EMPLOYMENT AGREEMENT
Amended and Restated September 18, 1997
THIS AGREEMENT, made and entered into as of this 1st day of January,
1996, by and between Kansas City Southern Industries, Inc., a Delaware
corporation ("KCSI") and Danny R. Carpenter, an individual ("Executive").
WHEREAS, Executive is now employed by KCSI, and KCSI and Executive desire
for KCSI to continue to employ Executive on the terms and conditions set forth
in this Agreement and to provide an incentive to Executive to remain in the
employ of KCSI hereafter, particularly in the event of any change in control
(as herein defined) of KCSI, Kansas City Southern Lines, Inc. ("KCSL") or
The Kansas City Southern Railway Company ("Railway"), thereby establishing
and preserving continuity of management of KCSI.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, it is agreed by and between KCSI and Executive as follows:
1. Employment. KCSI hereby continues the employment of Executive as its
Vice President Finance to serve at the pleasure of the Board of Directors of
KCSI (the "KCSI Board") and to have such duties, powers and responsibilities
as may be prescribed or delegated from time to time by the President or other
officer to whom Executive reports, subject to the powers vested in the KCSI
Board and in the stockholders of KCSI. Executive shall faithfully perform
his duties under this Agreement to the best of his ability and shall devote
substantially all of his working time and efforts to the business and affairs
of KCSI and its affiliates.
2. Compensation.
(a) Base Compensation. KCSI shall pay Executive as compensation
for his services hereunder an annual base salary at the rate in effect on the
date of this Agreement. Such rate shall not be increased prior to January 1,
1999 and shall not be reduced except as agreed by the parties or except as
part of a general salary reduction program imposed by KCSI and applicable to
all officers of KCSI.
(b) Incentive Compensation. For the years 1996, 1997 and 1998,
Executive shall not be entitled to participate in any KCSI incentive
compensation plan.
3. Benefits. During the period of his employment hereunder, KCSI shall
provide Executive with coverage under such benefit plans and programs as are
made generally available to similarly situated employees of KCSI, provided (a)
KCSI shall have no obligation with respect to any plan or program if Executive
is not eligible for coverage thereunder, and (b) Executive acknowledges that
stock options and other stock and equity participation awards are granted in
the discretion of the KCSI Board or the Compensation Committee of the KCSI
Board and that Executive has no right to receive stock options or other
equity participation awards or any particular number or level of stock options
or other awards. In determining contributions, coverage and benefits under
any disability insurance policy and under any cash compensation-based plan
provided to Executive by KCSI, it shall be assumed that the value of
Executive s annual compensation, pursuant to this Agreement, is 175% of
Executive's annual base salary. Executive acknowledges that all
rights and benefits under benefit plans and programs shall be governed by the
official text of each such plan or program and not by any summary or
description thereof or any provision of this Agreement (except to the extent
this Agreement expressly modifies such benefit plans or programs) and that
KCSI is not is under any obligation to continue in effect or to
fund any such plan or program, except as provided in Paragraph 7 hereof.
KCSI also shall reimburse Executive for ordinary and necessary travel and
other business expenses in accordance with policies and procedures
established by KCSI.
4. Termination.
(a) Termination by Executive. Executive may terminate this
Agreement and his employment hereunder by at least thirty (30) days advance
written notice to KCSI, except that in the event of any material breach of
this Agreement by KCSI, Executive may terminate this Agreement and his
employment hereunder immediately upon notice to KCSI.
(b) Death or Disability. This Agreement and Executive's employment
hereunder shall terminate automatically on the death or disability of
Executive, except to the extent employment is continued under KCSI's
disability plan. For purposes of this Agreement, Executive shall be deemed
to be disabled if he qualifies for disability benefits under KCSI's long-term
disability plan.
(c) Termination by KCSI For Cause. KCSI may terminate this
Agreement and Executive's employment "for cause" immediately upon notice to
Executive. For purposes of this Agreement (except for Paragraph 7),
termination "for cause" shall mean termination based upon any one or more of
the following:
(i) Any material breach of this Agreement by Executive;
(ii) Executive's dishonesty involving KCSI or any subsidiary of KCSI;
(iii) Gross negligence or willful misconduct in the performance of
Executive's duties as determined in good faith by the KCSI Board;
(iv) Willful failure by Executive to follow reasonable instructions
of the President or other officer to whom Executive reports concerning
the operations or business of KCSI or any subsidiary of KCSI;
(v) Executive's fraud or criminal activity; or
(vi) Embezzlement or misappropriation by Executive.
(d) Termination by KCSI Other Than For Cause.
(i) KCSI may terminate this Agreement and Executive s
employment other than for cause immediately upon notice to Executive, and
in such event, KCSI shall provide severance benefits to Executive in
accordance with Paragraph 4(d)(ii) below.
(ii) Unless the provisions of Paragraph 7 of this Agreement are
applicable, if Executive s employment is terminated under Paragraph
4(d)(i), KCSI shall continue, for a period of one (1) year following such
termination, (A) to pay to Executive as severance pay a monthly amount
equal to one-twelfth (1/12th) of the annual base salary referenced in
Paragraph 2(a) above, at the rate in effect immediately prior to
termination, and, (B) to reimburse Executive for the cost (including
state and federal income taxes payable with respect to this reimbursement)
of continuing the health insurance coverage provided pursuant to this
Agreement or obtaining health insurance coverage comparable to the health
insurance provided pursuant to this Agreement, and obtaining coverage
comparable to the life insurance provided pursuant to this Agreement,
unless Executive is provided comparable health or life insurance
coverage in connection with other employment. The foregoing
obligations of KCSI shall continue until the end of such one (1) year
period notwithstanding the death or disability of Executive during said
period (except, in the event of death, the obligation to reimburse
Executive for the cost of life insurance shall not continue). In the
year in which termination of employment occurs, Executive shall be
eligible to receive benefits under the KCSI Incentive Compensation Plan
and the KCSI Executive Plan (if such Plans then are in existence and
Executive was entitled to participate immediately prior to termination)
in accordance with the provisions of such plans then applicable, and
severance pay received in such year shall be taken into account for the
purpose of determining benefits, if any, under the
KCSI Incentive Compensation Plan but not under the KCSI Executive Plan.
After the year in which termination occurs, Executive shall not be
entitled to accrue or receive benefits under the KCSI Incentive
Compensation Plan or the KCSI Executive Plan with respect to the
severance pay provided herein, notwithstanding that benefits under such
plan then are still generally available to executive employees of KCSI.
After termination of employment, Executive shall not be entitled to
accrue or receive benefits under any other employee benefit plan or
program, except that Executive shall be entitled to participate in the
KCSI Profit Sharing Plan, the KCSI Employee Stock Ownership Plan and the
KCSI Section 401(k) Plan in the year of termination of employment only
if Executive meets all requirements of such plans for participation in
such year.
5. Non-Disclosure. During the term of this Agreement and at all times
after any termination of this Agreement, Executive shall not, either
directly or indirectly, use or disclose any KCSI trade secret, except to
the extent necessary for Executive to perform his duties for KCSI while an
employee. For purposes of this Agreement, the term "KCSI trade secret" shall
mean any information regarding the business or activities of KCSI or any
subsidiary or affiliate, including any formula, pattern, compilation, program,
device, method, technique, process, customer list, technical information or
other confidential or proprietary information, that (a) derives independent
economic value, actual or potential, from not being generally known to, and
not being readily ascertainable by proper means by, other persons who can
obtain economic value from its disclosure or use, and (b) is the
subject of efforts of KCSI or its subsidiary or affiliate that are reasonable
under the circumstance to maintain its secrecy. In the event of any breach
of this Paragraph 5 by Executive, KCSI shall be entitled to terminate any and
all remaining severance benefits under Paragraph 4(d)(ii) dand shall be
entitled to pursue such other legal and equitable remedies as may be available.
6. Duties Upon Termination; Survival.
(a) Duties. Upon termination of this Agreement by KCSI or Executive
for any reason, Executive shall immediately return to KCSI all KCSI trade
secrets which exist in tangible form and shall sign such written resignations
from all positions as an officer, director or member of any committee or
board of KCSI and all direct and indirect subsidiaries and affiliates of KCSI
as may be requested by KCSI and shall sign such other documents and papers
relating to Executive's employment, benefits and benefit plans as KCSI may
reasonably request.
(b) Survival. The provisions of Paragraphs 5, 6(a) and 7 of this
Agreement shall survive any termination of this Agreement by KCSI or Executive,
and the provisions of Paragraph 4(d)(ii) shall survive any termination of
this Agreement by KCSI under Paragraph 4(d)(i).
7. Continuation of Employment Upon Change in Control of KCSI.
(a) Continuation of Employment. Subject to the terms and conditions
of this Paragraph 7, in the event of a Change in Control (as defined in
Paragraph 7(d)) at any time during the term of this Agreement, Executive
agrees to remain in the employ of KCSI for a period of three years (the
"Three-Year Period") from the date of such Change in Control (the "Control
Change Date"). KCSI agrees to continue to employ Executive for the
Three-Year Period. During the Three-Year Period, (i) the Executive's
position (including offices, titles, reporting requirements and
responsibilities), authority and duties shall be at least commensurate in all
material respects with the most significant of those held, exercised and
assigned at any time during the 12 month period immediately before the
Control Change Date and (ii) the Executive s services shall be performed at the
location where Executive was employed immediately before the Control Change
Date or at any other location less than 40 miles from such former location.
During the Three-Year Period, KCSI shall continue to pay to Executive an
annual base salary on the same basis and at the same intervals as in effect
prior to the Control Change Date at a rate not less than 12 times
the highest monthly base salary paid or payable to the Executive by KCSI in
respect of the 12-month period immediately before the Control Change Date.
(b) Benefits. During the Three-Year Period, Executive shall be
entitled to participate, on the basis of his executive position, in each of
the following KCSI plans (together, the "Specified Benefits") in existence,
and in accordance with the terms thereof, at the Control Change Date:
(i) any benefit plan, and trust fund associated therewith,
related to (A) life, health, dental, disability, accidental death and
dismemberment insurance or accrued but unpaid vacation time, (B) profit
sharing, thrift or deferred savings (including deferred compensation,
such as under Sec. 401(k) plans), (C) retirement or pension benefits,
(D) ERISA excess benefits and similar plans and (E) tax favored employee
stock ownership (such as under ESOP, and Employee Stock Purchase
programs); and
(ii) any other benefit plans hereafter made generally available
to executives of Executive's level or to the employees of KCSI generally.
In addition, KCSI shall use its best efforts to cause all outstanding
options held by Executive under any stock option plan of KCSI or its
affiliates to become immediately exercisable on the Control Change Date
and to the extent that such options are not vested and are subsequently
forfeited, the Executive shall receive a lump-sum cash payment within
5 days after the options are forfeited equal to the difference between the
fair market value of the shares of stock subject to the non-vested,
forfeited options determined as of the date such options are forfeited and
the exercise price for such options. During the Three-Year Period Executive
shall be entitled to participate, on the basis of his executive
position, in any incentive compensation plan of KCSI in accordance with the
terms thereof at the Control Change Date; provided that if under KCSI
programs or Executive's Employment Agreement in existence immediately prior
to the Control Change Date, there are written limitations on participation
for a designated time period in any incentive compensation plan, such
limitations shall continue after the Control Change Date to the extent so
provided for prior to the Control Change Date.
If the amount of contributions or benefits with respect to the Specified
Benefits or any incentive compensation is determined on a discretionary basis
under the terms of the Specified Benefits or any incentive compensation plan
immediately prior to the Control Change Date, the amount of such
contributions or benefits during the Three-Year Period for each of the
Specified Benefits shall not be less than the average annual contributions or
benefits for each Specified Benefit for the three plan years ending prior to
the Control Change Date and, in the case of any incentive compensation plan,
the amount of the incentive compensation during the Three-Year Period shall
not be less than 75% of the maximum that could have been paid to the
Executive under the terms of the incentive compensation plan.
(c) Payment. With respect to any plan or agreement under which
Executive would be entitled at the Control Change Date to receive Specified
Benefits or incentive compensation as a general obligation of KCSI which has
not been separately funded (including specifically, but not limited to,
those referred to under Paragraph 7(b)(i)(d) above), Executive shall receive
within five (5) days after such date full payment in cash (discounted to the
then present value on the basis of a rate of seven percent (7%) per annum)
of all amounts to which he is then entitled thereunder.
(d) Change in Control. Except as provided in the last sentence of
this Paragraph 7(d), for purposes of this Agreement, a "Change in Control"
shall be deemed to have occurred if:
(i) for any reason at any time less than seventy-five percent
(75%) of the members of the KCSI Board shall be individuals who fall
into any of the following categories: (A) individuals who were members
of the KCSI Board on the date of the Agreement; or (B) individuals
whose election, or nomination for election by KCSI's stockholders,
was approved by a vote of at least seventy-five percent (75%) of the
members of the KCSI Board then still in office who were members of the
KCSI Board on the date of the Agreement; or (C) individuals whose
election, or nomination for election, by KCSI's stockholders, was
approved by a vote of at least seventy-five percent (75%) of the
members of the KCSI Board then still in office who were elected
in the manner described in (A) or (B) above, or
(ii) any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange Act"))
other than KCSI (as to KCSL and Railway securities) shall have become,
according to a public announcement or filing, the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of KCSI, KCSL or Railway representing thirty
percent (30%) (or, with respect to Paragraph 7(c) hereof, 40%) or more
(calculated in accordance with Rule 13d-3) of the combined voting power
of KCSI's, KCSL's or Railway's then outstanding voting securities; or
(iii) the stockholders of KCSI, KCSL or Railway shall have
approved a merger, consolidation or dissolution of KCSI, KCSL or Railway
or a sale, lease, exchange or disposition of all or substantially all
of KCSI's, KCSL's or Railway's assets, if persons who were the
beneficial owners of the combined voting power of KCSI's, KCSL's or
Railway's voting securities immediately before any such merger,
consolidation, dissolution, sale, lease, exchange or disposition do not
immediately thereafter, beneficially own, directly or indirectly, in
substantially the same proportions, more than 60% of the combined voting
power of any corporation or other entity resulting from any such
transaction. Notwithstanding the foregoing provisions of this
Paragraph 7(d) to the contrary, the sale of shares of stock of Kansas City
Southern Lines, Inc. ("KCSL") pursuant to an initial public offering of
shares of stock of KCSL shall not constitute a Change in Control.
(e) Termination After Control Change Date. Notwithstanding any other
provision of this Paragraph 7, at any time after the Control Change Date,
KCSI may terminate the employment of Executive (the "Termination"), but unless
such Termination is for Cause as defined in subparagraph (g) or for disability,
within five (5) days of the Termination KCSI shall pay to Executive his full
base salary through the Termination, to the extent not theretofore paid,
plus a lump sum amount (the "Special Severance Payment") equal to the product
(discounted to the then present value on the basis of a rate of seven
percent (7%) per annum) of (i) 175% his annual base salary specified in
Paragraph 7(a) multiplied by (ii) three; and Specified Benefits (excluding
any incentive compensation) to which Executive was entitled immediately prior
to Termination shall continue until the end of the 3-year period ("Benefits
Period") beginning on the date of Termination. If any plan pursuant to which
Specified Benefits are provided immediately prior to Termination would not
permit continued participation by Executive after Termination, then KCSI shall
pay to Executive within five (5) days after Termination a lump sum payment
equal to the amount of Specified Benefits Executive would have received under
such plan if Executive had been fully vested in the average annual
contributions or benefits in effect for the three plan years ending prior
to the Control Change Date (regardless of any limitations based on the
earnings or performance of KCSI) and a continuing participant in such plan to
the end of the Benefits Period.
(f) Resignation After Control Change Date. In the event of a
Change in Control as defined in Paragraph 7(d), thereafter, upon good reason
(as defined below), Executive may, at any time during the 3-year period
following the Change in Control, in his sole discretion, on not less than
thirty (30) days written notice (the "Notice of Resignation")
to the Secretary of KCSI and effective at the end of such notice period,
resign his employment with KCSI (the "Resignation"). Within five (5) days of
such a Resignation, KCSI shall pay to Executive his full base salary
through the effective date of such Resignation, to the extent not
theretofore paid, plus a lump sum amount equal to the Special Severance
Payment (computed as provided in the first sentence of Paragraph 7(e), except
that for purposes of such computation all references to "Termination" shall be
deemed to be references to "Resignation"). Upon Resignation of Executive,
Specified Benefits to which Executive was entitled immediately prior to
Resignation shall continue on the same terms and conditions as provided in
Paragraph 7(e) in the case of Termination (including equivalent payments
provided for therein). For purposes of this Agreement, "good reason" means
any of the following:
(i) the assignment to the Executive of any duties inconsistent
in any respect with the Executive s position (including offices,
titles, reporting requirements or responsibilities), authority or
duties as contemplated by Section 7(a)(i), or any other action by
KCSI which results in a diminution or other material
adverse change in such position, authority or duties;
(ii) any failure by KCSI to comply with any of the provisions of
Paragraph 7;
(iii) KCSI s requiring the Executive to be based at any
office or location other than the location described in Section 7(a)(ii);
(iv) any other material adverse change to the terms and
conditions of the Executives employment; or
(v) any purported termination by KCSI of the Executive's
employment other than as expressly permitted by this Agreement (any
such purported termination shall not be effective for any other purpose
under this Agreement).
A passage of time prior to delivery of the Notice of Resignation or a failure
by the Executive to include in the Notice of Resignation any fact or
circumstance which contributes to a showing of Good Reason shall not waive
any right of the Executive under this Agreement or preclude the Executive
from asserting such fact or circumstance in enforcing rights under this
Agreement.
(g) Termination for Cause After Control Change Date.
Notwithstanding any other provision of this Paragraph 7, at any time after
the Control Change Date, Executive may be terminated by KCSI "for cause."
Cause means commission by the Executive of any felony or willful breach of
duty by the Executive in the course of the Executive's employment;
except that Cause shall not mean:
(i) bad judgment or negligence;
(ii) any act or omission believed by the Executive in good
faith to have been in or not opposed to the interest of KCSI (without
intent of the Executive to gain, directly or indirectly, a profit to
which the Executive was not legally entitled);
(iii) any act or omission with respect to which a determination
could properly have been made by the KCSI Board that the Executive met
the applicable standard of conduct for indemnification or reimbursement
under KCSI's by-laws, any applicable indemnification agreement, or
applicable law, in each case in effect at the time of such act or
omission; or
(iv) any act or omission with respect to which Notice of
Termination of the Executive is given more than 12 months after the
earliest date on which any member of the KCSI Board, not a party to
the act or omission, knew or should have known of such act or omission.
Any Termination of the Executive s employment by KCSI for Cause shall be
communicated to the Executive by Notice of Termination.
(h) Gross-up for Certain Taxes. If it is determined (by the
reasonable computation of KCSI s independent auditors, which
determinations shall be certified to by such auditors and set forth
in a written certificate ("Certificate") delivered to the Executive)
that any benefit received or deemed received by the Executive from KCSI pursuant
to this Agreement or otherwise (collectively, the "Payments") is or will
become subject to any excise tax under Section 4999 of the Code or any
similar tax payable under any United States federal, state, local or other
law (such excise tax and all such similar taxes collectively,
"Excise Taxes"), then KCSI shall, immediately after such determination, pay
the Executive an amount (the "Gross-up Payment") equal to the product of:
(i) the amount of such Excise Taxes;
multiplied by
(ii) the Gross-up Multiple (as defined in Paragraph 7(k).
The Gross-up Payment is intended to compensate the Executive
for the Excise Taxes and any federal, state, local or other income or
excise taxes or other taxes payable by the Executive with respect
to the Gross-up Payment.
KCSI shall cause the preparation and delivery to the Executive
of a Certificate upon request at any time. KCSI shall, in addition to
complying with this Paragraph 7(h), cause all determinations and
certifications under Paragraphs 7(h)-(o) to be made as soon as
reasonably possible and in adequate time to permit the Executive
to prepare and file the Executive's individual tax returns on a timely
basis.
(i) Determination by the Executive.
(i) If KCSI shall fail (A) to deliver a Certificate to the
Executive or (B) to pay to the Executive the amount of the Gross-up
Payment, if any, within 14 days after receipt from the Executive of a
written request for a Certificate, or if at any time following receipt
of a Certificate the Executive disputes the amount of the
Gross-up Payment set forth therein, the Executive may elect to demand the
payment of the amount which the Executive, in accordance with an
opinion of counsel to the Executive ("Executive Counsel Opinion"),
determines to be the Gross-up Payment. Any such demand by the
Executive shall be made by delivery to KCSI of a written notice
which specifies the Gross-up Payment determined by the Executive and an
Executive Counsel Opinion regarding such Gross-up Payment (such written
notice and opinion collectively, the "Executive's Determination").
Within 14 days after delivery of the Executive's Determination to KCSI,
KCSI shall either (A) pay the Executive the Gross-up Payment set forth
in the Executive's Determination (less the portion of such
amount, if any, previously paid to the Executive by KCSI) or (B) deliver
to the Executive a Certificate specifying the Gross-up Payment determined
by KCSI's independent auditors, together with an opinion of KCSI's
counsel ("KCSI Counsel Opinion"), and pay the Executive the Gross-up
Payment specified in such Certificate. If for any reason KCSI fails to
comply with clause (B) of the preceding sentence, the Gross-up Payment
specified in the Executive s Determination shall be controlling for
all prposes.
(ii) If the Executive does not make a request for, and KCSI
does not deliver to the Executive, a Certificate, KCSI shall, for
purposes of Paragraph 7(j), be deemed to have determined that no Gross-up
Payment is due.
(j) Additional Gross-up Amounts. If, despite the initial conclusion
of KCSI and/or the Executive that certain Payments are neither subject to
Excise Taxes nor to be counted in determining whether other Payments are
subject to Excise Taxes (any such item, a "Non-Parachute Item"), it is
later determined (pursuant to subsequently-enacted provisions of the Code,
final regulations or published rulings of the IRS, final IRS determination or
judgment of a court of competent jurisdiction or KCSI s independent auditors)
that any of the Non-Parachute Items are subject to Excise Taxes, or are to
be counted in determining whether any Payments are subject to Excise Taxes,
with the result that the amount of Excise Taxes payable by the Executive is
greater than the amount determined by KCSI or the Executive pursuant to
Paragraph 7(h) or Paragraph 7(i), as applicable, then KCSI shall pay
the Executive an amount (which shall also be deemed a Gross-up Payment) equal
to the product of:
(i) the sum of (A) such additional Excise Taxes and (B) any
interest, fines, penalties, expenses or other costs incurred by the
Executive as a result of having taken a position in accordance with a
determination made pursuant to Paragraph 7(h); multiplied by
(ii) the Gross-up Multiple.
(k) Gross-up Multiple. The Gross-up Multiple shall equal a
fraction, the numerator of which is one (1.0), and the denominator of which
is one (1.0) minus the sum, expressed as a decimal fraction, of the rates
of all federal, state, local and other income and other taxes and any
Excise Taxes applicable to the Gross-up Payment; provided that, if such
sum exceeds 0.8, it shall be deemed equal to 0.8 for purposes of this
computation. (If different rates of tax are applicable to various portions
of a Gross-up Payment, the weighted average of such rates shall be used.)
(l) Opinion of Counsel. "Executive Counsel Opinion" means a legal
opinion of nationally recognized executive compensation counsel that there is
a reasonable basis to support a conclusion that the Gross-up Payment
determined by the Executive has been calculated in accord with this
Paragraph 7 and applicable law. "Company Counsel Opinion" means a legal
opinion of nationally recognized executive compensation counsel that (i)
there is a reasonable basis to support a conclusion that the Gross-up Payment
set forth in the Certificate of KCSI's independent auditors has been
calculated in accord with this Paragraph 7 and applicable law, and (ii)
there is no reasonable basis for the calculation of the Gross-up Payment
determined by the Executive.
(m) Amount Increased or Contested. The Executive shall notify KCSI
in writing of any claim by the IRS or other taxing authority that, if
successful, would require the payment by KCSI of a Gross-up Payment.
Such notice shall include the nature of such claim and the date on which
such claim is due to be paid. The Executive shall give such notice as soon
as practicable, but no later than 10 business days, after the Executive first
obtains actual knowledge of such claim; provided, however, that any failure to
give or delay in giving such notice shall affect KCSI's obligations under
this Paragraph 7 only if and to the extent that such failure results
in actual prejudice to KCSI. The Executive shall not pay such claim
less than 30 days after the Executive gives such notice to KCSI (or, if
sooner, the date on which payment of such claim is due). If KCSI notifies the
Executive in writing before the expiration of such period that it desires to
contest such claim, the Executive shall:
(i) give KCSI any information that it reasonably requests
relating to such claim;
(ii) take such action in connection with contesting such
claim as KCSI reasonably requests in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by KCSI;
(iii) cooperate with KCSI in good faith to contest such
claim; and
(iv) permit KCSI to participate in any proceedings relating
to such claim; provided, however, that KCSI shall bear and pay directly
all costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and
hold the Executive harmless, on an after-tax basis, for any
Excise Tax or income tax, including related interest and penalties,
imposed as a result of such representation and payment of costs and
expenses. Without limiting the foregoing, KCSI shall control all
proceedings in connection with such contest and, at its sole option,
may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such
claim and may, at its sole option, either direct the Executive to pay the
tax claimed and sue for a refund or contest the claim in any
permissible manner. The Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as KCSI shall
determine; provided, however, that if KCSI directs the Executive to pay
such claim and sue for a refund, KCSI shall advance the amount of
such payment to the Executive, on an interest-free basis and shall
indemnify the Executive, on an after-tax basis, for any Excise Tax or
income tax, including related interest or penalties, imposed with
respect to such advance; and further provided that any extension of the
statute of limitations relating to payment of taxes for the taxable year
of the Executive with respect to which such contested amount is claimed
to be due is limited solely to such contested amount. The KCSI's
control of the contest shall be limited to issues with
respect to which a Gross-up Payment would be payable. The Executive
shall be entitled to settle or contest, as the case may be, any other
issue raised by the IRS or other taxing authority.
(n) Refunds. If, after the receipt by the Executive of an amount
advanced by KCSI pursuant to Paragraph 7(m), the Executive receives any
refund with respect to such claim, the Executive shall (subject to KCSI's
complying with the requirements of Paragraph 7(m)) promptly pay
KCSI the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by KCSI pursuant to Paragraph 7(m), a determination is
made that the Executive shall not be entitled to a full refund with respect
to such claim and KCSI does not notify the Executive in writing of its
intent to contest such determination before the expiration of 30 days after
such determination, then the applicable part of such advance shall be
forgiven and shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-up Payment required
to be paid. Any contest of a denial of refund shall be controlled by
Paragraph 7(m).
(o) Expenses. If any dispute should arise under this Agreement
after the Control Change Date involving an effort by Executive to
protect, enforce or secure rights or benefits claimed by Executive
hereunder, KCSI shall pay (promptly upon demand by Executive accompanied
by reasonable evidence of incurrence) all reasonable expenses
(including attorneys fees) incurred by Executive in connection with such
dispute, without regard to whether Executive prevails in such dispute
except that Executive shall repay KCSI any amounts so received if a court
having jurisdiction shall make a final, nonappealable determination that
Executive acted frivolously or in bad faith by such dispute. To assure
Executive that adequate funds will be made available to discharge KCSI's
obligations set forth in the preceding sentence, KCSI has established a
trust and upon the occurrence of a Change in Control shall promptly
deliver to the trustee of such trust to hold in accordance
with the terms and conditions thereof that sum which the KCSI Board shall
have determined is reasonably sufficient for such purpose.
(p) Prevailing Provisions. On and after the Control Change Date,
the provisions of this Paragraph 7 shall control and take precedence over
any other provisions of this Agreement which are in conflict with or address
the same or a similar subject matter as the provisions of this Paragraph 7.
8. Mitigation and Other Employment. After a termination of
Executive's employment pursuant to Paragraph 4(d)(i) or a Change in Control as
defined in Paragraph 7(d), Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other
employment or otherwise, and except as otherwise specifically
provided in Paragraph 4(d)(ii) with respect to health and life insurance,
no such other employment, if obtained, or compensation or benefits payable
in connection therewith shall reduce any amounts or benefits to which
Executive is entitled hereunder. Such amounts or benefits payable to
Executive under this Agreement shall not be treated as damages but as
severance compensation to which Executive is entitled because Executive's
employment has been terminated.
9. Notice. Notices and all other communications to either party
pursuant to this Agreement shall be in writing and shall be deemed to have
been given when personally delivered, delivered by facsimile or deposited
in the United States mail by certified or registered mail, postage prepaid,
addressed, in the case of KCSI, to KCSI at 114 West 11th Street, Kansas City,
Missouri 64105, Attention: Secretary, or, in the case of the Executive,
to him at 5639 High Drive, Shawnee Mission, Kansas 66208, or to such other
address as a party shall designate by notice to the other party.
10. Amendment. No provision of this Agreement may be amended, modified,
waived or discharged unless such amendment, waiver, modification or discharge
is agreed to in a writing signed by Executive and the President of KCSI.
No waiver by any party hereto at any time of any breach by another party
hereto of, or compliance with, any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the time or at any prior or
subsequent time.
11. Successors in Interest. The rights and obligations of KCSI under
this Agreement shall inure to the benefit of and be binding in each and
every respect upon the direct and indirect successors and assigns of KCSI,
regardless of the manner in which such successors or assigns shall succeed
to the interest of KCSI hereunder, and this Agreement shall not be
terminated by the voluntary or involuntary dissolution of KCSI, KCSL or
Railway or by any merger or consolidation or acquisition involving KCSI,
KCSL or Railway, or upon any transfer of all or substantially all of KCSI's,
KCSL's or Railway's assets, or terminated otherwise than in accordance with
its terms. In the event of any such merger or consolidation or transfer of
assets, the provisions of this Agreement shall be binding upon
and shall inure to the benefit of the surviving corporation or the
corporation or other person to which such assets shall be transferred.
Neither this Agreement nor any of the payments or benefits hereunder may
be pledged, assigned or transferred by Executive either in whole or in
part in any manner, without the prior written consent of KCSI.
12. Severability. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provisions were omitted.
13. Controlling Law and Jurisdiction. The validity, interpretation and
performance of this Agreement shall be subject to and construed under the
laws of the State of Missouri, without regard to principles of conflicts of
law.
14. Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and terminates
and supersedes all other prior agreements and understandings, both written
and oral, between the parties with respect to the terms of Executive's
employment or severance arrangements.
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Agreement as of the 18th day of September, 1997.
KANSAS CITY SOUTHERN INDUSTRIES, INC.
By /s/ Landon H. Rowland
Landon H. Rowland, President
/s/ Danny R. Carpenter
Danny R. Carpenter