SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to _____________
Commission file number 1-4717
KANSAS CITY SOUTHERN INDUSTRIES, INC.
(Exact name of Company as specified in its charter)
Delaware 44-0663590
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
114 West 11th Street, Kansas City, Missouri 64105
(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code (816) 983-1303
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of Each class which registered
------------------- ----------------
Preferred Stock, Par Value $25 Per New York Stock Exchange
Share, 4%, Noncumulative
Common Stock, $.01 Per Share Par Value New York Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act: None
Indicate by check mark whether the Company (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Company
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Company's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Company Stock. The Company's common stock is listed on the New York Stock
Exchange under the symbol "KSU." As of March 31, 2000, 111,399,354 shares of
common stock and 242,170 shares of voting Preferred stock were outstanding.
On such date, the aggregate market value of the voting common and Preferred
stock held by non-affiliates was $9,577,014,534 (amount computed based on
closing prices of Preferred and common stock on New York Stock Exchange).
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the following documents are incorporated herein by reference into
Part of the Report as indicated:
Part of Report
Document into which incorporated
- -------- -----------------------
Company's Definitive Proxy Statement for the Parts I, III
2000 Annual Meeting of Shareholders, which will be
filed no later than December 31, 1999
Explanatory Note
- ----------------
The Company hereby amends Part IV, Item 14 of its Form 10-K for the year
ended December 31, 1999, solely for the purpose of filing the opinion of
counsel which was referenced in the Company's initial 10-K. Notwithstanding
the filing of this opinion of counsel, the issue of whether the Company may
continue to consolidate Janus Capital Corporation remains under discussion
with the Staff of the Securities and Exchange Commission.
<PAGE>
Part IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Item 14(a)(3) EXHIBITS
The separate section filed as part of the Annual report on 10-K under
the caption "List of Exhibits" is hereby amended to add the following exhibit
which is filed herewith.
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
99.2 Opinion Letter of Rothgerber Johnson
& Lyons LLP dated April 20, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized and in the capacities indicated on
April 24, 2000.
Kansas City Southern Industries, Inc.
By: /s/ Landon H. Rowland
----------------------------------
Landon H. Rowland
Chairman, President, Chief
Executive Officer and Director
<PAGE>
INDEX
NUMBER DESCRIPTION
- ------ -----------
99.2 Opinion Letter of Rothgerber Johnson & Lyons LLP dated
April 20, 2000.
<PAGE>
OPINION LTR OF ROTHGERBER
ROTHGERBER JOHNSON & LYONS LLP
ATTORNEYS AT LAW
SUITE 3000
COLORADO SPRINGS ONE TABOR CENTER CHEYENNE
------ 1200 SEVENTEENTH STREET ----
SUITE 1100 DENVER, COLORADO 80202-5839 SUITE 210
NORWEST BANK TOWER TELEPHONE (303) 623-9000 ONE PIONEER CENTER
90 SOUTH CASCADE FAX (303) 623-9222 2424 PIONEER AVENUE
COLORADO SPRINGS, COLORADO 80903 WWW.ROTHGERBER.COM CHEYENNE, WYOMING 82001
TELEPHONE (719) 386-3000 TELEPHONE (307)638-6262
FAX (719) 386-3070 FAX (307) 638-6565
April 20, 2000
Stilwell Financial, Inc.
114 West 11th Street
Kansas City, Missouri 64105
Ladies and Gentlemen:
You have asked for our opinion as to whether or not Stilwell Financial,
Inc., a Delaware corporation ("Stilwell"), which owns approximately 82% of the
voting securities of Janus Capital Corporation, a Colorado corporation
("Janus"), controls Janus under Colorado law notwithstanding certain rights
Thomas H. Bailey may have to designate a majority of the members of the Board
of Directors under the Stock Purchase Agreement described below. Further you
have asked our opinion as to whether the officer status of Thomas H. Bailey,
the President and Chairman of Janus, can be terminated so as to effectively
terminate his rights to select a majority of the directors of Janus, whether
the termination of the officer status of Mr. Bailey would be a breach of the
Stock Purchase Agreement, and, if the termination of the officer status of Mr.
Bailey were a breach of the Stock Purchase Agreement, whether Mr. Bailey would
have a right, through injunctive or other equitable relief, to be reinstated as
an officer of Janus. In addition, you have asked for a legal analysis of (i)
whether, if Mr. Bailey's removal as an officer were threatened, he could obtain
temporary injunctive relief and (ii) whether certain amendments to the Stock
Purchase Agreement made prior to April 13, 1994 extended the expiration of that
agreement under a Colorado statute limiting the duration of such voting
agreements to ten years. You have also asked for our opinion regarding the
effect under Colorado law of an amendment dated November 19, 1999 to the Stock
Purchase Agreement. In addition, you have asked whether support is found in
Colorado case law for each of the conclusions reached in our opinion and we are
including the citation of the relevant Colorado cases in support of each of our
conclusions.
Based upon the information, and subject to the qualifications and
limitations, set forth herein, having due regard for such legal considerations
as we deem relevant and our review of the documents described herein, we are of
the opinion that Stilwell controls Janus, the officer status of Mr. Bailey
could be terminated by Stilwell, if it chose to do so, without breaching the
Stock Purchase Agreement and, even if the termination of the officer status of
Mr. Bailey were a breach of the Stock Purchase Agreement, Mr. Bailey would not
have a right to be reinstated as an officer. In addition, we believe that a
Colorado court would not give Mr. Bailey temporary injunctive relief to stop
<PAGE>
his removal as an officer if such removal were threatened and that the
amendments prior to April 13, 1994 to the Stock Purchase Agreement did not
extend the 1994 expiration date of the voting provisions under C.R.S. 1973,
Section 7-4-117(6). We are unable to express an opinion as to whether the
November 19, 1999, amendment to the voting provisions of the Stock Purchase
Agreement was valid under Colorado law for the reasons set forth below, but we
note that that inability does not affect our conclusions as to the other
matters covered by this opinion.
Under Section 7-101-401 of the Colorado Business Corporation Act (the
"Colorado Act"), "control" is defined as "the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
an entity, whether through ownership of voting shares, by contract, or
otherwise." Section 7-108-101 of the Colorado Act provides that, unless
otherwise indicated in the articles of incorporation, "all corporate powers
shall be exercised by or under the authority of, and the business and affairs
of the corporation managed under the direction of, the board of directors or
such other persons as the articles of incorporation provide shall have the
authority and perform the duties of a board of directors." Article VII,
Section 1 of Janus' articles of incorporation provides that "the business and
affairs of the corporation shall be managed by a board of directors . . ."
Article III, Section 1 of the Janus bylaws provides that "the property and
business of the corporation shall be controlled and managed by a board of
directors, . . ." Based on the foregoing, Janus is controlled by its Board of
Directors. The question then becomes, does Stilwell control the Board of
Directors of Janus?
The Directors of Janus are to be elected at each annual meeting of
shareholders. SEE Section 7-108-103 of the Colorado Act; Article VII, Section
1 of Janus' articles of incorporation and Article II, Section 1 of Janus'
bylaws. Section 7-102-102 of the Colorado Act provides that cumulative voting
in the election of directors is mandatory unless the corporation provides
otherwise in its articles of incorporation. Article VIII of the Janus articles
of incorporation prohibits cumulative voting in the election of directors.
Article II, Section 11 of the Janus bylaws provides that directors shall be
elected by a plurality of the votes cast by shareholders entitled to vote for
directors. Section 7-107-202 of the Colorado Act and Section 9 of Article II
of Janus' bylaws provide that each outstanding share shall be entitled to one
vote upon each matter submitted to a vote of shareholders. Therefore, absent
any other limitations, Stilwell, as the holder of approximately 82% of the
voting power of Janus, would clearly control the election of the Board of
Directors of Janus.
However, in November 1999, Stilwell became a party (as assignee) to a
Stock Purchase Agreement with Thomas H. Bailey and others, dated April 13,
1984. This agreement has provisions pursuant to which Stilwell's predecessor
agreed to vote its shares to elect a majority of directors of Janus designated
by Mr. Bailey under certain conditions and thus under Colorado law this portion
of the Stock Purchase Agreement constituted a voting agreement. At the time
this agreement was entered into and until July 1, 1994, Colorado corporate law
provided that
An agreement between two or more shareholders, if in writing
and signed by the parties thereto, may provide that in exercising
any voting rights the shares held by them shall be voted as
<PAGE>
provided by the agreement, as the parties may agree, or as
determined in accordance with a procedure agreed upon by them. No
such agreement shall be effective for a term of more than ten
years, but at any time within two years prior to the time of
expiration of such agreement, the parties may extend its duration
for as many additional periods, each not to exceed ten years, as
they may desire. SEE C.R.S. 1973, Section 7-4-117(6).
It is our understanding that the voting provisions of the Stock Purchase
Agreement were not extended in accordance with the above reference provisions
and that no amendment extending the term of these provisions was entered into
during the two year period preceding the expiration of the statutory term as
provided in the statute.(1) Therefore the voting agreement provisions of the
original agreement terminated as a matter of Colorado law on its tenth
anniversary, April 13, 1994. SEE GROSSMAN V. SHERMAN, 599 P.2d 909, 911 (Colo.
1979)(holding that a contract for a term of one year expired when plaintiff
completed his agreed year of employment and no new agreement was reached by the
parties prior to expiration); MCDONALD'S CORP. V. ROCKY MOUNTAIN MCDONALD'S,
INC., 590 P.2d 519, 521 (Colo. App. 1979) (finding that where a contract
provides for a manner in which termination can be effected, those provisions
must ordinarily be enforced as written). As of November 19, 1999, an
Assignment and Assumption Agreement and Fifth Amendment to Stock Purchase
Agreement (the "Amendment") was entered into by the parties including Stilwell
which purported to amend and restate the original voting agreement provision to
replace it with the following provision that may be seen as limiting Stilwell's
control of the Board of Directors of Janus:
11.01 The parties hereto have AGREED that the present management
of JCC shall continue to operate the business of JCC, including the
business of JMC prior to the merger of JMC into JCC, of providing
investment advice and management services to Janus Fund, as hereinafter
provided. So long as Thomas H. Bailey is a holder of at least 5% of the
shares of JCC and continues to be employed as President or Chairman of
the Board of JCC and if Thomas H. Bailey does not serve as President of
JCC, James P. Craig, III serves as President and Chief Executive Officer
(or Co-Chief Executive Officer with Thomas H. Bailey) of JCC, (i) Thomas
H. Bailey shall continue to establish and implement policy with respect
to the investment advisory and portfolio management activity of JCC, (ii)
without Thomas H. Bailey's consent, Stilwell shall not cause JCC to
implement, or impose on the management of JCC any policies, conditions or
restrictions regarding the policy referred to in (i) other than those
which were in place at November 15, 1983, and (iii) any changes in
management philosophy, style or approach influencing the management of
JCC with respect to the policy referred to in (i) shall be mutually
agreed to by Thomas H. Bailey and by Stilwell. In furtherance of this
objective, so long as Thomas H. Bailey is a holder of at least 5% of the
shares of JCC and continues to be employed as President or Chairman of
the Board of JCC and if Thomas H. Bailey does not serve as President of
JCC, James P. Craig, III serves as President and Chief Executive Officer
- -----------------------------------
(1) The first four amendments to the Stock Purchase Agreement were dated
January 4, 1985; March 18, 1988; February 5, 1992; and January 1, 1991,
respectively. None of these amendments dealt with the voting agreement or
purported to extend its duration.
<PAGE>
(or Co-Chief Executive Officer with Thomas H. Bailey) of JCC, Stilwell
agrees to vote its JCC Shares to elect directors of JCC, at least a
majority of whom shall be selected by Thomas H. Bailey, subject to
Stilwell's approval, which approval shall not be unreasonably withheld.
Each of the preceding provisions set forth in this paragraph is expressly
conditioned, however, upon such management and Thomas H. Bailey
continuing to perform their respective duties with reasonable care and in
a manner which is consistent with past practice and not contrary to the
best interests of JCC.
We are unable to express an opinion as to how a Colorado court would treat
this purported amendment and restatement of an expired agreement, given that
the court's inquiry would center upon facts which we cannot know; in
particular, the intent of the parties other than Stilwell upon entering into
the Amendment. We also cannot predict how a court would deal with each party's
respective intent as impacted by the knowledge and intent of the other party.
If a court were to hold that the Amendment was null and void, then Mr. Bailey
lost his voting rights by operation of law in 1994, and neither KCSI nor
Stilwell have been bound to vote for any of Mr. Bailey's nominees since April
13, 1994. If this were the outcome, then our opinion regarding whether
Stilwell controls Janus would not be needed as Mr. Bailey would have no board
designation rights under the Stock Purchase Agreement. The alternative is that
the Amendment is valid as a new contract and that the voting provisions as so
stated in the Amendment are in effect. For purposes of the remainder of this
opinion we will assume that a court would treat the Amendment as a new
contract, and that Paragraph 11.01 as amended and restated by the Amendment is
currently in effect.
Under Colorado law, contracts are to be construed in accordance with the
intent of the parties thereto. SEE USI PROPERTIES EAST, INC. V. SIMPSON, 938
P.2d 168 (Colo. 1997); CACHE NAT'L BANK V. LUSHER, 882 P.2d 952 (Colo. 1994).
The provisions in Paragraph 11.01 of the Stock Purchase Agreement ("Paragraph
11.01") regarding Stilwell's support of Mr. Bailey's director selections
reflect that the parties intended to assure Mr. Bailey that FOR SO LONG AS HE
CONTINUED HIS SPECIFIED AFFILIATION WITH JANUS, he would control policy
regarding investment by Janus of its advisory clients' assets. If the
selection of directors by Mr. Bailey were to further some other objective, or
if the conditions of Paragraph 11.01, as set forth above, were not met,
Stilwell would not be obligated under that agreement to consent to, or vote
for, such directors. Therefore, reasonably Stilwell could refuse to approve
director selections who did not agree with Stilwell on matters other than
policy with respect to investment advisory and portfolio management. If the
parties' intent had been to give Mr. Bailey control over other aspects of
Janus, presumably they would not have required Stilwell's approval for his
director selections and would not have needed to state, as they did, that
Stilwell's obligation to support his nominees was to further the objective of
preserving his control over the investment policy of Janus. In fact, another
provision of the Stock Purchase Agreement, contained in Paragraph 12.01,
reflects the parties' intention that Stilwell control the Board of Directors of
Janus (except with respect to investment policy) because, under that provision
Stilwell is obligated to cause Janus to pay dividends. The declaration and
payment of dividends is, of course, a board function.
Stilwell also retains the power to unilaterally terminate Mr. Bailey's
board selection rights under the Stock Purchase Agreement by terminating his
status as an officer of Janus. Under the Stock Purchase Agreement, if Mr.
Bailey were no longer President or Chairman, his board selection rights would
end. (If he were to cease only to be President and Mr. Craig were President,
those rights would continue, unless Mr. Bailey also were to cease to be
Chairman.) The Janus Bylaws contain no reference to a Chairman, but authorize
the Board of Directors to designate officers in addition to a president. On
December 14, 1999, Mr. Bailey was elected by the Board to the offices of
President, Chairman and Chief Executive Officer as part of a slate of officers
of Janus. Under the circumstances, we believe his position as Chairman is that
of an officer. To remove Mr. Bailey, Stilwell could request the Board of
Directors of Janus to take that action or Stilwell could take direct action to
remove him. Stilwell has the power to amend the bylaws of Janus to allow
removal of Mr. Bailey, or any other Janus officer, by shareholder action
without Board action. Section 7-108-303(4) of the Colorado Act provides "The
bylaws or the board of directors may make provisions for the removal of
officers by other officers or by the shareholders." While the bylaws of Janus
do not currently provide for a removal of officers by shareholders, the bylaws
could be amended by shareholder action to include such a provision. Section 7-
110-201(2) of the Colorado Act provides "The shareholders may amend the bylaws
even though the bylaws may also be amended by the board of directors." Such
action could be taken at a meeting or by unanimous written consent of
shareholders. SEE Section 7-107-104 of the Colorado Act. Section 7-107-102
of the Colorado Act requires a corporation to hold a special meeting of
shareholders if it receives written demand for the meeting, stating the
purpose(s) for which it is to be held from holders of shares representing at
least 10% of all the votes entitled to be cast on any issue proposed to be
considered at the meeting. The Board of Directors may fix a record date for
such a meeting not more than 70 days preceding the date of the meeting and if
it does not, the record date is to be the twentieth day preceding the meeting.
SEE Section 7-107-107 and Article II, Section 4 of the Janus bylaws. Section
7-107-105 of the Colorado Act and Article II, Section 3 of the Janus bylaws
require notice of the special meeting to be given to shareholders no fewer than
10 nor more than 60 days' before the date of the meeting. If a corporation
does not give notice of the special meeting within 30 days after the date the
last of the demands necessary to require the calling of the meeting was
received by the corporation, on application of any person who participated in a
demand for a special meeting, the holding of the meeting may be summarily
ordered by the district court of the county in Colorado where the corporation's
principal office is located. SEE Section 7-107-103 of the Colorado Act.
Of importance, the power of shareholders to remove officers has existed
under Colorado law at all times since the Amendment was entered into. SEE
Section 7-108-303(4) of the Colorado Act. If a Colorado court were to find
that the Amendment constituted a new agreement or an amendment of the original
terminated agreement, rather than a nullity, a court would presume that the
parties were aware of the power of shareholders to remove officers. SEE KEELAN
V. VAN WATERS & ROGERS, INC., 820 P.2d 1145, 1148 (Colo. App. 1991)(statutory
law which pertains to the terms of a contract is considered part of that
contract). Therefore, the parties would have taken action to modify or waive
this right if it had been the intent of the parties to insure that Mr. Bailey
could not be removed as an officer by shareholder action. SEE ZIEGLER V.
HENDRICKSON, 528 P.2d 400, 403 (Colo. App. 1974)(waiver of contract terms
occurs when party is entitled to assert particular right, knows the right
exists, and intentionally relinquishes such right).
More important, even assuming the original agreement remained in effect,
we believe that Stilwell would be able to avail itself of the shareholder
removal provisions. When the Colorado Corporate Act was enacted effective July
1, 1994, Section 7-117-101 was included to set forth the applicability of the
Act to existing corporations. Section 7-117-101(2) states that Articles 101 to
117 of the Act applied to all existing corporations. While Section 7-117-101
does contain exceptions to certain provisions of the Act for corporations
existing prior to July 1, 1994, no exception was included as to the provisions
of Section 7-108-303(4). Therefore, the general rule of Section 7-117-101(2)
applies and Section 7-108-303(4) applies to corporations existing prior to July
1, 1994. Therefore, we do not believe there is a basis upon which a Colorado
court could find that the shareholder removal provisions were not available to
Stilwell.
The power to remove directors is further evidence of control of the Board.
Under Colorado law, shareholders have the right to remove any or all of the
directors of a Colorado corporation with or without cause at any time, unless
the articles of incorporation provide otherwise. SEE Section 7-108-108.
Janus' articles do not prohibit removal of directors by shareholders. Upon any
removal of Janus directors by Stilwell, the remaining directors would have the
power to terminate Mr. Bailey's employment and this would terminate his board
selection rights under the Stock Purchase Agreement. The Board would have to
take any such action by unanimous consent or at a meeting held in compliance
with Colorado law, including satisfying quorum requirements. Section 7-108-205
of the Colorado Act provides that, unless a greater number is required by the
bylaws, a quorum of a board of directors consists of (1) a majority of the
number of directors fixed if the corporation has a fixed board size, or (2) a
majority of the number of directors fixed (or, if no number is fixed, of the
number in office immediately before the meeting begins) if a range for the size
of the board is established pursuant to Section 7-108-103(2). Section 7-108-
103(2) provides that the bylaws may establish a range for the size of the board
of directors by fixing a minimum and maximum number of directors. Janus has a
fixed number of directors (6) under Article III, Section 1 of its bylaws.
Article III, Section 6 of Janus' bylaws provides that a majority of the full
board of directors shall constitute a quorum. However, if after any removal by
Stilwell there were not enough directors remaining to meet these quorum
requirements, Stilwell has the unilateral right to amend Janus' bylaws so that
a smaller number of directors, or even one director, would meet the quorum
requirements and could exercise the full powers of the Board of Directors. SEE
Section 7-110-201 of the Colorado Act.
It is our understanding that Mr. Bailey has no employment agreement.
Further, nothing in the Stock Purchase Agreement assures him of continued
employment. Removal of Mr. Bailey by Stilwell would not be inconsistent with
Stilwell's obligation to vote for his nominees to the Janus Board (selected
with Stilwell's consent), because it is clear from the language of the Stock
Purchase Agreement that the purpose for this obligation was to assure Mr.
Bailey that, as long as he continued to be so affiliated with Janus as an
officer, Stilwell would support his director nominees (to the extent noted
above). This was so he would not be forced by Stilwell to change his policies
regarding management of the assets of Janus' investment advisory clients. If
Mr. Bailey were to cease to be so affiliated, the need for such protection
would end and Stilwell no longer would have any limitation under the Stock
Purchase Agreement on its ability to elect or remove directors of Janus. In our
opinion, the removal of Mr. Bailey as President and Chairman of Janus would
terminate his director selection rights, and would not breach the Stock
Purchase Agreement. If Mr. Bailey were to challenge his removal by instituting
litigation, based solely upon the facts set forth herein and our review of the
documents described herein, we believe that Stilwell would prevail in that
litigation.
It is also our opinion that even if the removal of Mr. Bailey were found
by a Colorado court to be a breach of the Stock Purchase Agreement, we believe
that, as a matter of Colorado corporate law, Mr. Bailey would not be entitled
to reinstatement through injunctive or other equitable relief. The power of
removal of officers granted to directors and shareholders by statute is
absolute. SEE Section 7-108-303(4) of the Colorado Act. Officers of a
corporation, as a matter of corporate law, serve at the pleasure of the
directors and shareholders. While there are no cases in Colorado dealing with
the shareholders' power to remove officers, the statute is unambiguous.
Moreover, guidance as to this matter is contained in the Official Comments to
the Model Business Corporation Act Annotated relating to Section 8.43 regarding
removal of officers and Section 8.44 regarding contract rights of officers,
(Colorado courts have looked to the Model Business Corporation Act when
Colorado law was lacking. SEE BOWERS BUILDING COMPANY V. ALTURA GLASS CO., 694
P.2d 876 (Colo. 1984)). The Official Comment to Section 8.43 reads in
pertinent part:
In part because of THE UNLIMITED POWER OF REMOVAL, . . ., a
board of directors may grant an officer an employment contract that
extends beyond the term of the board of directors. This type of
contract is binding on the corporation even if the articles of
incorporation or bylaws provide that officers are appointed for
terms shorter than the period of the employment contract. If the
later board refuses to reappoint that person as an officer, HE HAS
THE RIGHT TO SUE FOR DAMAGES BUT NOT FOR SPECIFIC PERFORMANCE OF
HIS EMPLOYMENT CONTRACT. (Emphasis added.)
Mr. Bailey does not have an employment contract guaranteeing his right to
remain in office for any period of time. Nor does he have an absolute right to
elect the majority of directors of Janus since his Article XI rights require
that his nominees be reasonably acceptable to Stilwell. In addition, as noted
above, the provisions granting him this right gave him the right only as long
as he served as Chairman or President and owned 5% of its stock. It appears
that what Mr. Bailey bargained for was the assurance that as long as he was
Chairman or President of Janus, he would be working for a board of directors,
the majority of whom shared his views as to policies with respect to the
investment advisory and portfolio management activity of Janus. The language
of Article XI in fact implies that Mr. Bailey's employment could be terminated
because it says it continues his rights only so long as he ". . . CONTINUES TO
BE EMPLOYED . . ."
Mr. Bailey has been given certain rights to select directors of Janus only
so long as he is employed as Chairman or President. He has no contract with
respect to such employment. To reinstate him as Chairman or President or to
reinstate his Article XI rights following his removal, the Colorado courts
would have to violate their rule as set forth by the Colorado Supreme Court in
BELLOW V. FICO INSURANCE COMPANY, 878 P.2d 672 (1994). In that case, the court
held
"Specific performance can only be accomplished according to
the terms of the party's contract. The court may not make a
contract for the party and then order it to be specifically
performed."
Even if Colorado corporate law did not provide, as we believe it does,
that a removed officer has no right to reinstatement through injunctive relief
or other equitable remedy, we believe that reinstatement would not be an
available remedy to Mr. Bailey under Colorado contract law. In addition, we do
not believe that a temporary injunction would be an available remedy for Mr.
Bailey if his removal were threatened. The granting of a preliminary
injunction is an extraordinary remedy, and is considered the exception rather
than the rule. SEE SPORTSMEN'S WILDLIFE DEFENSE FUND V. WESTERN SLOPE
ENVIRONMENTAL RESOURCE COUNCIL, 949 F. Supp. 1510, 1522 (D. Colo. 1996).
Therefore, the right to relief must be clear and unequivocal. ID. A party
seeking injunctive relief must establish the following four factors: (1) a
substantial likelihood of success on the merits; (2) that the movant will
suffer irreparable injury unless the injunction issues; (3) that the threatened
injury to the movant substantially outweighs whatever damages the proposed
injunction may cause the opposing party; and (4) that the injunction would not
be adverse to the public interest. SEE LIBERTARIAN PARTY OF COLORADO V.
BUCKLEY, 938 F. Supp. 687, 690 (D. Colo. 1996). We believe it is very unlikely
that Mr. Bailey will be able to establish all four of these factors. SEE CROWN
RESOURCE CORP. V. GOLD CAPITAL CORP., 650 F. Supp. 985, 988 (D. Colo.
1987)(denying motion for preliminary injunction brought by incumbent management
of corporation to hold election results in abeyance because incumbent
management could not demonstrate element of irreparable harm). With respect to
Janus, given that Janus is not a party to the Stock Purchase Agreement nor to
the Amendment, Janus has no right under the Amendment to have Mr. Bailey serve
as an officer.
Our opinions as herein expressed are subject to the following
qualifications and limitations:
(a) We express no opinion as to the laws of any jurisdiction other than
Colorado;
(b) Our opinion is limited to the specific issues expressly set forth
herein and no other opinion may be inferred or implied beyond the
matters expressly stated in this letter;
(c) Our opinion is rendered on the date hereof and we have no continuing
obligation hereunder to inform you of changes of law or fact
subsequent to the date hereof or facts of which we have become aware
after the date hereof; and
This opinion is solely for your benefit for the purpose of a determination
by you and your accountants as to the appropriateness of filing consolidated
financial statements for KCSI, Stilwell and Janus and may not be furnished to,
or relied upon by, any other person or entity without the express written
consent of the undersigned, except that we hereby consent to your furnishing a
copy of this opinion to your accountants, PricewaterhouseCoopers, and to their
reliance hereon and to the filing of our opinion with the Securities and
Exchange Commission as an exhibit to the 1999 Form 10-K of Kansas City Southern
Industries, Inc. and the Form 10 Registration Statement of Stilwell.
Very truly yours,
ROTHGERBER JOHNSON & LYONS LLP
/s/ Rothgerber Johnson & Lyons LLP
