.
STOCK OPTION PLAN
The KCSI Compensation Committee has approved a performance-
based incentive compensation plan for key employees of Berger
Associates, Inc. ("Berger"), a KCSI subsidiary. The purpose of
the Stock Option Plan (the "Plan") is to provide a means by which
key employees of Berger and its subsidiaries can acquire and
maintain stock ownership, thereby strengthening their commitment
to the success of the Company and their desire to remain employed
by Berger and its subsidiaries. It is anticipated that the
acquisition of such stock ownership will stimulate the efforts of
such employees on behalf of Berger, strengthen their desire to
continue in the service of Berger and encourage shareholder and
entrepreneurial perspectives through employee stock ownership.
It is also anticipated that the opportunity to obtain such stock
ownership will prove attractive to promising new key employees
and will assist Berger in attracting such employees.
An important concern of KCSI in approving the Plan is to
ensure that any compensation paid under the Berger Plan is
deductible for federal income tax purposes. Under Section 162(m)
of the Internal Revenue Code, public companies and their
subsidiaries cannot deduct compensation in excess of $1 million
paid to any of the executive officers named in the public
company's summary compensation table under compensation plans
adopted after February 1993 unless the compensation is
"performance-based" as defined in Section 162(m). Under Section
162(m), performance-based compensation generally arises from
options if a committee of outside directors grants the options,
the plan limits the number of shares that may be granted to an
eligible participant, the compensation arises solely from the
increase in value of the underlying stock after the date of the
grant of the option and the plan is approved by stockholders of
the public company. The Board is, therefore, submitting the Plan
for stockholder approval.
The Board is also submitting this proposal concerning the
Plan for stockholder approval in order to comply with Section 422
of the Internal Revenue Code. Section 422 requires stockholder
approval of a plan under which incentive stock options ("ISO's")
may be issued in order to preserve the federal income tax
treatment of the ISO's.
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 BERGER ASSOCIATES, INC. STOCK OPTION PLAN
SUMMARY OF THE PLAN. The full Plan is attached as Appendix
A to this Proxy Statement, and the following summary is qualified
by reference to it. Capitalized terms in this summary not defined
in this Proxy Statement have the meaning set forth in the Plan.
A Committee appointed by the Board of Directors of Berger
(the "Committee") will administer the Plan and determine the
recipients of Awards, the type or types of Awards to be granted
to each such recipient, the term of such Awards, the
consideration to be received by Berger for such Awards, the
number of shares of Berger common stock (the "Stock") subject to
such Awards, and such other restrictions and conditions on the
exercise of an Award as the Committee may deem appropriate. The
Committee may not grant Awards under the Plan after January 13,
2008. The term of any Award granted under the Plan may be any
length equal to or less than 10 years from the date of grant and
may extend beyond January 13, 2008. The Awards may terminate
earlier than the end of the term following the termination of a
Grantee's employment with Berger or its subsidiaries.
The Awards may be either incentive or non-qualified options
granted in consideration for the Grantee's service to Berger.
The Plan makes available 300,000 shares of the Stock
(representing approximately 18 percent of the outstanding Berger
Stock as of the date the Berger Plan was adopted) for such
Awards. Awards that are terminated prior to exercise and shares
of Stock received in payment of the exercise price are added back
to the total shares available. The Committee may not grant an
Award to any participant if that Award together with all other
Awards granted to such participant in any one calendar year
exceeds 100,000 shares. Notwithstanding the Committee's
authority under the Plan, the Committee may not make any Award
representing more than 40,000 shares of Stock unless such Award
is approved or ratified by KCSI's Compensation and Organization
Committee.
The Berger Stock is currently not publicly traded. Its fair
market value for purposes of the Plan is determined by the
Committee based on the net earnings of Berger, or based on the
proceeds to the selling shareholder(s) upon an actual sale of
more than 50% of the Berger Stock. As of the December 19, 1997
Grant Date of the Awards made to date, the Committee determined
that the fair market value of Berger Stock was $50.28 per share.
The Committee may only grant Awards to employees of Berger
and any of its Subsidiaries. Berger and its Subsidiaries
currently have 82 employees who are eligible to participate in
the Plan. As of the date of this Proxy Statement, non-qualified
options to purchase 201,710 shares of Berger Stock have been
awarded to eleven current employees, none of which is an
executive officer of KCSI. Options granted to two of the
Grantees are subject to approval of the Plan by KCSI's
stockholders. No other Awards have been made under the Plan.
The Committee determines the exercise price of an Award.
The Award exercise price cannot be less than the Fair Market
Value of the Stock on the Grant Date. The Committee may impose
such additional restrictions on the exercise of an Award as the
Committee may deem appropriate. Any incentive stock options will
also be subject to the applicable conditions under the Code. The
Committee may allow an Optionee to borrow funds from Berger or
have Berger guarantee a loan to the Optionee in order for the
Optionee to exercise the Awards. A Grantee may not transfer his
or her Awards except by will or the laws of descent or, in the
case of non-qualified options, to or for the benefit of a family
relative. An Optionee has no rights as a stockholder of Berger
until the Award has been exercised.
The Board may amend, suspend or discontinue the Plan without
stockholder approval, but no such action that would adversely
affect an outstanding Award can be made without such Grantee's
consent unless such amendment is required in order for the Plan
to continue to comply with applicable law. In the case of
changes affecting the securities of Berger or certain other
events, the Committee must make certain adjustments in the Plan
or in Awards in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available
under the Plan.
<PAGE>
<TABLE>
<CAPTION>
NEW PLAN BENEFITS
NAME AND POSITION BERGER ASSOCIATES, INC.
STOCK OPTION PLAN
(ASSUMING PLAN EFFECTIVE
IN 1997)
NUMBER OF AWARDS
-----------------------------------------------------------------
<S> <C>
Landon H. Rowland Not Eligible
Chairman of the Board,
President and Chief
Executive Officer
Michael R. Haverty Not Eligible
Executive Vice President
Thomas H. Bailey Not Eligible
Chairman of the Board,
President and Chief
Executive Officer of
Janus Capital Corporation
Joseph D. Monello Not Eligible
Vice President and
Chief Financial Officer
Danny R. Carpenter Not Eligible
Vice President - Finance
Current Executive Officers as a Not Eligible
Group
Current Non-Employee Directors Not Eligible
as a Group
All Current Employees Other Than
Executive Officers as a Group 201,710*
-----------------------------------------------------------------
* The Awards to be granted under the Plan are discretionary.
This amount represents Awards made under the Plan since its
inception. Certain of these Awards are subject to stockholder
approval of the Plan as explained above.
</TABLE>
FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
KCSI understands that the federal income tax consequence
generally applicable to Awards under the Berger Plan are as
described below. The following discussion is based on the
federal income tax laws in effect as of the date of this Proxy
Statement and could be affected by future changes in the tax law.
The summary is not intended to constitute tax advice and, among
other things, does not address possible state, local or foreign
tax consequences.
A Grantee who is granted a non-qualified stock option under
the Plan generally will not recognize taxable income at the time
the option is granted. Upon exercise of the option, the Grantee
generally will be taxed at ordinary income tax rates on an amount
equal to the difference between the fair market value of the
Stock on the date of exercise and the option exercise price. If
the Grantee is subject to Section 16(b) of the Exchange Act and a
sale of the shares acquired would subject the Grantee to a suit
for profits under Section 16(b), special tax rules may apply.
Berger will receive a deduction with respect to the exercise
of a non-qualified stock option in the taxable year within which
the Grantee recognizes the corresponding taxable income, subject
to Berger's compliance with tax reporting requirements, the
reasonableness of the total compensation paid to the Grantee in
such taxable year, and any restrictions imposed by Section 162(m)
of the Code. Upon subsequent disposition of the shares, the
Grantee will realize long-term or short-term capital gain or loss
depending on the applicable holding period, provided the Grantee
holds the shares as a capital asset. A capital gain or loss is
long-term if the Grantee holds the stock for more than one year
(more than 18 months to obtain the current lowest capital gains
rate) and short-term if the Grantee holds the stock for one year
or less.
If a Grantee exercises a non-qualified option with cash, the
Grantee's basis in the Stock received upon exercise will equal
the option price plus the amount of ordinary income recognized by
the Grantee on such exercise. If a Grantee exercises a non-
qualified option with Stock, the Grantee (under current
interpretations of the Internal Revenue Service ("IRS")) will not
recognize gain or loss with respect to the disposition of the
shares transferred in payment of the option price. The Grantee
will have a carryover basis in a number of shares received upon
exercise equal to the number of shares surrendered; the Grantee's
basis in any additional shares received will be equal to the
amount of income the Grantee recognizes upon exercise of the
option.
A Grantee who is granted an incentive stock option under the
Plan will not recognize taxable income at the time the option is
granted or at the time the option is exercised. The Grantee's
basis in the shares acquired for cash upon exercise of an
incentive stock option will be equal to the option price.
However, the exercise of an incentive stock option will be an
adjustment for purposes of the alternative minimum tax. For
alternative minimum tax purposes, the exercise of an incentive
stock option generally is treated the same as the exercise of a
non-qualified stock option.
If a Grantee disposes of shares acquired pursuant to the
exercise of an incentive stock option prior to meeting the
required holding period (two years from the date of grant or one
year from the date the shares were transferred to the Grantee),
the difference between the fair market value of the shares at the
time of exercise (or the amount realized on disposition, if
lower) and the option price will be taxable to the Grantee as
ordinary income, and will be deductible by Berger subject to the
general condition noted above. The balance of any gain, or any
loss on such disposition, will be treated as capital gain or
loss, provided the Grantee holds the shares as a capital asset.
If a Grantee disposes of the shares after the required incentive
stock option holding period, the Grantee would realize capital
gain or loss (provided the Grantee holds the shares as a capital
asset), and Berger would not be entitled to any income tax
deduction. A capital gain or loss is long-term if the Grantee
holds the stock for more than one year (more than 18 months to
obtain the current lowest capital gains rate) and short-term if
the Grantee holds the stock for one year or less.
Under current rulings of the IRS, if a Grantee exercises an
incentive stock option with Stock, the Grantee will not recognize
gain or loss with respect to the shares of stock surrendered in
payment of the option price (unless the surrendered shares were
received under an incentive or other statutory stock option and
surrendered before expiration of the statutory holding period, in
which event a disqualifying disposition will have occurred). The
Grantee will have a carryover basis in a number of shares
received upon exercise equal to the number of shares surrendered.
The Grantee's basis in any additional shares of stock received
will be zero.
YOUR BOARD RECOMMENDS THAT YOU VOTE
"FOR"
APPROVAL OF THE BERGER ASSOCIATES, INC. STOCK OPTION PLAN
<PAGE>
PROPOSAL 3 - APPROVAL OF A PERFORMANCE-BASED INCENTIVE
COMPENSATION PLAN FOR THE CHIEF EXECUTIVE OFFICER
OF JANUS CAPITAL CORPORATION
The KCSI Compensation Committee has approved a
performancebased incentive compensation plan for Thomas H.
Bailey, the Chairman of the Board, President and 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 which is
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. The
Incentive Plan replaces the performance-based incentive
compensation plan for Mr. Bailey that was approved by
stockholders last year.
It is KCSI's inintention to ensure that any compensation
paid under the Incentive Plan is deductible for federal income
tax purposes. Under Section 162(m) of the Internal Revenue Code,
public companies and their subsidiaries 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 "performancebased" as defined in Section 162(m).
Section 162(m) generally defines performancebased compensation as
compensation payable solely on account of the satisfaction of
pre-established performance goals determined by a committee of
outside directors, but only if the material terms of the
performance goals under which the compensation is paid 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
The Incentive Plan would allow Mr. Bailey to earn incentive
compensation in each calendar year payable in cash ranging from
none (if the minimum performance goal is not reached) up to 125
percent (if the maximum performance goal is reached) of his base
salary for that year. If the maximum performance goal is reached
in any one year, total incentive compensation paid to Mr. Bailey
would not exceed $1 million for that year. The annual incentive
compensation would be determined by a formula tied to the
compounded annual growth rate of Janus' pre-tax profits. Subject
to the foregoing limit, the specific incentive payments
attainable for varying percentages of compounded annual growth in
Janus' pre-tax profits are determined by the KCSI Compensation
and Organization Committee (the "KCSI Compensation Committee")
after consideration of recommendation from the Janus Compensation
Committee generally prior to each applicable year.
The Incentive Plan is administered by the KCSI Compensation
Committee. Under the terms of the Incentive Plan as approved by
the KCSI Compensation Committee 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.
No incentive compensation has been paid under the Incentive
Plan, and KCSI cannot determine the amount of the incentive
compensation that will be paid to Mr. Bailey under the Incentive
Plan because the payments are dependent upon the future
compounded annual growth rate of Janus' pre-tax profits.
Assuming that the Incentive Plan was in effect in 1997, the
following incentive compensation would have been paid to the
following individuals or groups.
<TABLE>
<CAPTION>
NEW PLAN BENEFITS
1997 INCENTIVE COMPENSATION
(ASSUMING PLAN EFFECTIVE
NAME AND POSITION IN 1997)
-----------------------------------------------------------------
<S> <C>
Landon H. Rowland Not Eligible
President and Chief
Executive Officer
Michael R. Haverty Not Eligible
Executive Vice President
Thomas H. Bailey $1,000,000*
Chairman of the Board,
President and Chief
Executive Officer of
Janus Capital Corporation
Joseph D. Monello Not Eligible
Vice President and Chief
Financial Officer
Danny R. Carpenter Not Eligible
Vice President - Finance
Current Executive Officers $1,000,000*
as a Group
Current Non-Employee Directors Not Eligible
as a Group
All Current Employees including Not Eligible
Non-Executive Officers as a Group
-----------------------------------------------------------------
* Based on 1997 actual base salary. Only Mr. Bailey is eligible
to receive incentive compensation under this plan.
</TABLE>
FEDERAL INCOME TAX CONSEQUENCES
If KCSI stockholders approve the Incentive Plan, Janus 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 A PERFORMANCE-BASED INCENTIVE COMPENSATION PLAN FOR
THE CHIEF EXECUTIVE OFFICER OF JANUS CAPITAL CORPORATION
<PAGE>
PROPOSAL 4 - RATIFICATION OF THE BOARD OF DIRECTORS'
SELECTION OF INDEPENDENT ACCOUNTANTS
The Audit Committee has recommended, and the Board of
Directors has selected, the firm of Price Waterhouse LLP as
KCSI's independent accountants to examine KCSI's 1998
consolidated financial statements. Price Waterhouse LLP served
as KCSI's independent accountants for 1997. 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 are
expected to be present at the Annual Meeting and, if so, will
have the opportunity, if desired, to make a statement and are
expected to be available 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
<PAGE>
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 Officer that a
majority of the net after-tax value of any stock-based
awards (less any shares used to pay any exercise price) 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, and certain other
executives. 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.
The Committee further implemented its compensation strategy,
effective January 1, 1996, 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. Rowland and
Bailey) 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. No changes were made to this strategy in
1997.
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 weighting 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 weighting 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 compensation committee of the Board of Directors of
Janus Capital Corporation ("Janus"), with the aid of an
independent compensation consultant, set Mr. Bailey's base salary
and recommended incentive compensation for 1997. KCSI's
Compensation and Organization Committee approved the incentive
compensation.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Rowland's compensation package originally was
restructured in 1992 to link a significant portion of his total
compensation to changes in stockholder value. 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.
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 459,000 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 target stock
prices established in the stock option grants for Mr. Rowland and
the twenty-eight executives have been met. 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 percentile 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 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. The compensation
packages of the named officers (other than Mr. Bailey) were
comprised of base salary and stock compensation, and the highest
total base salary is within the $1 million limit. The stock
compensation awarded to those officers and Mr. Bailey's incentive
compensation package has the potential to result in total
compensation in excess of the $1 million limit of Section 162(m).
KCSI believes it is and has taken all steps necessary, including
requesting or obtaining stockholder approval, so that any
compensation expense that KCSI may incur as a result of awards
under its stock option and incentive compensation 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.
The Compensation and Organization Committee.
A. Edward Allinson
James E. Barnes, Chairman
Morton I. Sosland
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph shows the changes in value over the five
years ending December 31, 1997 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 1993-1997
[Stock Graph Inserted Here]
<TABLE>
<CAPTION>
Year Ended
December 31, 1992 1993 1994 1995 1996 1997
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
KCSI Total
Return $100 $211.93 $128.07 $191.19 $189.70 $404.17
Dow Jones $100 $122.98 $103.48 $143.65 $164.98 $244.28
Transportation
Average Total
Return
S&P 500 Index $100 $110.08 $111.53 $153.45 $188.68 $251.64
Total Return
-------------------------------------------------------------------
</TABLE>
1 The Dow Jones Transportation Average is an index prepared
by Dow Jones & Co., Inc., an independent company.
2 The S&P 500 is an index prepared by Standard and Poor's
Corporation, an independent company. The S&P 500 Index
reflects the change in weighted average market value for
500 companies whose shares are traded on the New York Stock
Exchange, American Stock Exchange and in the over-the-
counter market. Information concerning Standard and Poor's
Corporation and the S&P 500 Index is available on the
Internet at www.stockinfo.standardpoor.com.
SUMMARY COMPENSATION TABLE
--------------------------
The Summary Compensation Table shows certain information
concerning the compensation earned by the Chief Executive Officer
of KCSI and certain of the most highly compensated executive
officers for 1997 (based upon the total salary and bonus for 1997).
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation Awards
Name Securities
and Other Annual Underlying All Other
Principal Compensation Options/ Compensation
Position Year Salary($) Bonus <F1>($) ($) SARs (#) ($)
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Landon H. Rowland 1997 750,000 --- 57,900<F2> --- $114,801
Chairman of the 1996 500,004 --- 52,252 459,00 88,816
Board, President 1995 500,004 --- --- --- 187,702
and Chief Executive
Officer
Michael R. Haverty 1997 500,004 --- --- --- $ 87,500<F3>
Executive Vice 1996 500,004 --- --- 135,000 66,191
President 1995<F3> 310,486 --- --- 750,000 104,134
Thomas H. Bailey 1997 900,000 675,000 --- --- $ 75,667<F4>
Chairman of the 1996 585,000 400,000 --- --- 74,747
Board, President 1995 590,000 --- --- --- 69,244
and Chief Executive
Officer of Janus
Capital Corporation
Corporation
Joseph D. Monello 1997 250,008 --- --- --- $ 62,640<F5>
Vice President and 1996 250,008 --- --- --- 63,637
Chief Financial 1995 198,900 198,900 --- 315,000 31,282
Officer
Danny R. Carpenter 1997 190,008 --- --- --- $ 43,751<F6>
Vice President - 1996 190,008 --- --- --- 48,697
Finance 1995 154,500 154,500 --- 204,000 32,272
----------------------------------------------------------------------------------------------------
<FN>
<F1> The bonus for Messrs. Monello and Carpenter represented cash
awards under KCSI's incentive compensation program and the
bonus for Mr. Bailey for 1997 was under a performance based
incentive compensation plan approved by stockholders in 1997.
<F2> Other Annual Compensation for Mr. Rowland includes premiums
on disability insurance policy of $53,877. All other
compensation for Mr. Rowland for 1997 is comprised of: (i)
contributions to his account under the KCSI ESOP of $6,400;
(ii) interest on deferred director's fees of $1,678; (iii)
an estimated contribution to his account under KCSI's
401(k) plan of $4,800; (iv) an estimated contribution to
his account under KCSI's profit sharing plan of $4,800; (v)
an amount estimated to be credited to his account under the
KCSI Executive Plan of $71,500; and (vi) premiums on group
term life insurance of $25,623. As of December 31, 1997,
Mr. Rowland held no shares of restricted stock.
<F3> Mr. Haverty has been employed by KCSI since May 1995. All
other compensation for Mr. Haverty for 1997 is comprised
of: (i) a contribution to his account under the KCSI ESOP
of $6,400; (ii) an estimated contribution to his account
under KCSI's 401(k) plan of $4,800; and (iii) an estimated
contribution to his account under KCSI's profit sharing
plan of $4,800; and (iv) an amount estimated to be credited
to his account under the KCSI Executive Plan of $71,500.
As of December 31, 1997, Mr. Haverty held no shares of
restricted stock.
<F4> All other compensation for Mr. Bailey for 1997 is comprised
of: (i) director's fees in the amount of $5,000 and $54,667,
paid to Mr. Bailey in his capacity as director of Janus
Capital Corporation and Janus Investment Fund and the Janus
Aspen Series, respectively; and (ii) a contribution to his
account under the KCSI ESOP of $6,400; (iii) an estimated
contribution to his account under KCSI's 401(k) plan of
$4,800; and (iv) an estimated contribution to his account
under Janus'profit sharing plan of $4,800. As of December
31, 1997, Mr. Bailey held no shares of restricted stock.
<F5> All other compensation for Mr. Monello for 1997 is
comprised of: (i) a contribution to his account under the
KCSI ESOP of $6,400; (ii) an estimated contribution to his
account under KCSI's 401(k) plan of $4,800; (iii) an
estimated contribution to his account under KCSI's profit
sharing plan of $4,800; and (iv) an amount estimated to be
credited to his account under the KCSI Executive Plan of
$27,751. As of December 31, 1997, Mr. Monello held no
shares of restricted stock.
<F6> All other compensation for Mr. Carpenter for 1997 is
comprised of: (i) a contribution to his account under the
KCSI ESOP of $6,400; (ii) an estimated contribution to his
account under KCSI's 401(k) plan of $4,800; (iii) an
estimated contribution to his account under KCSI's profit
sharing plan of $4,800; and (iv) an amount estimated to be
credited to his account under the KCSI Executive Plan of
$17,251. As of December 31, 1997, Mr. Carpenter held 3,000
shares of restricted stock, which had a market value at
that time of $93,186.
</FN>
</TABLE>
1997 AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUES
-----------------------------------------------------------
The following table sets forth information with respect to
the aggregate option exercises during 1997 by the named Executive
Officers and the number and value of options held by such
officers as of December 31, 1997 (the last trading day of the
year).
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
Shares at FY-End at FY-End
Acquired (#) ($)
on Value
Exercise Realized<F1> Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable<F1>
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Landon H. -0- N/A 2,763,000/-0- 67,935,811/-0-
Rowland
Michael R. -0- N/A 885,000/-0- 14,815,655/-0-
Haverty
Thomas H. -0- N/A -0-/-0- N/A
Bailey
Joseph D. 42,000 1,131,593 471,000/-0- 8,493,447/-0-
Monello
Danny R. -0- N/A 261,000/-0- 4,201,819/-0-
Carpenter
---------------------------------------------------------------------------
<FN>
<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 the date of exercise or December
31, 1997 (the last trading day of 1997), respectively,
times the number of options exercised or held at year end.
</FN>
</TABLE>
<PAGE>
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 Amended and Restated
Employment Agreement with Mr. Rowland effective September 18,
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 in control of KCSI (as
defined in the Employment Agreement), unless such benefits are
provided by another employer. In the year in which termination
occurs, Mr. Rowland shall remain eligible to receive benefits
under the KCSI Incentive Compensation Plan, if any, and the KCSI
Executive Plan. After termination, Mr. Rowland shall not be
entitled to accrue or receive any benefits under any other
employee benefit plan, except he will be entitled to participate
in the KCSI Profit Sharing Plan, the KCSI Employee Stock
Ownership Plan and the KCSI 401(k) Plan in the year of
termination if he meets the requirements for participation in
such termination year.
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 tax withholding requirements).
If there is a change in control of KCSI during the term of
the Employment Agreement, Mr. Rowland's employment, executive
capacity, salary and benefits would be continued for a three-year
period at levels in effect on the control change date (as defined
in the Employment Agreement) at a rate not less than twelve times
the highest monthly base salary paid or payable to him in the
twelve months prior to any change in control. During such three-
year period, Mr. Rowland would also be eligible to participate in
all benefit plans made generally available to executives of his
level or to the employees of KCSI generally, would be eligible to
participate in any KCSI incentive compensation plan, and would be
entitled to immediately exercise all outstanding stock options
and receive a lump-sum cash payment equal to the fair market
value of all non-vested options. If the amounts payable during
this three-year period are discretionary, the benefits continued
shall not be less than the average annual amount for the three
years prior to the change in control and incentive compensation
shall not be less than 75% of the maximum amount which could have
been paid to Mr. Rowland under the terms of the incentive
compensation plan. 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 equal to 175 percent of three times his annual base
salary and continuation or payment of benefits for a three-year
period at levels in effect on the control change date. Mr.
Rowland is also permitted to resign employment after a change in
control upon "good reason" (as defined in the Employment
Agreement) and advance written notice, and to receive the same
payments and benefits as if his employment had been terminated by
KCSI. Mr. Rowland's Employment Agreement also provides for
payments to him necessary to relieve him of certain adverse
federal income tax consequences if amounts received under the
Agreement involve "parachute payments" under Section 4999 of the
Internal Revenue Code. In addition, upon a change in control of
KCSI, funds are to be placed in trust to secure the obligations
to pay any legal expenses of Mr. Rowland in connection with
disputes arising with respect to the Employment Agreement.
MESSRS. CARPENTER, HAVERTY AND MONELLO. KCSI has entered
into Amended and Restated Employment Agreements with Messrs.
Carpenter and Monello effective September 18, 1997. In addition,
KCSI and KCSR have entered into an Amended and Restated
Employment Agreement with Mr. Haverty also effective September
18, 1997. These Employment Agreements provide, respectively, for
Mr. Carpenter's continued employment as Vice-President-Finance,
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.
Pursuant to their Employment Agreements, Messrs. Carpenter
and Monello receive as compensation for their services an annual
base salary at the rate in effect on January 1, 1996. 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 Agreements, neither Mr. Carpenter nor
Mr. Monello is 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. The
Employment Agreements provide that the value of Messrs.
Carpenter's and Monello's annual compensation is fixed at 175
percent of their annual base salaries for purposes of cash
compensation benefit plans.
In the event of termination without cause by KCSI, Messrs.
Carpenter, Haverty and Monello 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. In the year in which
termination occurs, Messrs. Carpenter, Haverty and Monello shall
remain eligible to receive benefits under the KCSI Incentive
Compensation Plan, if any, and the KCSI Executive Plan. After
termination, the 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 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.
As part of the Employment Agreement, Messrs. Carpenter,
Haverty and Monello have agreed not to use or disclose any KCSI
trade secret (as defined in the Employment Agreements) after any
termination of their employment and shall, immediately upon
termination of employment return to KCSI or its subsidiaries or
affiliates any trade secrets in their possession which exist in
tangible form.
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). During the three-year period, salary
is to be paid at a rate not less than twelve times the highest
monthly base salary paid or payable to the officers by KCSI in
the twelve months immediately prior to any change in control.
During the three-year period, the officers also would be eligible
to participate in all benefit plans made generally available to
executives of their level or to the employees of KCSI generally,
would be eligible to participate in any KCSI incentive
compensation plan and would be entitled to immediately exercise
all outstanding stock options and receive a lump-sum cash payment
equal to the fair market value of all non-vested options. If the
amounts payable during this three-year period are discretionary,
the benefits continued shall not be less than the average annual
amount for the three years prior to the change in control and
incentive compensation shall not be less than 75% of the maximum
amount which could have been paid to the officers under the terms
of the incentive compensation plan. 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 equal to 175 percent of three
times their annual base salaries and continuation or payment of
benefits for a three-year period at levels in effect on the
control change date. 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.
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.
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 Directors 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.
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, 1997.
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 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 ESOP on January 1 or July 1 coincident
with or immediately following commencement of their employment.
As of December 31, 1997, approximately 1,640 employees of KCSI
and certain of its subsidiaries, including all of KCSI's
executive officers, were eligible to participate in the KCSI
ESOP.
The KCSI ESOP is designed to invest primarily in shares of
KCSI Common Stock. KCSI will provide funding for the 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
ESOP with respect to any plan year are based upon each
participant's proportionate share of the total compensation paid
during the plan year to all participants in the KCSI ESOP,
subject to Code maximum 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 at retirement, 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 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 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 or Janus. 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 ESOP
may be amended by KCSI's Board of Directors or the Compensation
and Organization Committee 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 the Record Date, the ESOP held 5,340,746 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, 1997, that
for purposes of the ESOP are allocated to participants' accounts
as of December 31, 1997. The ESOP borrowed funds to purchase a
number of the shares it holds, which borrowing was 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, 1997, 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 Profit Sharing Plan. Contributions to the
Profit Sharing 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
Profit Sharing 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, death or disability.
Distribution of benefits under the Profit Sharing 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 Profit Sharing Plan are held in a trust
fund by a trustee appointed by the KCSI Board of Directors. The
Profit Sharing Plan is administered by an Advisory Committee
appointed by KCSI's Board of Directors. The current members of
the Advisory Committee are officers and employees of KCSI. The
trustee has the responsibility for holding and investing Profit
Sharing Plan assets other than assets managed by an investment
manager or managers appointed by the Advisory Committee. The
Profit Sharing 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 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). Each participant may elect
to receive the annual benefit available under the Plan either in
cash or through a grant of non-qualified stock options to
purchase shares of common stock of KCSI. For purposes of the
Executive Plan, compensation includes base compensation plus cash
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 Mr. Rowland has
been fixed at $875,000, and compensation for Messrs. Carpenter,
Monello and Haverty has been fixed at 175 percent of their annual
base salaries for the plan as provided in their Employment
Agreements.
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 Janus Profit Sharing
Plan. Effective as of January 1, 1996, the requirement of one
year of service was eliminated. Contributions to the Janus
Profit Sharing 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 Janus Profit Sharing 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, death or disability.
<PAGE>
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.
1999 ANNUAL MEETING PROXY STATEMENT
-----------------------------------
If a holder of KCSI Common Stock or Preferred Stock wishes
to present a proposal, other than the election of a director, in
KCSI's Proxy Statement for next year's annual meeting of
stockholders, such proposal must be received by KCSI on or before
November 26, 1998. 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, executive officers and
certain other officers, and persons, legal or natural, who own
more than 10 percent of KCSI's Common Stock or Preferred Stock
(collectively "Reporting Persons"), to file reports of 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"). Based solely on a review of
the Section 16 reports for 1997 and any amendments thereto
furnished to KCSI and written representations from certain of the
ReportingPersons,no Reporting Person was late in its reporting
obligations.
<PAGE>
OTHER MATTERS
The Board of Directors knows of no other matters that are
expected to be presented for consideration at the Annual Meeting.
KCSI's Bylaws require that stockholders intending to bring
business before an Annual Meeting, including the nomination of
candidates for election to the Board of Directors, give timely
and sufficient notice thereof to the Secretary of KCSI, not 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
Richard P. Bruening
Vice President, General Counsel
and Corporate Secretary
Kansas City, Missouri
March 27, 1998
KCSI's Annual Report accompanying this proxy includes KCSI's
Annual Report on Form 10-K for the year ended December 31, 1997
(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, 1997 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>
EXHIBIT A
BERGER ASSOCIATES, INC.
STOCK OPTION PLAN
THE PLAN. Berger Associates, Inc. (the "Company") hereby
establishes the Berger Associates, Inc. Stock Option Plan as
amended by the first amendment dated December 19, 1997, as set
forth herein and as it may from time to time be further amended
(the "Plan"), effective as of the date of execution as set forth
on the signature page hereof.
1. PURPOSE. The purpose of the Plan is to provide a means
by which key employees of the Company and its Subsidiaries can
acquire and maintain Stock ownership, thereby strengthening their
commitment to the success of the Company and their desire to
remain employed by the Company and its Subsidiaries. It is
anticipated that the acquisition of such Stock ownership will
stimulate the efforts of such employees on behalf of the Company,
strengthen their desire to continue in the service of the Company
and encourage shareholder and entrepreneurial perspectives
through employee stock ownership. It is also anticipated that
the opportunity to obtain such Stock ownership will prove
attractive to promising new key employees and will assist the
Company in attracting such employees.
2. DEFINITIONS.
As used in the Plan, terms defined parenthetically
immediately after their use shall have the respective meanings
provided by such definitions and the terms set forth below shall
have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms
defined):
(a) "Affiliate" means any corporation or other entity which
directly or through intervening entities owns more than 50% of
the combined voting power or value of all shares of stock of a
corporation or more than 50% of the capital and profits interest
of an unincorporated entity, and any corporation or other entity
so owned by an Affiliate.
(b) "Award" means an option granted under the Plan.
(c) "Award Agreement" has the meaning specified in
Section 4(b)(v).
(d) "Board" means the Board of Directors of the Company.
(e) "Cause" (i) if the terms and conditions of the
Grantee's employment by the Company are governed by an employment
contract that addresses termination for cause and defines "cause"
or "for cause" for such purpose, "Cause" means "cause" or "for
cause" as defined in such employment contract, or (ii) in all
other cases means (A) the continued failure of the Grantee to
perform his duties in a manner substantially consistent with the
manner prescribed by the Board or by an executive officer more
senior to the Grantee (other than any such failure resulting from
his incapacity due to physical or mental illness), (B) the
engaging by the Grantee in misconduct materially injurious to the
Company, (C) any action or omission of the Grantee which is a
material violation of the Company's, Securities and Exchange
Commission's or other federal or state regulatory agency's
standards of conduct or ethical rules, or (D) commission by the
Grantee of a felony or other crime involving dishonesty or moral
turpitude, whether or not such felony or other crime was
committed in connection with the Company's business.
(f) "Code" means the Internal Revenue Code of 1986, as
amended, and regulations and rulings thereunder. References to a
particular section of the Code shall include references to
successor provisions.
(g) "Committee" means the committee appointed pursuant to
Section 4.
(h) "Company" has the meaning set forth in the introductory
paragraph.
(i) "Disability" means, as relates to the exercise of an
incentive stock option after Termination of Employment, a
disability within the meaning of Section 22(e)(3) of the Code,
and for all other purposes, a mental or physical condition which,
in the opinion of the Committee, renders a Grantee unable to
perform the essential functions of his job with or without
reasonable accommodation, and which is expected to be permanent
or for an indefinite duration exceeding one year.
(j) "Effective Date" means the date of execution of the
Plan as set forth on the signature page hereof.
(k) "Fair Market Value" of a share of Stock as of any date
means the Fair Market Value determined by the Committee in good
faith in accordance with Appendix I.
(l) "Grant Date" means the date on which an Award shall be
duly granted, as determined in accordance with Section 6(a)(i).
(m) "Grantee" means an individual who has been granted an
Award.
(n) "including" or "includes" means "including, without
limitation," or "includes, without limitation."
(o) "Optionee" means the Grantee or such other person who
has been assigned or who has succeeded pursuant to Section
6(e)(vii), Section 7, or Section 12(c) to the Grantee's right to
exercise an option.
(p) "Option Price" means the per share purchase price of
Stock subject to an option.
(q) "Permitted Transferee" means a person who is Grantee's
spouse, lineal ancestor, lineal descendant, a spouse of such
ancestor or descendant, a trust primarily for the benefit of
Grantee or one or more of such persons, or a partnership all the
partners of which are Grantee or one or more of such persons.
(r) "Plan" has the meaning set forth in the introductory
paragraph.
(s) "Retirement" means a Termination of Employment for any
reason other than Cause, death or Disability at or after
attaining age 65.
(t) "Share Withholding" has the meaning set forth in
Section 11(a).
(u) "Stock" means the common stock of the Company.
(v) "Subsidiary" means (i) with respect to incentive stock
options, a corporation as defined in Section 424(f) of the Code
with the Company being treated as the employer corporation for
purposes of this definition, and (ii) for all other purposes any
entity in which the Company directly or through intervening
subsidiaries owns eighty percent (80%) or more of the total
combined voting power or value of all classes of stock or, in the
case of an unincorporated entity, an eighty percent (80%) or more
interest in the capital and profits.
(w) "Taxable Event" has the meaning set forth in
Section 11(a).
(x) "Tax Date" has the meaning set forth in
Section 11(b)(iii).
(y) "Tendered Stock" has the meaning specified in
Section 13.
(z) "10% Owner" means a person who owns stock (including
stock treated as owned under Section 424(d) of the Code)
possessing more than 10% of the total combined voting power of
all classes of stock of the Company.
(aa) "Termination of Employment" occurs the first day an
individual is no longer employed by the Company or any of its
Subsidiaries, including the individual's continued employment by
an entity that ceases to be an Affiliate of the Company as
determined by the Committee.
(bb) "Voting Power" means the combined voting power of the
then-outstanding securities of a corporation entitled to vote
generally in the election of directors.
3. SCOPE OF THE PLAN.
(a) An aggregate of 300,000 shares of Stock is hereby made
available and is reserved for delivery on account of the exercise
of Awards. Such shares may be treasury shares or newly issued
shares, as may be determined from time to time by the Board or
the Committee. In order to assure that no Award would result in
the Company no longer being includable in a consolidated federal
income tax return with Kansas City Southern Industries, Inc.
("KCSI"), any of the provisions herein to the contrary
notwithstanding, no grant of Awards hereunder shall be made
which, when added to all prior Awards, or which upon exercise of
such prior Awards and such Award, would result in KCSI ceasing to
own at least 80% of the Stock, or which would otherwise result in
the Company and KCSI ceasing to be members of an affiliated group
as defined in Section 1504(a) of the Code; and any such Award,
commencing with the most recently granted Award, shall, to the
extent it would have such result, be void and unenforceable.
(b) If and to the extent (i) an Award shall expire or
terminate for any reason without having been exercised in full or
shall be forfeited, without, in either case, the Grantee having
enjoyed any of the benefits of stock ownership, or (ii) Stock is
used to pay the Option Price for Stock subject to an option, the
shares of Stock associated with such Award or used to pay the
Option Price shall become available under subsection (a) for
other Awards.
(c) The aggregate number of shares of Stock that may be
represented by Awards made under this Plan to any single
individual Grantee for any calendar year during which this Plan
is in effect shall not exceed 100,000 shares of Stock.
4. ADMINISTRATION.
(a) The Plan shall be administered by a committee
("Committee") which shall consist of one or more members, who
shall be appointed by the Board, any of whom may be removed by
the Board with or without cause, and in the absence of such
appointment, the Board shall be the Committee. Membership on the
Committee shall be subject to such other limitations as the Board
deems appropriate.
(b) The Committee shall have full and final authority, in
its discretion, but subject to the express provisions of the
Plan, as follows:
(i) to grant Awards, provided, however, that any Award
representing more than 40,000 shares of Stock shall be valid
and enforceable only if such Award has been authorized,
approved or ratified (before or after the making of the
Award) by the Compensation Committee of the KCSI Board of
Directors;
(ii) to determine (A) when Awards may be granted and
(B) to impose such additional restrictions or conditions on
the exercise of an Award (including specifying vesting or
performance requirements or other criteria) as the Committee
may deem appropriate;
(iii) to interpret the Plan and to make all
determinations necessary or advisable for the administration
of the Plan;
(iv) to prescribe, amend, and rescind rules and
regulations relating to the Plan, including rules with
respect to the exercisability and nonforfeitability of
Awards upon the Termination of Employment of a Grantee;
(v) to determine the terms and provisions and any
restrictions or conditions (including specifying any
performance or other criteria as the Committee deems
appropriate, and imposing restrictions in addition to the
restrictions of Section 13 with respect to Stock acquired
upon exercise of an option, which restrictions may continue
beyond the Grantee's Termination of Employment) of the
written agreements by which all Awards shall be evidenced
("Award Agreements") which need not be identical and, with
the consent of the Grantee, to modify any such Award
Agreement at any time;
(vi) to accelerate the exercisability of, and to
accelerate or waive any or all of the restrictions and
conditions applicable to, any Award, or any group of Awards
for any reason; and
(vii) to impose such additional conditions,
restrictions, and limitations upon the grant, exercise or
retention of Awards as are not inconsistent with the Plan
and as the Committee may, before or concurrently with the
grant thereof, deem appropriate.
The determination of the Committee on all matters relating to the
Plan or any Award Agreement shall be conclusive and final. No
member of the Committee shall be liable for any action or
determination made with respect to the Plan or any Award.
5. ELIGIBILITY. Awards may be granted to any employee of
the Company or any of its Subsidiaries. In selecting the
individuals to whom Awards may be granted, as well as in
determining the number of shares of Stock subject to, and the
other terms and conditions applicable to, each Award, the
Committee shall take into consideration such factors as it deems
relevant in promoting the purposes of the Plan.
6. CONDITIONS TO GRANTS.
(a) GENERAL CONDITIONS.
(i) The Grant Date of an Award shall be the date on
which the Committee grants the Award or such later date as
specified by the Committee.
(ii) The term of each Award shall be such period as
may be specified by the Committee in its sole discretion, in
the Award Agreement; provided that the term shall under no
circumstances extend more than 10 years after the Grant
Date.
(iii) A Grantee may, if otherwise eligible, be granted
additional Awards in any combination.
(b) GRANT OF OPTIONS AND OPTION PRICE. No later than the
Grant Date of any option, the Committee shall determine the
Option Price of such option. The Option Price of an option shall
not be less than 100% of the Fair Market Value of the Stock on
the Grant Date.
(c) GRANT OF INCENTIVE STOCK OPTIONS. At the time of the
grant of any option, the Committee may designate that such option
shall be made subject to additional restrictions to permit it to
qualify as an "incentive stock option" under the requirements of
Section 422 of the Code. Any option designated as an incentive
stock option:
(i) shall have an Option Price of (A) not less than
100% of the Fair Market Value of the Stock on the Grant Date
or (B) in the case of a 10% Owner, not less than 110% of the
Fair Market Value of the Stock on the Grant Date;
(ii) shall be for a period of not more than 10 years
(five years, in the case of a 10% Owner) from the Grant
Date, and shall be subject to earlier termination as
provided herein or in the applicable Award Agreement;
(iii) shall not have an aggregate Fair Market Value
(determined for each incentive stock option at its Grant
Date) of Stock with respect to which incentive stock options
are exercisable for the first time by such Grantee during
any calendar year (under the Plan and any other employee
stock option plan of the Grantee's employer or any parent or
Subsidiary thereof ("Other Plans")), determined in
accordance with the provisions of Section 422 of the Code,
which exceeds $100,000 (the "$100,000 Limit");
(iv) shall, if the aggregate Fair Market Value of
Stock (determined on the Grant Date) with respect to all
incentive stock options previously granted under the Plan
and any Other Plans ("Prior Grants") and any incentive stock
options under such grant (the "Current Grant") which are
exercisable for the first time during any calendar year
would exceed the $100,000 Limit, be exercisable as follows:
(A) the portion of the Current Grant exercisable
for the first time by the Grantee during any calendar
year which would, when added to any portions of any
Prior Grants first exercisable in such year, be
exercisable for the first time by the Grantee during
such calendar year with respect to Stock which would
have an aggregate Fair Market Value (determined as of
the respective Grant Date for such options) in excess
of the $100,000 Limit shall, notwithstanding the terms
of the Current Grant, be exercisable for the first time
by the Grantee in the first subsequent calendar year or
years in which it could be exercisable for the first
time by the Grantee when added to all Prior Grants
without exceeding the $100,000 Limit; and
(B) if, viewed as of the date of the Current
Grant, any portion of a Current Grant could not be
exercised under subparagraph (A) during any calendar
year commencing with the calendar year in which it is
first exercisable through and including the last
calendar year in which it may by its terms be
exercised, such portion of the Current Grant shall not
be an incentive stock option, but shall be exercisable
as a separate option at such date or dates as are
provided in the Current Grant;
(v) shall be granted within 10 years from the earlier
of the date the Plan is adopted or the date the Plan is
approved by the stockholders of the Company;
(vi) shall require the Grantee to notify the Committee
of any disposition of any Stock issued pursuant to the
exercise of the incentive stock option under the
circumstances described in Section 421(b) of the Code
(relating to certain disqualifying dispositions), within 10
days of such disposition; and
(vii) shall by its terms not be assignable or
transferable other than by will or the laws of descent and
distribution and may be exercised, during the Grantee's
lifetime, only by the Grantee; provided, however, that the
Grantee may, in any manner specified by the Committee,
designate in writing a beneficiary who is a Permitted
Transferee to exercise his incentive stock option after the
Grantee's death.
Notwithstanding the foregoing and Section 4(b)(v), the Committee
may, without the consent of the Grantee, at any time before the
exercise of an option (whether or not an incentive stock option),
take any action necessary to prevent such option from being
treated as an incentive stock option.
7. NON-TRANSFERABILITY. Each Award granted hereunder
shall not be assignable or transferable other than by will or the
laws of descent and distribution provided, however, that (i) a
Grantee may in any manner specified by the Committee, designate
in writing a beneficiary who is a Permitted Transferee to
exercise his Award after the Grantee's death, and (ii) a Grantee
may assign his Award to a Permitted Transferee.
8. EXERCISE. Subject to Sections 4(b)(vi) and 13 and such
terms and conditions as the Committee may impose, each option
shall be exercisable in one or more installments commencing not
earlier than the vesting date or dates specified in the Award
(and in no event earlier than the Grant Date of such option).
Each option shall be exercised by delivery to the Company at
the principal place of business, to the attention of the
Secretary, during normal business hours, of written notice of
intent to purchase a specific number of shares of Stock subject
to the option, together with a signed Restriction Agreement in
form attached as Appendix II. The Option Price of any shares of
Stock as to which an option shall be exercised shall be paid in
full at the time of the exercise. Payment may, at the election
of the Grantee, be made in any one or any combination of the
following:
(i) cash;
(ii) with the prior approval of the Committee, by
tendering Stock valued at its Fair Market Value on the date
of exercise; provided, however, that if such shares of Stock
were acquired by the person exercising the Award from the
Company or an Affiliate, the shares of Stock shall have been
held for at least six months; or
(iii) with the prior approval of the Committee, and to
the extent permitted by law, a note representing a loan in
accordance with Section 9.
9. LOANS AND GUARANTEES. The Committee may, in its
discretion:
(a) allow an Optionee to defer payment to the Company of
all or any portion of (i) the Option Price of an option and
(ii) any taxes associated with a benefit hereunder which is not a
cash benefit at the time such benefit is so taxable, or
(b) cause the Company to guarantee a loan from a third
party to the Optionee, in an amount equal to all or any portion
of such Option Price and any related taxes.
Any such payment deferral by the Company pursuant to this
Section 9 shall be represented by a full recourse negotiable note
of the Optionee, bearing interest at a rate determined by the
Committee not less than the applicable federal rate in effect at
the time the deferral is allowed, as determined and published by
the Secretary of the Treasury pursuant to Section 1274(d) of the
Code, secured by a pledge of the Stock acquired by exercise of
the option, and including such other terms and conditions not
inconsistent with this Plan as the Committee may determine. An
Optionee shall not be entitled to defer the payment of such
Option Price or any related taxes unless the Optionee enters into
a binding obligation to pay the deferred amount.
10. MANDATORY WITHHOLDING TAXES.
(a) Whenever, under the Plan, shares of Stock are to be
delivered upon exercise of an Award, the Company shall be
entitled to require as a condition of delivery (i) that the
Optionee remit an amount sufficient to satisfy all federal,
state, and local withholding tax requirements related thereto,
(ii) the withholding of such sums from compensation otherwise due
to the Optionee or from any shares of Stock due to the Optionee
under the Plan or (iii) any combination of the foregoing.
(b) If any disqualifying disposition described in
Section 6(c)(vi) is made with respect to shares of Stock acquired
under an incentive stock option granted pursuant to the Plan,
then the person making such disqualifying disposition or election
shall remit to the Company an amount sufficient to satisfy all
federal, state, and local withholding taxes thereby incurred;
provided that, in lieu of or in addition to the foregoing, the
Company shall have the right to withhold such sums from any
payment whether of compensation or otherwise due to the Grantee
or Optionee or from any shares of Stock due to the Grantee or
Optionee under the Plan.
11. ELECTIVE SHARE WITHHOLDING.
(a) Subject to Section 11(b), a Grantee may elect the
withholding ("Share Withholding") by the Company of a portion of
the shares of Stock otherwise deliverable to an Optionee upon the
exercise of an Award (each a "Taxable Event") having a Fair
Market Value equal to the minimum amount necessary to satisfy
required federal, state, or local withholding tax liability
attributable to the Taxable Event.
(b) Each Share Withholding election by a Grantee shall be
subject to the following restrictions:
(i) any Grantee's election shall be subject to the
Committee's right to revoke such election of Share
Withholding by such Grantee at any time before the Optionee
exercises the Award;
(ii) the Grantee's election must be made on or before
the date on which the Award is exercised; and
(iii) the Grantee's election shall be irrevocable.
12. TERMINATION OF EMPLOYMENT.
(a) FOR ANY REASON OTHER THAN CAUSE, RETIREMENT, DEATH OR
DISABILITY. Except as otherwise provided by the Committee in the
Award Agreement, if a Grantee has a Termination of Employment for
any reason other than for Cause, Retirement, death or Disability,
then any unexercised option, to the extent exercisable
immediately before the Grantee's Termination of Employment, may
be exercised in whole or in part, not later than three months
after such Termination of Employment (but only during the term of
the option).
(b) FOR CAUSE. If a Grantee has a Termination of
Employment for Cause, any unexercised options shall terminate
immediately upon the date of the Grantee's Termination of
Employment.
(c) FOR RETIREMENT, DEATH OR DISABILITY. Except as
otherwise provided in the Award Agreement, if a Grantee has a
Termination of Employment on account of the Grantee's Retirement,
death or Disability, then any unexercised options may be
exercised, in whole or in part, within 175 days after such
Termination of Employment (but only during the term of the
option) by the Grantee or, after his or her death, by (A) his or
her personal representative or by the person to whom the option
is transferred by will or the applicable laws of descent and
distribution, or (B) the Grantee's beneficiary designated in
accordance with Section 6(c)(vii) or 7.
13. RESTRICTIONS ON STOCK. All shares of Stock delivered
on account of the exercise of Awards shall be subject to the
restrictions set forth in Appendix III; moreover, in addition to
the restrictions set out in Appendix III if Stock bearing other
restrictions ("Tendered Stock") is used to pay the Option Price
for Stock subject to an option, then the Committee may, but need
not, specify that a number of shares of Stock acquired on
exercise of the option equal to the number of shares of Tendered
Stock shall, unless the Committee provides otherwise, be subject
to the same restrictions as the Tendered Stock, determined as of
the date of exercise of the option.
14. SECURITIES LAW MATTERS.
(a) If the Committee deems necessary to comply with the
Securities Act of 1933, the Committee may require a written
investment intent representation by the Optionee and may require
that a restrictive legend be affixed to certificates for shares
of Stock.
(b) If, based upon the opinion of counsel for the Company,
the Committee determines that the exercise or nonforfeitability
of, or delivery of benefits pursuant to, any Award would violate
any provision of (i) federal or state securities laws or (ii) the
listing requirements of any national securities exchange
applicable to the Company or any corporation of which the Company
is an affiliate as determined under such laws or requirements,
then the Committee may postpone any such exercise,
nonforfeitability or delivery, as the case may be, but the
Company shall use its best efforts to cause such exercise,
nonforfeitability or delivery to comply with all such provisions
at the earliest practicable date.
15. FUNDING. Benefits payable under the Plan to any person
shall be paid directly by the Company. The Company shall not be
required to fund, or otherwise segregate assets to be used for
payment of, benefits under the Plan.
16. NO EMPLOYMENT RIGHTS. Neither the establishment of the
Plan, nor the granting of any Award shall be construed to
(a) give any Grantee the right to remain employed by the Company
or any of its Subsidiaries or to any benefits not specifically
provided by the Plan or (b) in any manner modify the right of the
Company or any of its Subsidiaries to modify, amend, or terminate
any of its employee benefit plans.
17. RIGHTS AS A STOCKHOLDER. A Grantee or Optionee shall
not, by reason of any Award, have any right as a stockholder of
the Company with respect to the shares of Stock which may be
deliverable upon exercise or payment of such Award until such
shares have been delivered to him.
18. NATURE OF PAYMENTS. Any and all grants or deliveries
of shares of Stock hereunder shall constitute special incentive
payments to the Grantee and shall not be taken into account in
computing the amount of salary or compensation of the Grantee for
the purposes of determining any pension, retirement, death or
other benefits under (a) any pension, retirement, profit-sharing,
bonus, life insurance or other employee benefit plan of the
Company or any of its Subsidiaries or (b) any agreement between
the Company or any Subsidiary, on the one hand, and the Grantee,
on the other hand, except as such plan or agreement shall
otherwise expressly provide.
19. SUBSTITUTION OF AWARDS. Upon or in anticipation of any
recapitalization, merger, consolidation, reorganization,
liquidation, dissolution or similar event (whether or not also
described in Section 21) by reason of which the Company or the
Shares cease to exist:
(a) if (i) any person offers to issue awards ("Replacement
Awards") in substitution of Awards under this Plan, (ii) in the
determination of the Committee the economic value of the
Replacement Awards is equivalent to the then-existing difference
between the Option Price under an Award and the Fair Market Value
of the Stock subject to the Award, and (iii) in the determination
of the Committee the other terms and conditions of the
Replacement Awards are as similar as practicable under the
circumstances to the outstanding Awards under this Plan, then the
Committee may determine that each outstanding Award shall be
cancelled and replaced by the Replacement Award; or
(b) the Committee may determine that any outstanding Award
shall become immediately exercisable in full or in such part as
determined by the Committee; or
(c) the Committee may determine that any outstanding Award
that remains outstanding as of the date of such event shall be
cancelled and the Optionee paid in cash an amount equal to the
excess of (i) the highest price per share (in cash or in other
consideration valued at its fair market value) paid to any
shareholder of the Company in connection with such event, over
(ii) the Option Price, multiplied by the number of Shares subject
to the option.
20. NON-UNIFORM DETERMINATIONS. Neither the Committee's
nor the Board's determinations under the Plan need be uniform and
may be made by the Committee or the Board selectively among
persons who receive, or are eligible to receive, Awards (whether
or not such persons are similarly situated). Without limiting
the generality of the foregoing, the Committee shall be entitled,
among other things, to make non-uniform and selective
determinations, to enter into non-uniform and selective Award
Agreements as to (a) the identity of the Grantees, (b) the terms
and provisions of Awards, and (c) the treatment, under
Section 12, of terminations of employment. Notwithstanding the
foregoing, the Committee's interpretation of Plan provisions
shall be uniform as to similarly situated Grantees or Optionees.
21. ADJUSTMENTS. The Committee shall make equitable
adjustment of:
(a) the aggregate numbers of shares of Stock specified in
Sections 3(a) and 3(c);
(b) the number of shares of Stock specified in Section
4(b)(i);
(c) the number of shares of Stock covered by an Award; and
(d) the Option Price
to reflect a stock dividend, stock split, reverse stock split,
share combination, recapitalization, merger, consolidation,
acquisition of property or shares, separation, asset spin off,
reorganization, stock rights offering, liquidation or similar
event, of or by the Company. Any such adjustment made by the
Committee shall be final and binding upon the Grantee, any other
Optionee, the Company and all other interested persons.
22. AMENDMENT OF THE PLAN. The Board may from time to time
in its discretion amend or modify the Plan without the approval
of the stockholders of the Company; provided, however, that no
such amendment shall be applied to adversely affect any Award
previously granted without the consent of the Grantee unless such
amendment is required to comply with applicable law (including
applicable tax and securities law requirements).
23. REPURCHASE OF OPTIONS. In the event that KCSI or any
other person enters into an agreement to sell Stock of the
Company owned by it to any person (other than one or more
Affiliates of the Company) who prior to that transaction did not
directly or indirectly own more than 50% of the Stock of the
Company and who after the transaction directly or indirectly will
own more than 50% of the Stock of the Company, the Company at its
election by written notice to any or all Optionees may repurchase
any or all outstanding options at a price equal to the difference
of the Fair Market Value of the Stock subject to the option minus
the Option Price of such Stock. No option may be exercised after
delivery of such notice; and payment of such price shall fully
discharge and extinguish all obligations of the Company
respecting such option.
24. TERMINATION OF THE PLAN. The Plan shall terminate on
the tenth (10th) anniversary of the Effective Date or at such
earlier time as the Board may determine. Any termination,
whether in whole or in part, shall not affect any Award then
outstanding under the Plan.
25. NO ILLEGAL TRANSACTIONS. The Plan and all Awards
granted pursuant to it are subject to all laws and regulations of
any governmental authority which may be applicable thereto; and
notwithstanding any provision of the Plan or any Award, Optionees
shall not be entitled to exercise Awards or receive the benefits
thereof and the Company shall not be obligated to deliver any
Stock or pay any benefits to an Optionee if such exercise,
delivery, receipt or payment of benefits would constitute a
violation by the Optionee or the Company of any provision of any
such law or regulation.
26. CONTROLLING LAW. The law of the State of Delaware,
except its law with respect to choice of law, shall be
controlling in all matters relating to the Plan.
27. SEVERABILITY. If all or any part of the Plan is
declared by any court or governmental authority to be unlawful or
invalid, such unlawfulness or invalidity shall not serve to
invalidate any portion of the Plan not declared to be unlawful or
invalid. Any Section or part of a Section so declared to be
unlawful or invalid shall, if possible, be construed in a manner
which will give effect to the terms of such Section or part of a
Section to the fullest extent possible while remaining lawful and
valid.
Executed this 13th day of January, 1998.
BERGER ASSOCIATES, INC.
By: /s/Gerard M. Lavin, President
---------------------------------
<PAGE>
APPENDIX I
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FAIR MARKET VALUE
-----------------
This Appendix I sets forth the definition of Fair Market
Value that shall apply to shares of Stock delivered with respect
to Awards ("Option Stock") under the Berger Associates, Inc.
Stock Option Plan (the "Plan"). Terms used in this Appendix I
that are defined in the Plan shall have the meanings ascribed to
them in the Plan.
1. GENERAL. The Fair Market Value of a share of Stock as
of a specified date (the "determination date") shall equal 15
times the per share net after-tax earnings of the Company for the
four complete fiscal quarters preceding the determination date.
For this purpose, the Company's per share net earnings shall be
determined by the Committee in its sole discretion in accordance
with generally accepted accounting principles in effect for the
applicable period applied on a consistent basis, (a) excluding
(1) adjustments for discontinued operations, (2) the cumulative
effect of changes in accounting principles, and (3) extraordinary
items; (b) on a fully diluted basis using methods and assumptions
which the Committee determines to be consistent with those used
by Kansas City Southern Industries, Inc. ("KCSI"), and (c) based
upon the net after-tax earnings of the Company for the four
complete fiscal quarters preceding the determination date.
2. CERTAIN TRANSACTIONS. Notwithstanding Section 1 above,
in the event that Kansas City Southern Industries, Inc. ("KCSI"),
or any other person enters into and consummates an agreement to
sell Stock of the Company owned by it to any person who prior to
that transaction did not directly or indirectly own more than 50%
of the Stock of the Company and who after the transaction
directly or indirectly will own more than 50% of the Stock of the
Company, the Fair Market Value of a share of Stock as of the date
of consummation shall be the fair market value per share realized
or to be realized by such selling shareholder from such
transaction.
<PAGE>
APPENDIX II
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RESTRICTION AGREEMENT
---------------------
In accordance with the terms of the Berger Associates, Inc.
Stock Option Plan (the "Plan"), the undersigned Grantee or
Optionee exercising an option under the Plan hereby agrees that
the shares of Stock acquired by the exercise of the option under
the Plan shall be subject to the Stock Restrictions set forth in
Appendix III to the Plan, a copy of which is attached hereto.
-----------------------------------
Name (please print)
-----------------------------------
Signature
-----------------------------------
Date
<PAGE>
APPENDIX III
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STOCK RESTRICTIONS
------------------
This Appendix III sets forth restrictions that shall apply
to shares of Stock delivered with respect to Awards ("Option
Stock") under the Berger Associates, Inc. Stock Option Plan (the
"Plan"), which shall apply until such date as a registration
statement filed by the Company under the Securities Act of 1933
registering the Stock shall have become effective and a public
market exists for the Stock through listing on a national
securities exchange or being regularly quoted for trading on the
over-the-counter market. Terms used in this Appendix III that
are defined in the Plan shall have the meanings ascribed to them
in the Plan.
1. COMPANY/KCSI RIGHT OF FIRST REFUSAL.
------------------------------------
(a) In the event any holder of Option Stock (a "Selling
Stockholder") desires to sell, transfer, pledge, or otherwise
dispose of any or all of the shares of Option Stock owned by such
Selling Stockholder, the Selling Stockholder shall notify the
Company in writing prior to any such sale, transfer, pledge or
other disposition. The notice shall set forth the identity and
mailing address of the prospective purchaser or other transferee
("Prospective Purchaser"), the quantity and description of the
Option Stock proposed to be sold, the price per share to be
received therefor, the terms for payment of such price per share,
and the address of the Selling Stockholder to which the Company
(or Kansas City Southern Industries, Inc. ("KCSI")) may send
notices to such Selling Stockholder. Upon receipt of such notice
the Company shall promptly send a copy thereof to KCSI.
(b) The Company or, if KCSI desires to purchase the Option
Stock, KCSI (the "Purchaser") shall thereupon be entitled, for a
period of the longer of (i) 20 days after the date of receipt of
such notice by the Company or (ii) seven months after the date
the Selling Stockholder acquired the Option Stock, to purchase
all (but not less than all) of the Option Stock that the Selling
Stockholder proposes to transfer. The price per share for the
purchase shall be the Fair Market Value per share and the terms
of the purchase shall be immediate full payment in cash; except
that if the Selling Stockholder's notice contains the price and
terms of a bona fide offer, the price and terms of the purchase
may, at the option of the Purchaser, be either (i) the Fair
Market Value per share and immediate full payment in cash, or
(ii) the price and terms of the bona fide offer. The Purchaser
may exercise this right of first refusal by notice to the Selling
Stockholder within the time prescribed by clause (i) or (ii) of
the first sentence of this subsection as applicable, accompanied
by a negotiable check (if at Fair Market Value) for the
appropriate amount payable to the Selling Stockholder or payment
pursuant to the price and terms of the bona fide offer.
2. COMPANY/KCSI CALL OPTION.
-------------------------
(a) Either the Company or KCSI (a "Purchaser") may, at any
time on or after the later of (i) a Grantee's Termination of
Employment or (ii) six months after the date the Selling
Stockholder acquired the Option Stock, purchase from any holder
of any Option Stock acquired by or through the Grantee (a
"Selling Stockholder") all, but not less than all, of such Option
Stock. Except as otherwise provided in subsection (b), the price
per share shall be the Fair Market Value per share and the terms
of the purchase shall be immediate full payment in cash. The
Purchaser may exercise this right of purchase by written notice
to the Selling Stockholder accompanied (i) if the Grantee's
Termination of Employment occurred by reason of Retirement, by
notice of the Selling Stockholder's right to elect an installment
sale under subsection (b), and (ii) in all other cases by a
negotiable check for the appropriate amount payable to the
Selling Stockholder.
(b) Notwithstanding subsection (a), if the Grantee's
Termination of Employment occurred by reason of Retirement, then
the Selling Stockholder may irrevocably elect, by written notice
to the Purchaser within 10 days after the notice given by the
Purchaser under subsection (a), that in lieu of a sale and
purchase under subsection (a), the sale and purchase be made in
five annual installments, the first of which shall occur on the
date elected by the Selling Stockholder not later than 10 days
after the notice given by the Purchaser under subsection (a), and
the remaining sales and purchases on each annual anniversary of
that date. The number of Shares of Option Stock sold in each
installment shall be all of the Shares of Option Stock then owned
by the Selling Stockholder (including any Option Stock acquired
at any time during the installment period) divided by the number
of installments (including the current installment) remaining.
The price per share of the purchase shall be the Fair Market
Value per share at the time of each installment and the terms of
the purchase shall be full payment in cash for such installment.
A Selling Stockholder shall as to the first and each subsequent
installment provide written notice to the Purchaser accompanied
by a calculation of the number of shares of Option Stock to be
sold in the installment, a certificate or certificates
representing the Option Stock sold in the installment in
accordance herewith duly endorsed for transfer, and containing
the address of the Selling Stockholder to which the Purchaser may
send the purchase price required hereunder. Within 5 days of the
Purchaser's receipt of such certificates, the Purchaser shall
send the Selling Stockholder a negotiable check for the
appropriate amount payable to the Selling Stockholder.
3. DELIVERY OF STOCK. Immediately upon the receipt of a
negotiable check for the purchase price from a Purchaser pursuant
to Section 1 or 2, the Selling Stockholder shall surrender to the
Purchaser, by first class or certified mail addressed to the
Company as aforesaid, the certificate or certificates
representing the Option Stock sold in accordance herewith, duly
endorsed for transfer. If the certificate or certificates
surrendered by the Selling Stockholder represent a greater number
of shares of Option Stock than have been so sold, the Company
shall promptly issue to the Selling Stockholder a new certificate
representing the shares of Option Stock not so sold.
4. OBLIGATIONS ON A CHANGE OF CONTROL SALE. If (i) the
holders of Stock representing a majority of the Stock on a fully
diluted basis (collectively, "Control Sellers" and each,
individually, a "Control Seller") approve a sale of the Company's
outstanding Stock, or a merger or other business combination
involving the Company, or a sale of all or substantially all of
the Company's assets, and (ii) in the opinion of a nationally
recognized investment bank selected by the Control Sellers
substantially the fair value of the Company is being realized in
such transaction (an "Approved Sale"), then each holder of Option
Stock (a "Non-Control Seller") shall consent to and raise no
objections against the Approved Sale, and if the Approved Sale is
structured as a sale of Stock, each Non-Control Seller shall, if
requested by the Control Sellers, sell (or otherwise transfer)
the same proportion of his, her or its Stock as the proportion of
the Stock being transferred by the Control Sellers which are
being transferred by the Control Sellers in such transaction or
related series of transactions, on the terms and conditions
received by the Control Sellers. Each Non-Control Seller shall
promptly take all actions reasonably necessary or reasonably
desirable (in the judgment of the Control Sellers) in connection
with the consummation of the Approved Sale. Without limiting the
foregoing, (i) if the Approved Sale is structured as a merger,
consolidation or similar transaction, each Non-Control Seller
shall vote in favor of such transaction and waive any dissenters'
rights, appraisal rights or similar rights in connection with
such merger or consolidation, and (ii) if the Approved Sale is
structured as a sale or exchange of Shares, each Non-Control
Seller shall sell or exchange the Shares held by such Non-Control
Seller on the terms and conditions approved by the Control
Sellers. The Company or the Control Sellers shall notify the
Non-Control Sellers in writing not less than ten days prior to
the proposed consummation of an Approved Sale; PROVIDED that such
Non-Control Seller agrees not to directly or indirectly (without
the prior written consent of the Company), disclose to any other
Person (other than to such Non-Control Seller's legal counsel in
confidence, as otherwise necessary to protect such Non-Control
Seller's rights under this Appendix III or as otherwise required
by law) any information related to such potential sale of the
Company.
5. RESTRICTION ON TRANSFER. No Grantee, Optionee, or
other holder of Option Stock may sell, transfer, pledge, or
otherwise dispose of Option Stock except as permitted by this
Appendix III; except that the restrictions of this Appendix III
shall not apply to: (1) involuntary transfers of shares of
Option Stock by operation of law or otherwise, (2) transfer by
gift, or in exchange for a partnership interest, to a Permitted
Transferee, provided the Permitted Transferee shall agree in
writing to take such Option Stock subject to, and to be bound by,
all the terms of the Plan including this Appendix III, (3) a
pledge of Option Stock in connection with a loan to enable the
Grantee to acquire Option Stock pursuant to Section 9 of the
Plan, or (4) any sale of Option Stock to the Company or KCSI on
any terms negotiated between the Selling Stockholder and the
Purchaser, whether or not consistent with this Appendix III. The
restrictions of this Appendix III shall continue to apply to
Option Stock and the holder thereof following any transfer
thereof, except that the restrictions shall not apply to Option
Stock sold to the Company or KCSI. Any sale or transfer of
Option Stock by any holder thereof in violation of the
restrictions of this Appendix III shall be void. The
restrictions of this Appendix III shall terminate on such date as
a registration statement filed by the Company under the
Securities Act of 1933 registering the Stock shall have become
effective and a public market exists for the Stock through
listing on a national securities exchange or being regularly
quoted for trading on the over-the-counter market.
6. LEGEND. All certificates representing shares of Option
Stock or other Securities convertible or exchangeable for Option
Stock which are held by any person shall bear the following
legend, in addition to any other legend required by applicable
law or otherwise:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH RESTRICTIONS UNDER
THE TERMS OF A STOCK OPTION PLAN AND A RESTRICTION
AGREEMENT, COPIES OF WHICH ARE ON FILE WITH THE
SECRETARY OF BERGER ASSOCIATES, INC.
7. FAILURE TO DELIVER SHARES. If a holder of Option Stock
becomes obligated to sell any shares of Option Stock to the
Company or KCSI pursuant to this Appendix III and fails to
deliver such Option Stock in accordance with the terms of this
Appendix III, the Company or KCSI, as the case may be, may, at
its option, in addition to all other remedies it may have, send
to such holder the Fair Market Value for such shares as is herein
specified. Thereupon, the Company upon written notice to such
holder (a) shall cancel on its books the certificate or
certificates representing the Option Stock to be sold and
(b) shall issue, in lieu thereof, in the name of the Company or
KCSI, as the case may be, a new certificate or certificates
representing such Option Shares, and thereupon all of such
holder's rights in and to such Option Shares shall terminate.
8. MISCELLANEOUS.
-------------
(A) AMENDMENTS. This Appendix III may be amended by
the Company at any time in accordance with Section 22 of the
Plan, except that it may not be amended to impose greater
restrictions on Option Stock received with respect to Awards
previously awarded without the consent of the Grantee to whom the
Option Stock was awarded.
(B) NOTICE. Any notice, certificate for Option Stock,
or other document that this Appendix III requires or permits to
be given or delivered to the Company shall be properly given if
sent by United States mail, first class postage prepaid, properly
addressed to the Company at:
Berger Associates, Inc.
210 University Boulevard
Denver, Colorado 80206
Attn: Corporate Secretary
or to such other address as the Company may specify, or delivered
by hand to the office of the Secretary of the Company during
normal business hours.
(C) FURTHER EXECUTION. The Company, Grantees and
Optionees shall execute any additional documents or instruments
necessary to carry out the purposes of this Appendix III.
(D) HEADINGS. The headings herein are solely for
convenience and shall not serve to modify or interpret the text
of the Sections at the beginning of which they appear.
Executed this ______ day of _________________, 1997.
BERGER ASSOCIATES, INC.
By: ____________________________________
Gerard M. Lavin, President
<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 FOUR DIRECTORS" and
"THE BOARD OF DIRECTORS."
STOCK PERFORMANCE GRAPH
The proxy statement also includes two stock performance
graphs, which are supplemented by tables showing the dollar value
of the points on the graph. The tables are set forth in this
electronic format document in the section entitled "STOCK
PERFORMANCE GRAPH." Both the graphs and the tables 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, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of
Stockholders of Kansas City Southern Industries, Inc., at the Gem
Theater, 1601 East 18th Street, Kansas City, Missouri, at 10:00
a.m., on Thursday, April 30, 1998. 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,
Landon H. Rowland
Chairman of the Board, 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)
<PAGE>
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, 1998, receipt of which is hereby acknowledged.
Signature ____________________ Date __________________, 1998
Signature ____________________ Date __________________, 1998
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)
<PAGE>
KANSAS CITY SOUTHERN INDUSTRIES, INC. PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
Landon H. Rowland, James E. Barnes and Michael R. Haverty, or any
one of them, are hereby authorized, with full power of
substitution, to vote the shares of stock of Kansas City Southern
Industries, Inc. entitled to vote for the stockholder(s) signing
this proxy at the Annual Meeting of Stockholders to be held on
April 30, 1998, or any adjournment thereof as specified herein
and in their discretion on all other matters that are properly
brought before the Annual Meeting. IF NO CHOICE IS SPECIFIED,
SUCH PROXIES WILL VOTE "FOR" THE NOMINEES NAMED HEREON AND "FOR"
PROPOSALS 2, 3 AND 4.
1. Election of four directors: Nominees: A. Edward Allinson,
Paul F. Balser, James R. Jones and Landon H. Rowland.
[ ] 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 holders' discretion, to elect
the maximum number of management nominees.
2. Approval of the Berger Associates, Inc. Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of a Performance-Based Incentive Compensation Plan
for the Chief Executive Officer of Janus Capital
Corporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Ratification of the Board of Directors' selection of Price
Waterhouse LLP as KCSI's independent accountants for 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE>
KANSAS CITY SOUTHERN INDUSTRIES, INC.
114 West 11th Street
Kansas City, Missouri 64105-1804
March 27, 1998
Dear KCSI 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
Thank you,
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)
<PAGE>
CONFIDENTIAL VOTING INSTRUCTIONS TO UMB BANK, N.A. AS TRUSTEE
UNDER THE KANSAS CITY SOUTHERN INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
Signature _______________________ Date _____________, 1998
Please sign exactly as name appears.
(Continued on other side)
(Continued, and to be signed on reverse side)
(Tear Here)
<PAGE>
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 April 30, 1998, 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 four directors: Nominees: A. Edward Allinson,
Paul F. Balser, James R. Jones and Landon H. Rowland
[ ] FOR all nominees except those indicated below:
[ ] WITHHOLD AUTHORITY to vote for all nominees.
2. Approval of the Berger Associates, Inc. Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of a Performance-Based Incentive Compensation Plan
for the Chief Executive Officer of Janus Capital
Corporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Ratification of the Board of Directors' selection of Price
Waterhouse LLP as KCSI's independent accountants for 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
If the voting instruction card is not returned, the Trustee
must vote such shares in the same proportions as the shares for
which voting instruction cards were received from the plan
participants.
<PAGE>
KANSAS CITY SOUTHERN INDUSTRIES, INC.
114 West 11th Street
Kansas City, Missouri 64105-1804
March 27, 1998
Dear DST ESOP Participant:
Enclosed is your voting instruction card to UMB Bank, N.A.
as Trustee for shares allocated to your account under the DST
Systems, Inc. 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:
Becky Bremerkamp 816-435-8609 or
Tammy Vincent 816-435-8628 or
800-438-2320
Thank you,
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)
<PAGE>
CONFIDENTIAL VOTING INSTRUCTIONS TO UMB BANK, N.A. AS TRUSTEE
UNDER THE DST SYSTEMS, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
Signature ____________________________ Date ____________, 1998
Please sign exactly as name appears.
(Continued on other side)
(Continued, and to be signed on reverse side)
(Tear Here)
<PAGE>
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 April 30, 1998, 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 four directors: Nominees: A. Edward Allinson,
Paul F. Balser, James R. Jones and Landon H. Rowland
[ ] FOR all nominees except those indicated below:
[ ] WITHHOLD AUTHORITY to vote for all nominees.
2. Approval of the Berger Associates, Inc. Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of a Performance-Based Incentive Compensation Plan
for the Chief Executive Officer of Janus Capital
Corporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Ratification of the Board of Directors' selection of Price
Waterhouse LLP as KCSI's independent accountants for 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
If the voting instruction card is not returned, the Trustee
must vote such shares in the same proportions as the shares for
which voting instruction cards were received from the plan
participants.
<PAGE>
KANSAS CITY SOUTHERN INDUSTRIES, INC.
114 West 11th Street
Kansas City, Missouri 64105-1804
March 27, 1998
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,
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.)
<PAGE>
(Tear Here)
CONFIDENTIAL VOTING INSTRUCTIONS TO UMB BANK, N.A.
AS TRUSTEE UNDER THE KANSAS CITY SOUTHERN INDUSTRIES, INC.
PROFIT SHARING PLAN
Signature ________________________ Date _______________, 1998
Please sign exactly as name appears.
(Continued on other side.)
(Continued, and to be signed on reverse side)
(Tear Here)
<PAGE>
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 April 30, 1998, 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 four directors: Nominees: A. Edward Allinson,
Paul F. Balser, James R. Jones and Landon H. Rowland
[ ] FOR all nominees except those indicated below:
____________________________________________________________
[ ] WITHHOLD AUTHORITY to vote for all nominees.
2. Approval of the Berger Associates, Inc. Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of a Performance-Based Incentive Compensation Plan
for the Chief Executive Officer of Janus Capital
Corporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Ratification of the Board of Directors' selection of Price
Waterhouse LLP as KCSI's independent accountants for 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
If the voting instruction card is not returned, the Trustee
must vote such shares in the same proportions as the shares for
which voting instruction cards were received from the plan
participants.
