Exhibit 10.20
KANSAS CITY SOUTHERN ANNUAL INCENTIVE PLAN
1. PURPOSE. The purpose of the Plan is to provide management employees of the
Employer with annual incentive compensation based on the level of
achievement of financial and other performance criteria. The Plan is
intended to focus the interests of these employees on the key measures of
the Company's success and to reward these employees for achieving the key
measures of the Company's success. This Plan is not intended to be a
performance-based plan for purposes of Section 162(m) of the Code.
2. DEFINITIONS. As used in the Plan, the following terms shall have the
meanings set forth below:
(a) "Award" shall mean a cash payment for a Performance Year paid
to a Participant on account of his or her participation in the Plan.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, including applicable regulations and
rulings thereunder and any successor provisions thereto.
(d) "Committee" shall mean the Compensation and Organization
Committee of the Board (or any successor committee).
(e) "Company" shall mean Kansas City Southern, and any successor
thereto which adopts the Plan.
(f) "Disability" shall mean a disability as defined under the
Employer's applicable long-term disability program.
(g) "Eligible Employee" shall mean an individual who is employed
by an Employer in active service and who is not represented by a union
or other collective bargaining organization at any time during the
Performance Year.
(h) "Employer" shall mean the Company and KCSR.
(i) "KCSR" shall mean The Kansas City Southern Railway Company,
and any successor thereto which adopts the Plan.
(j) "Leave" shall mean an absence from work with the approval of
the applicable Employer. Leaves include absences for short-term
disability, family leaves of absence and other approved leaves of
absence.
(k) "Maximum Award" shall mean an Award level that may be paid if
the maximum level of the Performance Goal(s) is achieved in the
Performance Year.
(l) "Participant" shall mean, with respect to any Performance
Year, any Eligible Employee who is selected to participate in the Plan
in accordance with Section 3 of the Plan.
(m) "Performance Goal" shall mean the pre-established performance
goal(s) established by the Committee for each Performance Year as
described in Section 4 of the Plan.
(n) "Performance Measures" shall mean one or more of the
following criteria, on which Performance Goals may be based: revenues,
net income, pre-tax income, operating income, earnings per share,
earnings before interest and taxes (EBIT), earnings before interest,
taxes, depreciation and amortization (EBITDA), cash flow, return on
equity, return on capital, return on assets, cash flow, operating
ratio, and capital expenditures; provided, that the Committee shall
have the authority to use Performance Measures other than those herein
specified as it deems appropriate in its sole discretion.
(o) "Performance Year" shall mean the calendar year of the
Company in which a Participant provides services on account of which
the Award is made.
(p) "Plan" shall mean the Kansas City Southern Annual Incentive
Plan, as set forth herein, as from time to time amended.
(q) "Proration Fraction" shall mean a fraction, the numerator of
which is the number of days in the Performance Year the individual was
an Eligible Employee, and the denominator of which is 365.
(r) "Target Award" shall mean an Award level that may be paid if
the target level of the Performance Goal(s) is achieved in the
Performance Year.
(s) "Threshold Award" shall mean an Award level that may be paid
if the threshold level of the Performance Goal(s) is achieved in the
Performance Year.
3. ELIGIBILITY AND PARTICIPATION.
(a) In General. An Eligible Employee of an Employer will become a
Participant for a Performance Year if he or she is selected by the
Committee as eligible to participate in the Plan. Participants will be
determined by the Committee at the beginning of each Performance Year,
and participation in the Plan during one Performance Year does not
guarantee continued participation in future Performance Years. The
Committee may add Participants during the course of a Performance Year
as it deems appropriate in its sole discretion. A Participant must be
employed by an Employer on the last business day of a Performance Year
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in order to be eligible to receive an Award, except as provided in
Section 3(b) below.
(b) Prorations for Partial Year. A Participant who is not an
Eligible Employee for an entire Performance Year may receive an Award
for any portion of the Performance Year that he or she is an Eligible
Employee, subject to Section 5 of the Plan and the following:
1) New Hires, Transfers. A Participant who becomes an
Eligible Employee on account of being hired or
transferred during a Performance Year will be eligible
for a prorated Award for such Performance Year. The
amount of the prorated Award shall be equal to the full
amount of the Award otherwise determined under
Section 4 of the Plan, multiplied by the Proration
Fraction.
2) Death or Disability. A Participant who has a
termination of employment during a Performance Year on
account of death or Disability will be eligible for a
prorated Award for such Performance Year. The amount of
the prorated Award shall be equal to the full amount of
the Award for such individual for the Performance Year
in which the death or Disability occurs, multiplied by
the Proration Fraction. With respect to the calculation
of an Award for purposes of this provision, the
Participant's rate of base salary in effect for the
last full payroll period of his or her employment shall
be used.
(c) Leaves. A Participant who is on Leave for an aggregate of
more than three (3) months during a Performance Year will be eligible
for an Award, the amount of which shall be prorated based on the
portion of the Performance Year the individual was actively at work
for an Employer. Such a Participant's prorated Award will be the full
amount of such Award otherwise determined under Section 4 of the Plan,
multiplied by the Proration Fraction. With respect to the calculation
of an Award for purposes of this provision, the first three months of
a Participant's Leave will be counted as a period during which the
individual was actively at work.
4. DETERMINATION OF AWARDS.
(a) Establishment of Performance Goal. The Committee shall
establish objective Performance Goals for each Award after the
beginning of each Performance Year. The Performance Goals may be based
upon the performance of the Company, KCSR, the Employer, or any
operating unit level, division or function thereof, and may be applied
either alone or relative to the performance of other businesses or
individuals (including industry or general market indices), based on
one or more of the
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Performance Measures. Performance Goals may be expressed as whole
dollar amounts, percentages or growth rates. Performance Goals will be
determined each year by the Committee based on a recommendation from
senior management of the Company, with consultation from other third
party sources. Performance Goals will be set for each Performance
Measure as follows: threshold, target and maximum. No Award will be
made under a Performance Measure if results are below the threshold
level.
(b) Establishment of Awards. The Committee shall also establish
the Threshold Award, the Target Award and the Maximum Award payable to
a Participant if the Performance Goal(s) is achieved. The payment of
any Award shall be subject to achievement of the applicable
Performance Goals and certification by the Committee to the degree to
which each of the Performance Goals have been attained. Threshold
Awards, Target Awards and Maximum Awards will be expressed as a
percentage of a participant's base salary and correspond to salary
grades. Target Award percentages will be determined each year by the
Committee based on a recommendation from senior management of the
Company, with consultation from other third party sources. For
purposes of determining the amount of an Award, the Participant's rate
of base salary in effect for the last full payroll period of the
Performance Year to which the Award pertains shall be used.
(c) Maximum Individual Award. The maximum amount of any Maximum
Award to a Participant for any Performance Year shall be the lesser of
$2,000,000 or 200 percent of a Participant's Target Award for a
Performance Year. Threshold Award amounts will be 25% of the potential
Target Award amount (multiplied by the Performance Measure weighting).
(d) Adjustments to Awards. The Committee may, in its discretion,
modify the amount of any Award based on such criteria as it shall
determine, including, but not limited to, financial results,
individual performance, safety performance, business unit and site
accomplishments, and other factors tied to the success of the Company
or any of its business units. The Committee shall retain the
discretion to adjust any Award downward. There is no obligation of
uniformity of treatment of Participants under the Plan.
(e) Determination of Attainment of Performance Goals. The
Committee may determine in its sole discretion how results will be
calculated related to the Performance Measures selected for a
particular Performance Year. In determining results for a Performance
Year, the Committee may approve adjustments in the calculations to
reflect extraordinary, unusual or non-recurring items.
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5. PAYMENT OF AWARDS.
(a) Time of Payment. An Award shall be paid to a Participant in
cash as soon as practicable after the Committee has certified in
writing that the Performance Goal(s) for the Performance Year have
been achieved. No absolute right to any Award shall be considered as
having accrued to any Participant prior to the payment of the Award.
Awards payable to other Participants who have had a termination of
employment on account of death or Disability during the Performance
Year shall be payable in accordance with Section 3(b) of the Plan and
at the same time other Participants receive Awards under the Plan.
(b) Termination of Employment Other Than on Account of Death or
Disability. A Participant who has a termination of employment other
than on account of death or Disability prior to the last day of a
Performance Year shall not be paid any Award for such Performance
Year.
(c) Termination of Employment on Account of Death or Disability.
A Participant who has a termination of employment on account of death
or Disability after the end of the Performance Year but prior to the
payment date for Awards for such Performance Year shall be paid the
full amount of any Award for such Performance Year, determined under
Section 4 of the Plan (in addition to any amount determined under
Section 3(b) for the Performance Year in which the termination of
employment on account of death or Disability occurs). If the
Participant dies prior to receiving payment of an Award, any Award
payable under the Plan to such Participant shall be paid to the
Participant's estate.
(d) Withholding. Awards are subject to withholding for applicable
federal, state and local taxes.
6. PLAN ADMINISTRATION.
(a) Administration. The Plan shall be administered by the
Committee. The Committee shall have full discretionary authority to
establish the rules and regulations relating to the Plan, to interpret
the Plan and those rules and regulations, to determine the Awards and
the Performance Measures applicable to each Award, to approve all
Awards, to decide the facts in any case arising under the Plan, and to
make all other determinations and to take all other actions necessary
or appropriate for the proper administration of the Plan. In making
any determinations under or referred to in the Plan, the Committee
shall be entitled to rely on opinions, reports or statements of
employees of the Company and KCSR and of counsel, public accountants,
and other professional or expert persons. The Committee's
administration of the Plan, including all such rules and regulations,
interpretations, selections, determinations, approvals, decisions,
delegations, amendments, terminations and other actions, shall be
final and binding on the Company and its stockholders and all
employees, including Participants and their beneficiaries. No member
of
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the Committee shall be liable for any action taken or determination
made in good faith with respect to the Plan or any Award.
(b) Delegation. Except to the extent prohibited by applicable law
or the applicable rules of a stock exchange, the Committee may
allocate all or any portion of its responsibilities and powers to any
one or more of its members, may delegate all or any part of its
responsibilities and powers for administering the Plan to one or more
persons as the Committee deems appropriate, and at any time revoke the
allocation or delegation.
7. AMENDMENT OR TERMINATION OF PLAN. The Committee may amend (in whole or in
part) or terminate the Plan at any time, effective at such date as the
Committee may determine.
8. MISCELLANEOUS PROVISIONS.
(a) Awards Not Transferable. A Participant's right and interest
under the Plan may not be assigned or transferred. Any attempted
assignment or transfer shall be null and void and shall extinguish, in
the Committee's sole discretion, the Company's obligation under the
Plan to pay Awards with respect to the Participant.
(b) Effect of Awards on Other Compensation.
1) Awards shall not be considered eligible pay under other
plans, benefit arrangements or fringe benefit
arrangements of the Company or KCSR, unless otherwise
provided under the terms of other plans.
2) To the extent provided in the applicable benefit plan
or benefit arrangement of an Employer, amounts payable
as Awards will be reduced in accordance with the
Participant's compensation reduction election, if any,
in effect under other plans at the time the Award is
paid.
(c) No Employment Rights. This Plan is not a contract between the
Employer and any employee or Participant. Neither the Plan, nor any
action taken hereunder, shall be construed as giving to any
Participant the right to be retained in the employ of the Company or
KCSR. Nothing in the Plan shall limit or affect in any manner or
degree the normal and usual powers of management, exercised by the
officers and the Board or any committee of the Board, to change the
duties or the character of employment of any employee or to remove an
individual from the employment of the Company or KCSR at any time, all
of which rights and powers are expressly reserved.
(d) Unfunded Plan. The Plan shall be unfunded. Neither the
Company nor KCSR shall be required to establish any special or
separate fund, or to
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make any other segregation of assets, to assure payment of Awards.
Awards shall be paid solely from the general assets of the
Participant's Employer, to the extent the payments are attributable to
services for the Employer. To the extent any person acquires a right
to receive payments from an Employer under the Plan, the right is no
greater than the right of any other unsecured general creditor.
(e) Applicable Law. The Plan shall be governed by the laws of the
State of Missouri and applicable federal law.
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