KANSAS CITY SOUTHERN INDUSTRIES. INC.
1987 STOCK OPTION PLAN
(as amended September 26, 1996)
1. Plan and Eligibility.
Options to purchase shares of the Company's common stock and stock
appreciation rights and Limited Rights with respect to such options may be
granted to such key management employees of the Company or of its subsidiaries
or of the "Milwaukee-Kansas City Southern Joint Agency," who are regularly
employed for more than twenty hours per week and more than five (5) months per
year as salaried employees and who are selected by the Stock Option Plan
Committee of the Company's Board of Directors (the "Committee"). Such options
to purchase shares of the Company's common stock granted hereunder shall be
either incentive stock options as defined by Section 422A of the Internal
revenue Code of 1986 (the "Code") or non-incentive stock options, as may be
designated by the Committee.
2. Limitation on Aggregate Shares.
No more than one million eight hundred thousand (1,800,000) shares of
common stock in the aggregate may be sold pursuant to options or delivered
upon the exercise of stock appreciation rights granted under this Plan. Such
one million eight hundred thousand (1,800,000) shares of common stock may be
either authorized and unissued shares, treasury shares, or a combination
thereof, as the Committee shall determine. Any shares that, prior to
exercise, cease to be subject to previously granted options or stock
appreciation rights, whether by expiration, cancellation or otherwise, shall
be available for reoffering under this Plan, except as otherwise provided in
paragraphs 4(b) and 5(b).
3. Options.
Subject to the terms of this Plan, the Committee shall grant options
hereunder, determine and designate the recipients of options, the status of
the option as incentive stock options or non-incentive stock options, the
dates options are granted (which shall be the date the Committee adopts a
resolution granting an option pursuant to this Plan or such later date as may
be specified by the Committee in such resolution (the "Grant Date")), the
number of shares subject to option, the option prices and the option periods.
Options granted under this Plan shall be subject to such terms and conditions
and evidenced by agreements in such form as shall be determined from time to
time by the Committee and shall in any event be subject to the terms and
conditions set forth below and in paragraph 6, and in the case of incentive
stock options, subject also to the express provisions in paragraph 7:
(a) Option Price. The option price per share shall be fixed by the
Committee at not less than one hundred percent (100%) of the fair market
value of the shares on the date of grant, subject to amendment as
provided in paragraph 7.
(b) Term of Options. No option shall be made exercisable more ten (10)
years after the date of grant.
(c) Exercise of Option. Options shall be exercised by written notice
to the Company (attention of the Corporate Secretary) accom panied by
payment in full of the option price. Such payment is to be made in
cash, or, if approved by the Committee by the transfer and delivery to
the Company of shares of common stock of the Company having a fair
market value equal to the option price of the shares to be received in
exchange therefor.
4. Stock Appreciation Rights.
Subject to the terms of this Plan, the Committee shall determine and
designate the recipients of stock appreciation rights, the dates stock
appreciation rights are granted, and the number of shares subject to stock
appreciation rights. Stock appreciation rights may be granted only with
respect to shares of common stock as to which options have been granted
hereunder, whether such options are granted previous to, or contemporaneous
with, such stock appreciation rights. Stock appreciation rights shall be
subject to such terms and conditions and evidenced by agreements in such form
as may be determined from time to time by the Committee and shall in any event
be subject to the terms and conditions set forth below and in paragraph 6:
(a) Nature of Stock Appreciation Rights. Stock appreciation rights
shall be exercisable at such time and to such extent as the option to which
such rights relate (the "Related Option") shall be exercisable. A stock
appreciation right shall entitle an optionee to receive from the Company, at
the time of exercise of such right, an amount equal to the excess of the fair
market value (at the date of exercise) of a common share over the option
price of the Related Option multiplied by the number of shares as to which the
optionee is exercising the stock appreciation right. The amount payable to
the optionee hereunder may be paid by the Company in common stock (at fair
market value on the date of exercise), in cash, or in a combination thereof,
as the Committee may determine, which determination shall be made after
considering any preference expressed by the optionee.
(b) Exercise. A stock appreciation right shall be exercised by written
notice to the Company (attention of the Corporate Secretary) at any time
prior to its stated ex piration (which shall not be more than ten (10)
years after the date of grant of the Related Option), and the Related
Option shall be deemed canceled to the extent the stock a ppreciation right
is exercised. Any exercise of the Related Option or any Limited Rights
granted in connection with a stock appreciation right (the "Related Limited
Right") prior to the exercise of a stock appreciation right shall be deemed to
cancel the stock appreciation rights to the extent the Related Option or
Related Limited Right is so exercised. Upon exercise of a stock appreciation
right, shares covered by the Related Option, or the applicable portion thereof
(whether or not stock is delivered upon such exercise), shall not be available
for the granting of further options under this Plan.
5. Limited Rights.
Subject to the terms of this Plan, the Committee shall determine and
designate the recipients of Limited Rights, the dates Limited Rights are
granted, and the number of shares subject to Limited Rights. Limited Rights
may be granted only with respect to shares of common stock as to which options
have been granted hereunder, whether such options are granted previous to, or
contemporaneous with, such Limited Rights. Limited Rights shall be subject to
such terms and conditions and be evidenced by agreements in such form as may
be determined from time to time by the Committee and shall in any event be
subject to the terms set forth below in paragraph 6:
(a) Nature of Limited Rights. A Limited Right shall be exercisable to
such extent as the option to which such Limited Right relates (the "Related
Option") is exercisable and only during the three (3) month period immediately
following a Change in Control of the Company (as defined in subparagraph (i)
of paragraph 6 hereof). A Limited Right shall entitle an optionee to receive
from the Company, at the time of exercise of the Limited Right, an amount
equal to the excess of (i) the fair market value (at the date of exercise) of
one (1) share of the Company's common stock, over (ii) the option price of the
Related Option, multiplied by the number of shares as to which the optionee is
exercising the Limited Right, if the Related Option is an incentive stock
option, or an amount equal to the excess of (i) the greater of (A) the highest
price per share of KCSI common stock paid in connection with any Change in
Control of the Company, or (B) the fair market value (at the date of exercise)
of one (1) Share of the Company's common stock, over (ii) the option price of
the Related Option, multiplied by the number of shares as to which the
optionee is exercising the Limited Right, if the Related Option is a
non-incentive stock option. The amount payable to the optionee hereunder shall
be paid by the Company in cash.
(b) Exercise. A Limited Right shall be exercised by written notice to
the Company (attention of the Corporate Secretary) at any time prior to its
stated expiration (which shall be the date of the expiration of the Related
Option or such earlier expiration date as may be specified in the agreement
granting the Limited Rights), and the Related Option and any stock
appreciation right granted in connection with the Related Option (the "Related
Stock Appreciation Right") shall be deemed canceled to the extent the Limited
Right is exercised. Any exercise of the Related Option or Related Stock
Appreciation Right prior to the exercise of a Limited Right shall be deemed to
cancel the Limited Right to the extent the Related Option or Related Stock
Appreciation Right is so exercised. Upon exercise of a Limited Right, shares
covered by the Related Option, or the applicable portion thereof, shall not be
available for the granting of further options under this Plan.
6. Additional Provisions Applicable to Options, Stock Appreciation Rights and
Limited Rights.
(a) Conditions and Limitations on Exercise. Options, stock
appreciation rights and Limited Rights may be made exercisable in one (1) or
more installments, upon the happening of certain events, up on the passage of
a specified period of time, or upon the fulfillment of conditions, as the
Committee shall decide in each case when the option, stock appreciation right
or Limited Right is granted. Except as otherwise provided in paragraph 6(c)
or 6(i), no option, stock appreciation right or Limited Right shall be
exercisable earlier than one (1) year after the date of grant of the option,
except that in the case of an extension of a previously granted option, stock
appreciation right or Limited Right or a grant of a stock appreciation right
or Limited Right with respect to a previously granted option, such option,
stock appreciation right, or Limited Right shall not be exercisable earlier
than six (6) months after the date of such extension or grant. A stock
appreciation right or Limited Right granted hereunder may be exercised only
when there is a positive spread, i.e., when the market price of the stock
subject to the option exceeds the exercise price of the option.
(b) Termination of Emp loy ment. In the event the employment of an
employee to whom an option, stock appreciation right or Limited Right has been
granted under the Plan shall be terminated other than by death or by the
Company for cause (as determined by the Board of Directors) or, in the case of
voluntary termination by the employee, without the Company's consent, such
option, stock appreciation right or Limited Right may be exercised (to the
extent that the employee was entitled to do so immediately prior to
termination of his or her employment) at any time within three (3) months
after such termination of employment, or one (1) year after such
termination
in the case of any person who is disabled within the meaning of Section
22(e)(3) of the Code, but in no event after the expiration of the term for
which the option was granted (except that the Committee may, in its
discretion, include in any option or stock appreciation right an acceleration
of the time within which such option or stock appreciation right may be
exercised in the event of the option's disability). However, in the event
that the employee' s termination of employment is as a result of retirement
pursuant to any retirement plan of the Company (as determined by the Board of
Directors), any option, stock appreciation right or Limited Right held by such
employee may be exercised (to the extent that the employee was entitled to do
so immediately prior to termination of his or her employment) after such
termination of employment until the expiration of the term for which the
option or right was granted; provided, however, that no shares of stock
acquired by such employee upon exercise of an incentive stock option will be
eligible to qualify for tax treatment under Section 422A of the Internal
Revenue Code unless such employee acquires such stock by exercising such
incentive stock option not later than three (3) months from the date such
employee is last employed by the Company. Options, stock appreciation rights
and Limited Rights granted under the Plan shall not be affected by any change
of duties or position so long as the optionee continues to be in the employ of
the Company. Retirement pursuant to any retirement plan of the Company shall
be deemed to be a termination of employment with the Company. The option
agreements may contain such provisions as the Committee shall approve with
reference to the effect of approved leaves of absence.
(c) Death of Optionee. If a person holding an option, stock
appreciation right, or Limited Right which has not expired or terminated
shall die, then the estate of the decedent or the person or persons to
whom his or her rights under the op tion, stock appreciation right or Limited
Right were transferred by will or by the laws of descent and distribution or
pursuant to a written designation of beneficiary by such person filed with,
and approved by, the Committee prior to such person's death may, at any time
within twelve (12) months after the date of such death (whether or not the
three (3) month or one (1) year period specified in subparagraph (b), if
applicable, had commenced to run on the date of such death), but in no event
after the expiration of the term for which the option, stock appreciation
right or Limited Right was granted, exercise such option, stock appreciation
right or Limited Right with respect to any shares as to which such person
could have exercised such option, stock appreciation right or Limited Right at
the time of his or her death (except that the Committee may, in its
discretion, include in any option or stock appreciation right an acceleration
of the time within which such optio n or stock appreciation right may be
exercised in the event of t he option's death). Any such exercise shall be
effected by written notice to the Committee from the person entitled to
exercise the option, stock appreciation right or Limited Right and the person
or persons giving the same shall furnish to the Committee such other documents
or papers as the Committee may reasonably require, including, without
limitation, evidence of the authority of such person or persons to exercise
the option, stock appreciation right or Limited Right and evidence
satisfactory to the Committee that any death taxes payable with respect to
such shares, if applicable, have been paid or provided for.
(d) Termination for Cause. In the event that the employment of a n
employee to whom an option has been granted under the Plan has been terminated
by the Company for cause (as determined by the board of Directors), then any
outstanding options and stock appreciation rights granted to such employee
shall terminate and cease to be exercisable immediately upon such termination
of employment.
(e) Nontransferability. Options, stock appreciation rights and Limited
Rights may not be transferred other than by will or the laws of descent and
distribution or pursuant to a written designation of beneficiary as provided
in paragraph 6(c) and, during the lifetime of the optionee, may be exercised
only by the optionee.
(f) Listing, Registration and Compliance With Laws and Regulations.
Each option, stock appreciation right and Limited Right shall be subject to
the requirement that if at any time the Committee shall determine, in its
discretion, that the listing, registration or qualification of the shares
subject to the option or appreciation right upon any securities exchange or
under state or federal securities or other law or regulation, or the consent
or approval of any governmental regulatory body, is necessary or desirable as
a condition of, or in connection with, the granting of such option, stock
appreciation right or Limited Right or the issue or purchase of the shares
thereunder, no such option, stock appreciation right or Limited Right may be
exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free
of any conditions not acceptable to the Committee, and the optionee will
supply the Company with such certificates, representations and information as
the Company shall request and shall otherwise cooperate with the Company in
obtaining such listing, regist ration, qualification, consent or approval.
In the case of officers and other persons subject to Section 16(b) of the
Securities Exchange Act of 1934, the Committee may at any time impose any
limitations upon the exercise of an option, stock appreciation right or
Limited Right which, in the Committee's discretion, are necessary or
desirable to permit transactions hereunder by such persons to comply with
Section 16(b) and the rules and regulations thereunder. If the Company,
as part of an offering of securities or otherwise, finds it desirable
because of federal or state regulatory requirements to reduce the period
during which any options, stock appreciation rights or Limited Right may
be exercised, the Committee may, in its discretion and without the
options' consent, so reduce such period on not less than fifteen (15) days'
written notice to the optionees.
(g) Adjustment for Change in Common Stock. In order to prevent the
dilution or enlargement of options, stock appreciation rights or Limited
Rights in the event of a reorganization, recapitalization, stock split, stock
dividend, combination of shares, merger, consolidatio nor other change in the
Company's common stock, the Committee shall make such changes as it may deem
appropriate in the number and type of shares authorized by this Plan, the
number and type of shares covered by outstanding options, stock appreciation
rights and Limited Rights, and the prices specified in outstanding options,
stock appreciation rights and Limited Rights.
(h) Taxes. The Company shall be authorized to withhold from any option,
stock appreciation right or Limited Right granted, payment due or shares or
other property transferred under the Plan the amount of income, withholding
and payroll taxes due and payable in respect of an option , stock appreciation
right or Limited Right, payment or shares or other property transferred
hereunder and to take such other action as may be necessary in the opinion of
the Company to satisfy all obligations for the payment of such taxes. The
Company may require the employee to pay to it such tax prior to and as a
condition of the making of such payment or transfer of shares or property
under the Plan. In accordance with any applicable administrative guidelines
it establishes, the Committee may allow or may require the employee exercising
the option, stock appr eciation right or Limited Right to pay the amount of
taxes due or payable in respect of such option, stock appreciation right or
Limited Right by withholding from any payment of shares due as a result of
such option, stock appreciation right or Limited Right, or by permitting the
employee to deliver to the Company, shares having a fair market value, as
determined by the Committee, equal to the amount of such taxes.
(i) Acceleration upon Change in Control. Notwithstanding anything
contained herein to the contrary, in the event of a Change in Control of the
Company (as hereinafter defined), each outstanding option, stock appreciation
right, and Limited Right shall become immediately exercisable in full;
provided, however, that no option, stock appreciation right, or Limited Right
shall be exercisable earlier than six (6) months after the date of grant. For
purposes of this Plan, a "Change in Control of the Company" shall be deemed
to have occurred if (i) for any reason at any time at least seventy-five
percent (75%) of the members of the Board of Directors shall be individuals
who were members of such Board on the date of adoption of this Plan or
individuals whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least seventy-five percent (75%) of
the members of the Board then still in office who were members of such Board
on the date of adoption of the this Plan, or (ii) any "person" (as such term
is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934
(the "Exchange Act")) shall have become according to a public announcement
or filing, without the prior approval of the Board of Directors of the
Company, the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing
twenty-five percent (25%) or more (calculated in accordance with Rule 13d-3)
of the combined voting power of the Company's then outstanding voting
securities (such "person" hereafter referred to as a "Major Stockholder"); or
(iii) the stockholders of the Compa ny shall have approved a merger,
consolidation or dissolution of the Company or a sale, lease, exchange or
disposition of all or substantially all of the Company's assets, or a Major
Stockholder shall have proposed any such transaction, unless any such merger,
consolidation, dissolution, sale, lease, exchange or disposition shall have
been approved by at least seventy-five percent (75%) of the members of the
Board of Directors of the Company who were either (A) members of such Board of
Directors on the date of adoption of this Plan or (B) elected or nominated by
at least seventy-five percent (75%) of the members of the Board of Directors
then still in office who were members of the Board of Directors on the date of
adoption of this Plan.
7. Additional Provisions Applicable to Incentive Stock Options.
(a) Stock Ownership Limitation. No incentive stock option shall be
granted to any employee if at the time the option is granted such employee
owns stock possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company unless (i) the option price is at
least one hundred and ten percent (110%) of the fair market value of the
Company stock at the time of the grant, and (ii) such option by its terms is
not exercisable after the expiration of five (5) years from the date such
option is granted.
(b) Fai r Market Value Limitation. With respect to any option granted
after December 31, 1986, and before May 21, 1987, the aggregate fair market
value (determined as of the time the option is granted) of the stock with
respect to which incentive stock options are exercisable for the first time by
any employee during any calendar year (under all incentive stock option plans
of the Company or any subsidiary corporation) shall not exceed one hundred
thousand ($100,000) or such greater amount as may be permitted under
subsequent amendments to Section 422A. With respect to any option granted on
or after May 21, 1987, no fair market value limitation of the stock with
respect to which options are exercisable for the first time by any employee
during any calendar year shall be applicable.
(c) Exercise of Option. Except as provided in paragraph 6(b) or 6(c),
no incentive stock option granted hereunder may be exercised by the optionee
unless the optionee is then in the employ of the Company and shall have been
continuously so employed by the Company since the date such option was
granted.
(d) Intent to Qualify as Incentive Stock Options. Each of the incentive
stock options granted pursuant to the Plan is intended to qualify as an
"incentive stock option" and the Plan shall be interpreted, and the power and
authority granted to the Committee shall be exercised, only in a manner
consistent with such intent.
8. Administration.
This Plan shall be administered by the Committee, which shall consist of
at least that number of directors required by Rule 16b-3 and/or Code Section
162(m), each of whom is a non-employee director within the meaning of Rule
16b-3 and an outside director within the meaning of Code Section 162(m).
The Committee shall have full power to construe and interpret this Plan
and options, stock appreciation rights and Limited Rights granted under this
Plan, to determine the terms and provisions of the respective option
agreements, which need not be identical, including such terms and provisions
as in the judgment of the Committee are necessary or desirable to qualify any
of the options as "incentive stock options," to establish and amend rules for
its administration, to grant options, stock appreciation rights and Limited
Rights under this Plan and to correct any defect or supply any omission or
reconcile any inconsistency in this Plan or in any option, stock appreciation
right or Limited Right to the extent the Committee deems desirable to carry
this Plan or any option, stock appreciation right or Limited Right into
effect. The Committee may, with the consent (except as otherwise provided in
paragraph 6(f)) of the person entitled to exercise any outstanding option,
stock appreciation right or Limited Right, amend such option or right,
including reducing the price to not less than the fair market value of the
common stock at the time of the amendment and extending the period so long as
it is not more than ten (10) years from the time such option was granted.
The Committee may act by a majority of a quorum present at a meeting or
by an instrument executed by all of its members. All actions taken and
decisions made by the Board of Directors or the Committee pursuant to this
Plan shall be binding and conclusive on all persons interested in this Plan.
The Committee may from time to time authorize the Chairman of the Board or the
President of the Company to determine the dates on which options or stock
appreciation rights shall be granted to persons designated by the Committee
for such number of shares as the Committee shall have designated at prices
determined by or in a manner specified by the Committee.
9. Definitions.
"Common Stock" means shares of common stock, one cent ($.01) par value
per share, of the Company, or such other shares as are substituted pursuant to
the adjustment provisions of paragraph 6(g). The "Company" means Kansas City
Southern Industries, Inc., its subsidiaries and the "Milwaukee-Kansas City
Southern Joint Agency." "Subsidiaries" means any "subsidiary corporation" as
that term is defined in Section 425 of the Code. "Incentive stock option"
means an option granted pursuant to and meeting the qualifications of Section
422A of the Code. "Optionee" means the holder of an option or stock
appreciation right. The "fair market value" of the Company's common stock on
any given date means the average of the highest and lowest reported sales
prices of such common stock (on the New York Stock Exchange Composite
Transactions Table, if so reported) on such date or if there is no sale on
such date, then on the last previous date on which a sale was reported.
10. Termination and Amendment.
The term of this Plan shall be ten (10) years from February 20, 1987,
and no options, stock appreciation rights or Limited Rights may be granted
under the Plan after February 19, 1997. Options, stock appreciation rights or
Limited Rights outstanding on February 19, 1997 shall thereafter continue to
have force and effect in accordance with the provisions of the instruments
evidencing such options, stock appreciation rights and Limited Rights. The
Board of Directors or the Committee at any time may suspend or terminate this
Plan and make such additions or amendments as it deems advisable under this
Plan, except that it may not, without further approval by the stockholders (i)
increase the maximum number of shares as to which options or stock
appreciation rights may be granted under this Plan, except as may be permitted
under the provisions of paragraph 6(g) above, (ii) extend the term of this
Plan, (iii) change the method of determining the minimum price specified in an
option pursuant to paragraph 3(a), except as set forth in paragraph 6(g) and
8, (iv) change the class of employees to whom options or stock appreciation
rights may be granted under this Plan, or (v) make any other amendments
requiring shareholder approval by reason of corporate, securities or tax laws.