SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12]
KANSAS CITY SOUTHERN INDUSTRIES, INC.
------------------------------------
(Name of Registrant as Specified In Its Charter)
NOT APPLICABLE
------------------------
(Name of Person(s) Filing Proxy Statement
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:________
(2) Aggregate number of securities to which transaction applies:___________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
_______________________________________________________________________
(4) Proposed maximum aggregate value of transaction: ______________________
(5) Total fee paid: _______________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: _______________________________________________
(2) Form, Schedule or Registration Statement No.: _________________________
(3) Filing Party: _________________________________________________________
(4) Date Filed: ___________________________________________________________
[KCSI LOGO]
427 WEST 12TH STREET
KANSAS CITY, MISSOURI 64105
KANSAS CITY SOUTHERN INDUSTRIES, INC.
NOTICE AND PROXY STATEMENT
FOR
THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
MAY 2, 2002
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YOUR VOTE IS IMPORTANT!
Please mark, date and sign the enclosed proxy card or voting instruction
card and promptly return it in the enclosed envelope,
or vote by telephone or through the Internet as described
on the proxy card or voting instruction card.
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MAILING OF THIS NOTICE AND PROXY STATEMENT, THE ACCOMPANYING ENCLOSED PROXY
CARD OR VOTING INSTRUCTION CARD, AND THE ACCOMPANYING 2001 ANNUAL REPORT
COMMENCED ON OR ABOUT MARCH 29, 2002
KANSAS CITY SOUTHERN INDUSTRIES, INC.
427 WEST 12TH STREET
KANSAS CITY, MISSOURI 64105
MARCH 29, 2002
TO OUR STOCKHOLDERS:
You are cordially invited to attend the Annual Meeting of Stockholders of
Kansas City Southern Industries, Inc., at Union Station Kansas City, City Stage
Theater, 30 West Pershing Road, Kansas City, Missouri, at 10:00 a.m., on
Thursday, May 2, 2002. The purposes of this meeting are set forth in the
accompanying Notice of Annual Meeting and Proxy Statement.
We urge you to read these proxy materials and the Annual Report and to
participate in the Annual Meeting either in person or by proxy. WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE SIGN AND RETURN PROMPTLY THE
ACCOMPANYING PROXY CARD, IN THE ENVELOPE PROVIDED, TO ASSURE THAT YOUR SHARES
WILL BE REPRESENTED. ALTERNATIVELY, YOU MAY CAST YOUR VOTES BY TELEPHONE OR
THROUGH THE INTERNET, AS DESCRIBED ON THE ACCOMPANYING PROXY CARD.
Sincerely,
Michael R. Haverty
Chairman of the Board, President
and Chief Executive Officer
KANSAS CITY SOUTHERN INDUSTRIES, INC.
427 WEST 12TH STREET
KANSAS CITY, MISSOURI 64105
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
--------------
The Annual Meeting of the Stockholders of Kansas City Southern Industries,
Inc., a Delaware corporation ("KCSI" or the "Company"), will be held at Union
Station Kansas City, City Stage Theater, 30 West Pershing Road, Kansas City,
Missouri, at 10:00 a.m. on Thursday, May 2, 2002, to consider and vote upon:
(1) Election of Two Directors;
(2) Amendment of KCSI's Certificate of Incorporation to change the
Company's name from "Kansas City Southern Industries, Inc." to "Kansas
City Southern";
(3) Ratification of the Board of Directors' selection of KPMG LLP as
KCSI's independent accountants for 2002; and
(4) Such other matters as may properly come before the Annual Meeting or
any adjournment thereof.
Only stockholders of record at the close of business on March 4, 2002, are
entitled to notice of and to vote at this meeting or any adjournment thereof.
By Order of the Board of Directors,
Michael R. Haverty
Chairman of the Board, President
and Chief Executive Officer
The date of this Notice is March 29, 2002.
PLEASE DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY CARD, REGARDLESS
OF THE NUMBER OF SHARES YOU MAY OWN AND WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING IN PERSON. ALTERNATIVELY, YOU MAY CAST YOUR VOTES BY TELEPHONE OR
THROUGH THE INTERNET AS DESCRIBED ON THE ACCOMPANYING PROXY CARD. YOU MAY REVOKE
YOUR PROXY AND VOTE YOUR SHARES IN PERSON IF REVOKED IN ACCORDANCE WITH THE
PROCEDURES DESCRIBED IN THIS NOTICE AND PROXY STATEMENT. PLEASE ALSO INDICATE ON
YOUR PROXY CARD WHETHER YOU PLAN TO ATTEND THE ANNUAL MEETING.
KANSAS CITY SOUTHERN INDUSTRIES, INC.
427 WEST 12TH STREET
KANSAS CITY, MISSOURI 64105
PROXY STATEMENT
TABLE OF CONTENTS
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PAGE
----
Information About the Annual Meeting..................................... 1
Voting................................................................... 2
Principal Stockholders and Stock Owned Beneficially by Directors
and Certain Executive Officers........................................ 5
Proposal 1--Election of Two Directors.................................... 8
The Board of Directors................................................... 9
Audit Matters............................................................ 13
Proposal 2--Amendment of Certificate of Incorporation to Change
the Company's Name from "Kansas City Southern Industries, Inc."
to "Kansas City Southern"............................................. 15
Proposal 3--Ratification of the Board of Directors' Selection of
Independent Accountants............................................... 16
Management Compensation.................................................. 18
Stockholder Proposals.................................................... 32
Section 16(a) Beneficial Ownership Reporting Compliance.................. 33
Householding of Annual Meeting Materials................................. 33
Other Matters............................................................ 34
INFORMATION ABOUT THE ANNUAL MEETING
WHY WERE KCSI'S STOCKHOLDERS SENT THIS PROXY STATEMENT?
Kansas City Southern Industries, Inc., a Delaware corporation ("KCSI"), is
mailing this Proxy Statement on or about March 29, 2002 to its stockholders of
record on March 4, 2002 in connection with KCSI's Board of Directors'
solicitation of proxies for use at the 2002 Annual Meeting of Stockholders and
any adjournment thereof (the "Annual Meeting"). The Annual Meeting will be held
at Union Station Kansas City, City Stage Theater, 30 West Pershing Road, Kansas
City, Missouri, on Thursday, May 2, 2002 at 10:00 a.m. The Notice of Annual
Meeting of Stockholders, KCSI's 2001 Annual Report to Stockholders (the "Annual
Report"), and a proxy card accompany this Proxy Statement.
KCSI will pay for the Annual Meeting, including the cost of mailing the
proxy materials and any supplemental materials. Directors, officers and
employees of KCSI may, either in person, by telephone or otherwise, also solicit
proxy cards. They have not been specifically engaged for that purpose, however,
nor will they be compensated for their efforts. Morrow & Co., Inc. has been
retained to assist in the solicitation of proxies at a cost not expected to
exceed $7,500, plus expenses. In addition, KCSI may reimburse brokerage firms
and other persons representing beneficial owners of KCSI shares for their
expenses in forwarding this Proxy Statement, the Annual Report and other
soliciting materials to the beneficial owners.
Brokers, dealers, banks, voting trustees, other custodians and their
nominees are asked to forward this Notice and Proxy Statement, the proxy card
and the Annual Report to the beneficial owners of KCSI's stock held of record by
them. Upon request, KCSI will reimburse them for their reasonable expenses in
completing the mailing of the materials to beneficial owners of our stock.
WHO MAY ATTEND THE ANNUAL MEETING?
Only KCSI stockholders or their proxies and guests of KCSI may attend the
Annual Meeting. Any stockholders or stockholder's representative who, because of
a disability, may need special assistance or accomodation to allow him or her to
participate in the Annual Meeting may request reasonable assistance or
accomodation from KCSI by contacting the office of the Corporate Secretary at
KCSI's principal executive offices at 114 West 11th Street, Kansas City,
Missouri 64105, (816) 983-1538 before April 5, 2002 and at 427 West 12th Street,
Kansas City, Missouri 64105, (816) 983-1538 on and after April 5, 2002. To
provide KCSI sufficient time to arrange for reasonable assistance, please submit
all requests by April 23, 2002.
WHAT MATTERS WILL BE CONSIDERED AT THE ANNUAL MEETING?
At the Annual Meeting, stockholders will consider and vote upon: (1) the
election of two directors; (2) amendment of KCSI's certificate of incorporation
to change the Company's name from "Kansas City Southern Industries, Inc." to
"Kansas City Southern"; (3) ratification of the Board of Directors' selection of
KPMG LLP as KCSI's independent accountants for 2002; and (4) such other matters
as may properly come before the Annual Meeting or any adjournment thereof.
Stockholders do not have dissenters' rights of appraisal in connection with the
matters set forth in (1) through (3) of the preceding sentence. Each of these
matters has been proposed by the Board of Directors, and none of them is related
to or contingent upon the other or others. The Board of Directors knows of no
other matters that will be presented or voted on at the Annual Meeting.
VOTING
WHICH STOCKHOLDERS MAY VOTE AT THE ANNUAL MEETING?
Only the holders of KCSI's common stock, par value $0.01 per share (the
"Common Stock"), and preferred stock, par value $25.00 per share (the "Preferred
Stock"), of record at the close of business on March 4, 2002 (the "Record
Date"), are entitled to notice of and to vote at the Annual Meeting. On the
Record Date, KCSI had outstanding 242,170 shares of Preferred Stock (which does
not include 407,566 shares held in treasury) and 59,945,871 shares of Common
Stock (which does not include 13,423,245 shares held in treasury) for a total of
60,188,041 shares eligible to be voted at the Annual Meeting.
The Common Stock and the Preferred Stock (collectively, the "Voting Stock")
constitute KCSI's only voting securities and will vote together as a single
class on all matters to be considered at the Annual Meeting. Each holder of
Voting Stock is entitled to cast one vote for each share of Voting Stock held on
the Record Date on all matters other than the election of directors.
Stockholders may vote cumulatively for the election of directors. In other
words, each stockholder has votes equal to the number of shares of Voting Stock
held on the Record Date multiplied by the number of directors to be elected, and
the stockholder may cast all votes for a single nominee or distribute the votes
among the nominees as the stockholder chooses. Internet and telephone voting are
also available, and the accompanying form of proxy contains the Internet address
and toll-free telephone number. This Proxy Statement solicits discretionary
authority to vote cumulatively for the election of directors, and the
accompanying form of proxy or telephone or Internet vote grants that authority.
HOW DOES KCSI DECIDE WHETHER ITS STOCKHOLDERS HAVE APPROVED ANY OF THE
PROPOSALS?
Stockholders owning at least a majority of the shares of Voting Stock
entitled to vote must be present in person or represented by proxy to constitute
a quorum for the transaction of business at the Annual Meeting. The shares of a
stockholder who is present and entitled to vote at the Annual Meeting, either in
person or through a proxy, are counted for purposes of determining whether there
is a quorum, regardless of whether the stockholder votes the shares.
The directors are elected by an affirmative vote of the plurality of shares
of Voting Stock present at the Annual Meeting that are entitled to vote,
provided a quorum exists. A plurality means receiving the largest number of
votes, and where, as here, there are two vacancies for director, the two
nominees with the highest number of affirmative votes are elected. Approval of
the amendment to KCSI's Certificate of Incorporation to change the corporate
name will require the affirmative vote of a majority of the outstanding Voting
Stock entitled to vote. Approval of the proposal to ratify the Board of
Directors' selection of KCSI's independent accountants will require the
affirmative vote of a majority of the shares of Voting Stock present at the
Annual Meeting in person or by proxy and entitled to vote, provided a quorum
exists.
Voting ceases when the chairman of the Annual Meeting closes the polls. The
votes are counted and certified by three inspectors appointed by the Board of
Directors of KCSI in advance of the Annual Meeting. In determining whether a
majority of shares have been affirmatively voted for a particular purpose, the
affirmative votes for the proposal are measured against the votes for and
against the proposal plus the abstentions from voting on the proposal. A
stockholder may abstain from voting on any proposal other than the election of
directors, and abstentions from voting are not considered to be votes
affirmatively cast. Abstaining will, therefore, have the effect of a vote
against a proposal. With regard to the election of directors, votes may be cast
in favor or withheld; votes that are withheld will be excluded entirely from the
vote and will have no effect.
WHAT IF A STOCKHOLDER HOLDS SHARES IN A BROKERAGE ACCOUNT?
The Voting Stock is traded on the New York Stock Exchange, Inc. (the
"NYSE"). Under the rules of the NYSE, member stockbrokers who hold shares of
Voting Stock in the broker's name for customers are required to get directions
from the customers on how to vote their shares. NYSE rules also permit brokers
to vote shares on certain proposals when they have not received any directions.
The Staff of the NYSE, prior to the Annual Meeting, informs the brokers of those
proposals upon which the brokers are entitled to vote the undirected shares.
When a stockholder does not vote, the stockbroker's abstention is referred
to as a "broker non-vote" (customer directed abstentions are not broker
non-votes). Broker non-votes generally do not affect the determination of
whether a quorum is present at the Annual Meeting because, in most cases, some
of the shares held in the broker's name have been voted on at least some
proposals, and, therefore, all of those shares are considered present at the
Annual Meeting. Under applicable law, a broker non-vote will have the same
effect as a vote against any proposal other than the election of directors and
will have no effect on the outcome of the election of directors.
HOW ARE A STOCKHOLDER'S SHARES VOTED IF THE STOCKHOLDER SUBMITS A PROXY?
Stockholders who return a properly executed proxy card or properly give
instructions via the Internet or telephone are appointing the Proxy Committee to
vote their shares of Voting Stock covered by the Proxy. That Committee consists
of the three directors of KCSI whose names are listed on the related proxy card.
A stockholder wishing to name as his, her or its proxy someone other than the
Proxy Committee designated on the proxy card may do so by crossing out the names
of the designated proxies and inserting the name of another person. In that
case, it will be necessary for the stockholder to sign the proxy card and
deliver it to the person so named and for that person to be present and vote at
the Annual Meeting. Proxy cards so marked should NOT be mailed directly to KCSI.
The Proxy Committee will vote the shares of Voting Stock covered by a proxy
in accordance with the instructions given by the stockholders executing the
proxy(1) or authorizing the proxy and voting by Internet or telephone. If a
properly executed, or authorized, and unrevoked proxy solicited hereunder does
not specify how the shares represented thereby are to be voted, the Proxy
Committee intends to vote the shares FOR the election of the persons nominated
by management for directorships, FOR amendment of KCSI's certificate of
incorporation to change its corporate name, FOR ratification of the Board of
Directors' selection of KPMG LLP as KCSI's independent accountants for 2002; and
in accordance with their discretion upon such other matters as may properly come
before the Annual Meeting. The Proxy Committee reserves the right to vote such
proxies cumulatively and for the election of less than all of the nominees for
director, but does not intend to do so unless other persons are nominated and
such a vote appears necessary to assure the election of the maximum number of
management nominees.
MAY A STOCKHOLDER REVOKE HIS OR HER PROXY OR VOTING INSTRUCTION CARD?
At any time before the polls for the Annual Meeting are closed, a
stockholder who holds stock in his or her name may revoke a properly executed or
authorized proxy by (a) an Internet or telephone vote subsequent to the date
shown on a previously executed and delivered proxy or to the date of a prior
electronic vote or telephone vote, or (b) with a later-dated, properly executed
and delivered proxy, or (c) a written revocation delivered to the Corporate
------------------
(1) Internet and telephone voting are also available, and the accompanying form
of proxy contains the Internet address and toll-free telephone number.
Secretary of KCSI. A stockholder who holds stock in a brokerage account must
contact the broker and comply with the broker's procedures if he or she wants to
revoke or change the instructions that the stockholder returned to the broker.
Attendance at the Annual Meeting will not have the effect of revoking a properly
executed or authorized proxy unless the stockholder delivers a written
revocation to the Corporate Secretary before the proxy is voted.
HOW DO PARTICIPANTS IN KCSI'S OR DST SYSTEMS, INC.'S EMPLOYEE STOCK OWNERSHIP
PLANS OR IN KCSI'S OR STILWELL FINANCIAL INC.'S 401(K) AND PROFIT SHARING PLANS
VOTE?
Participants in KCSI's and DST Systems, Inc.'s employee stock ownership
plans ("ESOPs") and in KCSI's and Stilwell Financial Inc.'s 401(k) and Profit
Sharing Plans ("401(k) Plans") are each provided a separate voting instruction
card (accompanying this Proxy Statement) to instruct the respective trustees of
these ESOPs and 401(k) Plans how to vote the shares of Common Stock held on
behalf of the participant.(2) The trustee is required under the trust agreements
to vote the shares in accordance with the instructions indicated (either on the
voting instruction card or through Internet or telephone voting). If voting
instructions are not given by the participant, the trustee must vote those
shares, as well as any unallocated shares, in the same proportions as the shares
for which voting instructions were received from the plan participants. Unless
voting by Internet or telephone, the voting instruction card should be returned
in the envelope provided to UMB Bank, N.A., Securities Transfer Division, P.O.
Box 410064, Kansas City, Missouri 64179-0013. THE VOTING INSTRUCTION CARD SHOULD
NOT BE RETURNED TO KCSI, STILWELL FINANCIAL INC. ("STILWELL") OR DST SYSTEMS,
INC. ("DST"). ESOP participants or 401(k) Plan participants who wish to revoke
their voting instructions must contact the trustee and follow its procedures.
ARE THE VOTES OF PARTICIPANTS IN THE ESOPS AND THE 401(K) PLANS CONFIDENTIAL?
Under the terms of the ESOP and the 401(k) Plan trust agreements, the
trustee is required to establish procedures to ensure that the instructions
received from participants are held in confidence and not divulged, released or
otherwise utilized in a manner that might influence the participants' free
exercise of their voting rights.
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(2) Internet and telephone voting are also available, and the accompanying
voting instruction card contains the Internet address and toll-free number.
PRINCIPAL STOCKHOLDERS AND STOCK OWNED BENEFICIALLY
BY DIRECTORS AND CERTAIN EXECUTIVE OFFICERS
The following table sets forth information as of the Record Date concerning
the beneficial ownership of KCSI's Common Stock by: (1) beneficial owners of
more than five percent of any class of such stock that have publicly disclosed
their ownership; (ii) the members of the Board of Directors, the Chief Executive
Officer and the four other most highly compensated executive officers; and (iii)
all executive officers and directors as a group. KCSI is not aware of any
beneficial owner of more than five percent of the Preferred Stock. None of the
directors or executive officers own any shares of Preferred Stock. No officer or
director of KCSI owns any equity securities of any subsidiary of KCSI.
Beneficial ownership is generally either the sole or shared power to vote or
dispose of the shares. KCSI is not aware of any arrangement which would at a
subsequent date result in a change of control of KCSI.
PERCENT
COMMON OF
NAME AND ADDRESS (1) STOCK (2) CLASS (2)
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Perkins, Wolf, McDonnell & Company 3,308,689(3) 5.51%
A. Edward Allinson 86,033(4) *
Director
Robert H. Berry 411,073(5) *
Senior Vice President and
Chief Financial Officer
Gerald K. Davies 455,636(6) *
Executive Vice President and
Chief Operating Officer
Michael G. Fitt 94,800(7) *
Director
Michael R. Haverty 2,321,862(8) 3.81%
Chairman of the Board,
President and Chief
Executive Officer
James R. Jones 56,880(9) *
Director
William J. Pinamont 25,994(10) *
Vice President and General Counsel
Albert W. Rees 472,619(11) *
Senior Vice President--Operations of KCSR
Landon H. Rowland 865,606(12) 1.44%
Director
Rodney E. Slater 0 *
Director
Byron G. Thompson 40,000(13) *
Director
All Directors and Executive Officers 5,255,319(14) 8.42%
as a Group (15 Persons)
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* Less than one percent of the outstanding shares.
(1) The address for each of the individuals listed in the above table as of the
Record Date, other than Mr. Rowland, is 114 West 11th Street, Kansas City,
Missouri 64105. Effective April 5, 2002, the address for such individuals
will be 427 West 12th Street, Kansas City, Missouri 64105. The address for
Mr. Rowland is Stilwell Financial Inc., 920 Main Street, 21st Floor, Kansas
City, Missouri 64105-2008.
(2) Under applicable law, shares that may be acquired upon the exercise of
options or other convertible securities that are exercisable on the Record
Date, or will become exercisable within 60 days of that date, are
considered beneficially owned. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares subject to options held by that person that are exercisable on the
Record Date, or exercisable within 60 days of the Record Date, are deemed
outstanding. These shares are not, however, deemed outstanding for the
purpose of computing the percentage ownership of any other person. In
addition, under applicable law, shares that are held indirectly are
considered beneficially owned. Directors and executive officers may also be
deemed to own, beneficially, shares included in the amounts shown above
which are held in other capacities. The holders may disclaim beneficial
ownership of shares included under certain circumstances. Except as noted,
the holders have sole voting and dispositive power over the shares. The
list of executive officers of KCSI is included in KCSI's Annual Report on
Form 10-K. See the last page of this proxy statement for instructions on
how to obtain a copy of the Form 10-K.
(3) Based upon information in Schedule 13G filed February 26, 2002. The address
for Perkins, Wolf, McDonnell & Company is 310 S. Michigan Avenue, Suite
2600, Chicago, Illinois 60604. Perkins, Wolf, McDonnell & Company reports
that it has sole voting and dispositive power with respect to 37,189 shares
and shared voting and dispositive power with respect to 3,271,500 shares.
(4) Mr. Allinson's beneficial ownership includes 70,000 shares that may be
acquired through options that are exercisable as of, or will become
exercisable within 60 days of, the Record Date and 1,200 shares held in a
Keogh plan.
(5) Mr. Berry's beneficial ownership includes 248,434 shares that may be
acquired through options that are exercisable as of, or will become
exercisable within 60 days of, the Record Date, 10,152 shares allocated to
his account in the KCSI ESOP, and 2,337 shares allocated to his account in
KCSI's 401(k) and Profit Sharing Plan.
(6) Mr. Davies' beneficial ownership includes 388,645 shares that may be
acquired through options that are exercisable as of, or will become
exercisable within 60 days of, the Record Date, and 585 shares allocated to
his account in the KCSI ESOP.
(7) Mr. Fitt's beneficial ownership includes 40,000 shares that may be acquired
through options that are exercisable as of, or will become exercisable
within 60 days of, the Record Date.
(8) Mr. Haverty's beneficial ownership includes 1,015,570 shares that may be
acquired through options that are exercisable as of, or will become
exercisable within 60 days of, the Record Date, 26,322 shares allocated to
his account in the KCSI ESOP, 10,843 shares allocated to his account in
KCSI's 401(k) and Profit Sharing Plan, 412 shares held by one of his
children and 375,000 shares held in trusts for his children for which his
brother acts as trustee.
(9) Mr. Jones' beneficial ownership includes 46,000 shares that may be acquired
through options that are exercisable as of, or will become exercisable
within 60 days of, the Record Date.
(10) Mr. Pinamont's beneficial ownership includes 25,000 shares that may be
acquired through options that are exercisable as of, or will become
exercisable within 60 days of, the Record Date, and 994 shares allocated to
his account in the KCSI's 401(k) and Profit Sharing Plan.
(11) Mr. Rees' beneficial ownership includes 246,728 shares that may be acquired
through options that are exercisable as of, or will become exercisable
within 60 days of, the Record Date, 17,227 shares allocated to his account
in the KCSI ESOP, 9,905 shares allocated to his account in KCSI's 401(k)
and Profit Sharing Plan, 2,914 shares in his wife's IRA account, 7,300
shares held in trust by his wife, and 430 shares held as custodian for his
son.
(12) Mr. Rowland's beneficial ownership includes 10,000 shares that may be
acquired through options that are exercisable as of, or will become
exercisable within 60 days of, the Record Date and 240 shares allocated to
his account in Stilwell's 401(k) and Profit Sharing Plan.
(13) Mr. Thompson's beneficial ownership includes 30,000 shares that may be
acquired through options that are exercisable as of, or will become
exercisable within 60 days of, the Record Date.
(14) The number includes 2,498,392 shares that may be acquired through options
that are exercisable as of, or will become exercisable within 60 days of,
the Record Date and 481,311 shares otherwise held indirectly.
PROPOSAL 1--ELECTION OF TWO DIRECTORS
The Board of Directors of KCSI is divided into three classes. The members
of each class serve staggered three-year terms of office, which results in one
class standing for election at each annual meeting of stockholders. The term of
office for the directors elected at the Annual Meeting will expire in 2005 or
when their successors are elected and qualified.
Two persons have been nominated by management for election as directors.
All of these nominees are presently directors of KCSI, all have indicated that
they are willing and able to serve as directors if elected, and all have
consented to being named as nominees in this Proxy Statement. If any nominee
should become unable or unwilling to serve, the Proxy Committee intends to vote
for one or more substitute nominees chosen by them in their sole discretion.
KCSI's Bylaws provide that after January 1, 1990, no one who is 72 years
old shall be eligible to be nominated or to serve as a member of the Board of
Directors, but any person who shall attain the age of 72 during the term of
directorship to which he was elected shall be eligible to serve the remainder of
such term. KCSI's Certificate of Incorporation and Bylaws do not have any other
eligibility requirements for directors.
As explained further under "How Does KCSI Decide Whether Its Stockholders
Have Approved Any of the Proposals," directors are elected by the affirmative
vote of the plurality of the shares of Voting Stock present at the Annual
Meeting that are entitled to vote on the election of directors, assuming a
quorum.
NOMINEES FOR DIRECTORS TO SERVE UNTIL THE ANNUAL MEETING OF STOCKHOLDERS IN 2005
------------------- -------------------------------------------------------------------------------------------------
[PICTURE] RODNEY E. SLATER, age 47, has been a director of KCSI since June 5, 2001. Mr. Slater is a
partner in the public policy practice group of the firm Patton Boggs LLP and serves as head of
the firm's transportation practice group in Washington, D.C. since April 1, 2001. He served as
U.S. Secretary of Transportation from 1997 to January 2001 and head of the Federal Highway
Administration from 1993 to 1996. Mr. Slater is also a director of Southern Development
Bancorporation and Parsons Brinckerhoff International Advisory Board.
------------------- -------------------------------------------------------------------------------------------------
[PICTURE] BYRON G. THOMPSON, age 69, has been a director of KCSI since August 17, 2000. Mr. Thompson has
served as Chairman of the Board of Country Club Bank, n.a., Kansas City since February 1985.
Prior to that time, Mr. Thompson served as Vice Chairman of Investment Banking at United
Missouri Bank of Kansas City and as a member of the Board of United Missouri Bancshares, Inc.
------------------- -------------------------------------------------------------------------------------------------
YOUR BOARD RECOMMENDS THAT YOU VOTE
"FOR"
THE ELECTION OF MANAGEMENT'S NOMINEES
THE BOARD OF DIRECTORS
The Board of Directors met five times in 2001. The Board meets regularly to
review significant developments affecting KCSI and to act on matters requiring
Board approval. The Board reserves certain powers and functions to itself; in
addition, it has requested that the Chief Executive Officer refer certain
matters to it. All directors attended all of the meetings of the Board in 2001
(with Mr. Slater attending all meetings of the Board in 2001 from the time he
became a director).
DIRECTORS SERVING UNTIL THE ANNUAL MEETING OF STOCKHOLDERS IN 2003
------------------- -------------------------------------------------------------------------------------------------
[PICTURE] MICHAEL G. FITT, age 70, has been a director of KCSI since 1986. Prior to retirement, he was
Chairman and Chief Executive Officer of Employers Reinsurance Corporation, Overland Park,
Kansas, from 1980 through 1992 and President of that company from 1979 through 1991. Employers
Reinsurance Corporation, a subsidiary of General Electric Capital Services, Inc., is a
reinsurance company. Mr. Fitt is also a director of DST Systems, Inc., Kansas City, Missouri.
------------------- -------------------------------------------------------------------------------------------------
[PICTURE] MICHAEL R. HAVERTY, age 57, has been the President and Chief Executive Officer of KCSI since
July 12, 2000 and a director since May 1995. Mr. Haverty has served as Chairman of the Board
of KCSI since January 1, 2001. Mr. Haverty served as Executive Vice President of KCSI from May
1995 until July 12, 2000. He has been President, Chief Executive Officer and a director of The
Kansas City Southern Railway Company ("KCSR"), a subsidiary of KCSI, since 1995. He has served
as Chairman of the Board of KCSR since November 1999. Mr. Haverty has served as the President
and a director of Mexrail, Inc., an affiliate of KCSI, since 1995 and as a director of the
Panama Canal Railway Company, an affiliate of KCSI, since October 1996 and as Co-Chairman of
the Board of Directors of that company since May 1999. Mr. Haverty has served as Co-Chairman
of Panarail Tourism Company, an affiliate of KCSI, since October 2000. He is also a director
and Chairman of the Executive Committee of the Board of Grupo Transportacion Ferroviaria
Mexicana, S.A. de C.V., a director of The Texas-Mexican Railway Company and a director and
Chairman of the Executive Committee of TFM, S.A. de C.V., each an affiliate of KCSI. Mr.
Haverty previously served as Chairman and Chief Executive Officer of Haverty Corporation from
1993 to May 1995, acted as an independent executive transportation adviser from 1991 to 1993
and was President and Chief Operating Officer of The Atchison, Topeka and Santa Fe Railway
Company from 1989 to 1991. Mr. Haverty is also a director of Midwest Grain Products, Inc.,
Atchison, Kansas.
------------------- -------------------------------------------------------------------------------------------------
DIRECTORS SERVING UNTIL THE ANNUAL MEETING OF STOCKHOLDERS IN 2004
------------------- -------------------------------------------------------------------------------------------------
[PICTURE] A. EDWARD ALLINSON, age 67, has been a director of KCSI since 1990. He served as the Chief
Executive Officer and Chairman of the Board of EquiServe LP ("EquiServe") from December 1999
through October 2000. EquiServe provides stock transfer and related services to publicly
listed corporations. Prior to joining EquiServe, Mr. Allinson was an Executive Vice President
of State Street Bank and Trust Company, Chairman of the Board of Directors of Boston Financial
Data Services, Inc. ("BFDS"), and Executive Vice President of State Street Corporation from
March 1990 through December 1999. BFDS provides full service share owner accounting and
recordkeeping services to mutual funds, selected services to certain retirement plans and
certain securities transfer services. DST Systems, Inc. owns 50% of BFDS. In 2001, EquiServe
became a wholly-owned subsidiary of DST. Mr. Allinson is also a director of DST Systems, Inc.,
Kansas City, Missouri.
------------------- -------------------------------------------------------------------------------------------------
[PICTURE] JAMES R. JONES, age 62, has been a director of KCSI since November 1997. Mr. Jones is also a
director of Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V. and TFM, S.A. de C.V., both
affiliates of KCSI. He has been Senior Counsel to the firm of Manatt, Phelps & Phillips since
March 1, 1999. Mr. Jones is also Co-Chairman of Manatt Jones Global Strategies. He is also
Chairman of Globe Ranger Corp. Mr. Jones was President of Warnaco Inc. International Division,
1997 through 1998; U.S. Ambassador to Mexico, 1993 through 1997; and Chairman and Chief
Executive Officer of the American Stock Exchange, 1989 through 1993. Mr. Jones served as a
member of the U.S. Congress representing Oklahoma for 14 years. He was White House Special
Assistant and Appointments Secretary to President Lyndon Johnson. Mr. Jones is also a director
of Anheuser-Busch; Grupo Modelo S.A. de C.V.; San Luis Corporacion; TV Azteca; and Keyspan
Energy Corporation.
------------------- -------------------------------------------------------------------------------------------------
[PICTURE] LANDON H. ROWLAND, age 64, has been a director of KCSI since 1983. Mr. Rowland served as
President of KCSI from July 1983, and as Chief Executive Officer of KCSI from January 1987,
until July 12, 2000, when KCSI distributed to its shareholders all of the outstanding shares of
Stilwell, its then wholly-owned subsidiary (the "Spin-off"). He served as Chairman of the
Board of KCSI from May 1997 through December 31, 2000. Mr. Rowland has been a director and
President of Stilwell since May 1998. He has served as Chairman of the Board and Chief
Executive Officer of Stilwell since August 1999.
------------------- -------------------------------------------------------------------------------------------------
COMMITTEES OF THE BOARD OF DIRECTORS
------------------------------------
The Board of Directors has established an Executive Committee (which also
nominates individuals to serve as directors of KCSI), an Audit Committee and a
Compensation and Organization Committee. The members of the committees are
elected at the Board's annual meeting immediately following KCSI's annual
meeting of stockholders. During 2001, there was one meeting by telephone of the
Executive Committee, three meetings of the Audit Committee, and three meetings
of the Compensation and Organization Committee, one of which was by telephone.
All directors attended all meetings of all committees on which they served
during 2001.
THE EXECUTIVE COMMITTEE
The Executive Committee consists of KCSI's Chairman of the Board and three
non-officer directors elected by the Board to serve one-year terms. When the
Board is not in session, the Executive Committee has all the powers of the Board
for management of KCSI in all matters in which direction has not been
specifically reserved by the full Board.
The Executive Committee also serves as the Board's nominating committee and
recommends to the Board suitable nominees for election to the Board of Directors
or to fill newly created directorships or vacancies on the Board. The Chairman
of the Board is a non-voting member with respect to nomination activities. As a
part of its nominating duties, the Executive Committee may meet with and
consider suggestions from Board members, management, consultants and others in
formulating its recommendations. The Executive Committee generally will consider
director nominees recommended by stockholders. Stockholders should see
"Stockholder Proposals" and "Other Matters" below for information relating to
the submission by stockholders of nominees and matters for consideration at a
meeting of KCSI stockholders.
The members of the Executive Committee are: Michael G. Fitt (Chairman),
Michael R. Haverty, James R. Jones and Landon H. Rowland.
THE AUDIT COMMITTEE
The Audit Committee consists of three outside directors elected by the
Board of Directors to serve staggered three-year terms. The members of the Audit
Committee are independent (as independence is defined in Sections
303.01(B)(2)(a) and (3) of the NYSE's listing standards). The Audit Committee
meets with and considers suggestions from members of management and KCSI's
internal audit staff, as well as KCSI's independent accountants, concerning the
financial operations of KCSI. The Audit Committee also reviews the audited
financial statements of KCSI and considers and recommends the appointment of and
approves fee arrangements with independent accountants for audit functions and
for advisory and other consulting services. The Board of Directors has adopted a
written charter for the Audit Committee.
The members of the Audit Committee are: A. Edward Allinson, Michael G. Fitt
and Byron G. Thompson (Chairman).
THE COMPENSATION AND ORGANIZATION COMMITTEE
The Compensation and Organization Committee (the "Compensation Committee")
consists of three outside directors (at least two of whom are considered to be
"disinterested persons" as defined under applicable federal income tax and
securities laws) elected by the Board to serve one-year terms. The Compensation
Committee has the authority to: (a) authorize all salaries for certain KCSI and
subsidiary company officers and supervisory employees; (b) administer the
incentive compensation plans of KCSI and certain subsidiaries in accordance with
the terms of those plans and determine any incentive allowances made to their
officers and staff; (c) administer KCSI's Employee Stock Purchase Plan under
which eligible employees of KCSI and its subsidiaries and certain affiliates are
permitted to subscribe to and purchase shares of KCSI Common Stock through
payroll deductions; (d) administer KCSI's 401(k) and Profit Sharing Plan and
Employee Stock Ownership Plan; (e) act as KCSI's stock option plan committee and
administer KCSI's stock option plans, in accordance with KCSI's Bylaws, the
terms of the plan and the applicable laws; and (f) initiate, review and approve
the succession plans and major organizational changes.
The members of the Compensation and Organization Committee are: A. Edward
Allinson, Michael G. Fitt and James R. Jones (Chairman).
The Committee's report on executive compensation is set forth in the
section under "Management Compensation."
COMPENSATION OF DIRECTORS
Directors who are officers or employees of KCSI or its subsidiaries do not
receive any fees or other compensation for service on the Board or its
committees. No fees were paid during 2001 to any director or Named Executive
Officer (as defined herein) of KCSI for service on any board of directors of any
subsidiary of KCSI.
The Outside Directors (those directors who are not employees of KCSI or its
subsidiaries) are not paid any retainers for Board or committee membership. The
Outside Directors are paid $4,000 for each Board meeting attended in person or
$2,000 for telephone meetings. The Outside Directors are also paid $2,000 for
each committee meeting attended in person or $1,000 for telephone meetings. The
Chair of a committee receives an additional $500 for each committee meeting. The
Outside Directors may also be granted awards, including among others, options to
buy shares of KCSI Common Stock, pursuant to the 1991 Amended and Restated Stock
Option and Performance Award Plan, as determined by the Committee (as defined in
such plan). The Outside Directors were each granted options for 10,000 shares of
KCSI Common Stock in 2001, except for Mr. Slater, who was granted options for
20,000 shares upon initially becoming a member of the Board of Directors in June
2001.
Directors of KCSI are permitted to defer receipt of directors' fees under
an unfunded directors' deferred fee plan adopted by the Board of Directors, and
either to receive interest on such fees until they have been paid to them or, in
lieu of receiving interest, to have earnings on their deferred fees determined
pursuant to a formula based on the performance of certain mutual funds advised
by Janus Capital Corporation. The rate of interest to be paid under the KCSI
plan is set at the prime rate of a certain national bank less one percent.
Distributions under the plan are allowed in certain instances as approved by the
Board of Directors. The KCSI deferred fee plan also allows the directors to
elect to receive deferred amounts in installments payable over several years.
AUDIT MATTERS
REPORT OF THE AUDIT COMMITTEE
-----------------------------
March 29, 2002
In accordance with the Audit Committee's written charter duly adopted by
the Board of Directors, we have reviewed and discussed with management the
Company's audited financial statements as of and for the year ended December 31,
2001.
We have discussed with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61, COMMUNICATION WITH AUDIT
COMMITTEES, as amended, by the Auditing Standards Board of the American
Institute of Certified Public Accountants.
We have received and reviewed the written disclosures and the letter from
the independent auditors required by Independence Standard No. 1, INDEPENDENCE
DISCUSSIONS WITH AUDIT COMMITTEES, as amended, by the Independence Standards
Board, and have discussed with the auditors the auditors' independence.
Based on the reviews and discussions referred to above, we recommended to
the Board of Directors that the financial statements referred to above be
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2001 for filing with the Securities and Exchange Commission.
Based on the reviews and discussions referred to above, we recommend to the
Board of Directors and to the shareholders that KPMG LLP be retained as the
Company's independent auditing firm for the 2002 fiscal year.
The Audit Committee
A. Edward Allinson
Michael G. Fitt
Byron G. Thompson, Chairman
PRINCIPAL ACCOUNTING FIRM FEES
Upon completion of a competitive proposal process, KPMG LLP was engaged by
KCSI on June 20, 2001 and served as KCSI's principal independent accountants in
2001. For the period in 2001 prior to the engagement of KPMG LLP,
PricewaterhouseCoopers LLP ("PWC") served as KCSI's independent accountants. The
following table sets forth the aggregate fees billed to KCSI for the fiscal year
ended December 31, 2001 by KPMG LLP and PWC:
KPMG LLP
Audit Fees, Excluding Audit Related...............................$327,658
Financial Information Systems Design and Implementation Fees...... 0
All Other Fees:
Audit Related Fees....................................... 58,956(a)(b)
Other Non-Audited Services............................... 9,529(a)(c)
--------
Total All Other Fees..............................................$ 68,485
PRICEWATERHOUSECOOPERS LLP
Audit Fees, Excluding Audit Related...............................$235,631
Financial Information Systems Design and Implementation Fees...... 0
All Other Fees:
Audit Related Fees....................................... 275,406(a)(d)
Other Non-Audited Services............................... 438,129(a)(e)
-------
Total All Other Fees $713,535
--------------------
(a) The Audit Committee has considered whether the provision of these services
is compatible with maintaining the principal accountant's independence.
(b) Includes fees for benefit plan audits, comfort letters, and SEC filing
review.
(c) Includes fees for litigation support and tax consultation.
(d) Includes fees for the review of the annual financial report required by the
Surface Transportation Board for Class I railroads and registration
statement audit.
(e) Includes fees for various tax recovery and tax planning projects and
litigation and actuarial consulting services.
PROPOSAL 2 - AMENDMENT OF CERTIFICATE OF INCORPORATION
TO CHANGE THE COMPANY'S NAME FROM "KANSAS CITY SOUTHERN
INDUSTRIES, INC." TO "KANSAS CITY SOUTHERN"
On February 6, 2002, the Board of Directors approved an amendment to KCSI's
Certificate of Incorporation to change the Company's name to Kansas City
Southern. Under Delaware law, the adoption of the amendment to the Certificate
of Incorporation is subject to the approval of KCSI's shareholders. If approved
by the shareholders at the Annual Meeting, the amendment will become effective
when filed with the Secretary of State of the State of Delaware. The Board of
Directors approved the name change to reflect the change in KCSI's business and
holdings following the spin-off of Stilwell Financial Inc. on July 13, 2000. By
dropping "Industries" from KCSI's name we will maintain the identification in
the marketplace of the Company and its principle subsidiary, The Kansas City
Southern Railway Company, while emphasizing our focus on transportation rather
than a variety of industries The proposed name change would not require a change
in the security ticker symbol of KCSI. Stockholders would not be required to
submit their stock certificates for exchange. If approved by the shareholders,
following the effective date of the amendment changing KCSI's name, all new
stock certificates issued by KCSI will bear the new name.
As explained further under "How Does KCSI Decide Whether Its Stockholders
Have Approved Any of the Proposals," approval of this proposal requires the
affirmative vote of the holders of a majority of the outstanding shares of
Voting Stock that are entitled to vote on the proposal.
YOUR BOARD RECOMMENDS THAT YOU VOTE
"FOR"
THE AMENDMENT OF THE CERTIFICATE OF INCORPORATION
TO CHANGE THE CORPORATE NAME TO
KANSAS CITY SOUTHERN
PROPOSAL 3 - RATIFICATION OF THE BOARD OF DIRECTORS'
SELECTION OF INDEPENDENT ACCOUNTANTS
The Audit Committee has recommended, and the Board of Directors has
selected, the firm of KPMG LLP as KCSI's independent accountants to examine
KCSI's 2002 consolidated financial statements.
On June 20, 2001, KCSI notified PWC, KCSI's principal accountant during the
1999 and 2000 fiscal years, that it had been replaced as KCSI's principal
accountant. Additionally, on June 20, 2001, KCSI engaged the accounting firm of
KPMG LLP as its principal accountant for the 2001 fiscal year. The decision to
change certifying accountants was discussed with the Audit Committee and
approved by the Chairman of the Audit Committee. Prior to the Spin-off in July
2000, KCSI management had been discussing internally whether or not to
competitively bid out its audit services. Given the circumstances surrounding
the Spin-off, KCSI management determined that it was not feasible to initiate
the competitive bid process until after the completion of the audit for the year
in which the Spin-off occurred. Accordingly, subsequent to the completion of the
audit for the year ended December 31, 2000, KCSI management initiated the
competitive proposal process which began in April 2001. The selection of KPMG
LLP was made after the completion of this competitive proposal process, which
involved all five major accounting firms. No relationship exists between KCSI
and KPMG LLP other than that of independent accountant and client, except as
follows: NAFTA Rail, S.A. de C.V. ("NAFTA"), our Mexican affiliate and the
holder of our shares of Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V.
("Grupo TFM"), employs the retired managing partner of KPMG Cardenas Dosal,
S.C., the Mexican affiliate of KPMG LLP, as our Comisario at Grupo TFM. NAFTA,
as a shareholder of approximately 37%, has the right to appoint a Comisario, or
statutory auditor, at Grupo TFM. The Comisario's alternate, or Comisario
Suplente, is a current partner of KPMG Cardenas Dosal, S.C. Both the Comisario
and Comisario Suplente are paid by Grupo TFM. Our tax advisers in Mexico are
affiliated with KPMG LLP. We also use KPMG, an affiliate of KPMG LLP, as our
auditors in Panama.
For the 1999 and 2000 fiscal years, the reports of PWC on KCSI's financial
statements contained no adverse opinion or disclaimer of opinion and were not
qualified as to uncertainty, audit scope or accounting principle. In connection
with its audits for the 1999 and 2000 fiscal years and through June 20, 2001,
there were no disagreements with PWC on any matter of accounting principles or
practices, financial statements disclosure, or auditing scope or procedure,
which disagreements if not resolved to the satisfaction of PWC would have caused
them to make reference thereto in their report on the financial statements for
such years, except as discussed below.
During the year ended December 31, 2000, KCSI completed a transaction to
monetize, for a one-time payment, the rights to the future income stream
associated with certain billboard advertising sites located on the right of way
of KCSI's railroad operating property. The transaction was completed with a
third party vendor to KCSI, which provides advertising signage services to other
companies in the railroad industry. Based upon the details of the transaction,
KCSI believed that the associated transaction should be accounted for under the
guidance of Staff Accounting Bulletin No. 101 - "Revenue Recognition in
Financial Statements" ("SAB 101") and consistent with railroad industry
accounting practices. After reviewing industry practice and SAB 101 related to
the specifics of this transaction, KCSI concluded that the appropriate criteria,
of both industry accounting practices and the guidance in SAB 101, were met to
record the initial one-time payment as income in the Statement of Income for the
year ended December 31, 2000. KCSI's certifying accountant, PWC, believed that
SAB 101 did not apply and railroad industry accounting practice would not take
precedence over standards promulgated by the Financial Accounting Standards
Board. PWC believed that the transaction should be evaluated under lease
accounting rules which, in this instance, would require that the up-front
payment be initially deferred and recognized over future periods. After further
discussion between KCSI and PWC, KCSI recorded the transaction as recommended by
PWC in the financial statements for the year ended December 31, 2000.
During the period of time that KCSI was exploring with PWC the various
accounting rules regarding this matter and following PWC's expression of its
conclusion with regard to this matter, KCSI inquired of PWC as to other avenues
that might be available to KCSI. PWC acknowledged that one alternative might be
for KCSI to seek a SAS 50 opinion from another independent accountant. In early
February 2001, KCSI's management discussed this transaction with KPMG LLP to
obtain an understanding of relevant industry practice and application of SAB
101. Also, at KCSI's request, PWC discussed the issue with representatives of
the other major accounting firms, including KPMG LLP. KPMG LLP communicated to
KCSI that this issue was discussed with representatives of the major accounting
firms and that PWC reaffirmed their earlier position on the proper accounting
treatment of the transaction. KCSI did not request a SAS 50 opinion or report
from KPMG LLP, and none was issued. Additionally, KPMG LLP did not express any
specific viewpoint to KCSI regarding the accounting for the transaction. KCSI's
management and PWC discussed this matter with KCSI's Audit Committee.
Additionally, KCSI authorized PWC to respond fully to inquiries of KPMG LLP
concerning this matter.
KCSI became aware that as a result of a reorganization during 2001 between
two of the participants in the Grupo TFM venture (in which KCSI has a minority
interest), Grupo TFM may be reported by one of the participants as a
consolidated subsidiary under International Accounting Standards. KCSI has
historically treated Grupo TFM as a foreign corporate joint venture under U.S.
generally accepted accounting principles and, accordingly, has not provided
deferred income taxes at the statutory rates on the difference between the
financial accounting and income tax bases in its investment in Grupo TFM. PWC
informed KCSI that at the time of their replacement, PWC had not completed the
analysis and testing necessary to confirm KCSI's continued accounting for Grupo
TFM as a foreign corporate joint venture under these circumstances and,
accordingly, that PWC believed this matter represented a reportable event under
Regulation S-K Item 304(a)(1)(v)(D). KCSI's management and PWC discussed this
matter with KCSI's Audit Committee. Additionally, KCSI authorized PWC to respond
fully to inquiries of KPMG LLP concerning this matter.
KCSI seeks its stockholders' ratification of the Board of Directors'
selection of KCSI's independent accountants even though KCSI is not legally
required to do so. If KCSI's stockholders ratify the Board of Directors'
selection, the Board of Directors nonetheless may, in their discretion, retain
another independent accounting firm at any time during the year if the Board of
Directors feels that such change would be in the best interest of KCSI and its
stockholders. Alternatively, in the event that this proposal is not approved by
stockholders, the Audit Committee and the Board will re-evaluate their decision.
One or more representatives of KPMG LLP are expected to be present at the
Annual Meeting and, if so, will have the opportunity, if desired, to make a
statement and are expected to be available to respond to appropriate questions
by stockholders.
As explained further under "How Does KCSI Decide Whether Its Stockholders
Have Approved Any of the Proposals," approval of this proposal requires the
affirmative vote of a majority of the shares of Voting Stock present at the
Annual Meeting that are entitled to vote on the proposal, assuming a quorum.
YOUR BOARD RECOMMENDS THAT YOU VOTE
"FOR"
RATIFICATION OF THE BOARD OF DIRECTORS'
SELECTION OF KPMG LLP
MANAGEMENT COMPENSATION
COMPENSATION AND ORGANIZATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
------------------------------------------------------------------------
INTRODUCTION
The Board of Directors believes that increasing the value of KCSI to its
stockholders is its most important objective. In support of this objective, the
Board charges the Compensation and Organization Committee (the "Committee") with
the responsibility of designing compensation packages for KCSI's executives that
provide substantial incentives to increase stockholder value while enabling KCSI
to attract and retain exceptionally qualified executives. The Board emphasizes
its overall objective by also relating the Outside Directors' compensation to
stockholder value through stock options.
The Committee seeks to align the interests of KCSI executives with the
Board's overall objective through a compensation strategy that emphasizes
long-term stock ownership and closely links executive compensation with changes
in stockholder value. In designing those compensation packages, the Committee
believes KCSI's compensation packages should provide executives with market
competitive base salaries and the opportunity to earn additional compensation if
stockholders experience long-term increases in the value of their stock. The
Committee also believes that KCSI's executives should maintain a significant
equity interest in KCSI, but that executives should earn such interest only if
KCSI's stockholders also experience an increase in the value of their
investment.
The Committee has implemented this strategy through compensation packages
that:
o Eliminate participation in any annual cash incentive program.
o Provide stock-based incentives through awards of stock options that
require, for the recipient to receive any benefits, market price
increases in KCSI's Common Stock.
o Emphasize long-term stock ownership through the Committee's
consideration of the retention of past KCSI stock-based awards in
determining the levels of future stock-based grants.
The result is that a significant portion of these compensation packages is based
upon at-risk components.
The Committee has used this compensation strategy with all KCSI and KCSR
executive officers who the Committee identifies as especially important to the
long-term success of KCSI. In connection with the Spin-off, the Committee
approved a compensation package described below for these executives which
became effective upon the Spin-off.
To assist the Committee with its responsibilities, the Committee utilizes
the expertise of independent compensation consultants. In addition to advising
the Committee, the compensation consultants provide the Committee with surveys
of compensation practices of selected industries and companies. The compensation
surveys used to determine competitive market pay range focused on general
industrial companies having the same level of revenues as KCSI and publicly
traded railroads. These compensation surveys include some of the companies
comprising the Dow Jones Transportation Average (the peer group used in the
stock performance graph below), as well as other companies in other industries.
The Committee believes using a broader sample of companies better represents the
market for executives. Where appropriate, compensation data from these surveys
are adjusted through regression analysis to estimate compensation levels at
companies similar in size to KCSI or its operating units. The next section of
this report details the compensation program for these executives.
COMPENSATION PACKAGE COMPONENTS
BASE SALARY. The Committee determines the level of base salaries for all of
the executives for whom the Committee has responsibility based on competitive
market practices as indicated in surveys utilized by the Committee, individual
contribution and performance, level of responsibility, experience and KCSI's
corporate performance. The Committee does not give any specific weighting to any
of these factors.
The Committee targets the 75th percentile of the observed competitive
market practice in setting base salary levels. The Committee chooses such levels
based on the fact such executives will not participate in any annual cash
incentive plans and such executives have a higher risk (because of the use of
the stock-based incentives) of not being compensated than they would if they had
participated in the annual cash incentive program.
Under the compensation package, which became effective upon the Spin-off,
the base salaries of the executive officers were frozen at the rates in effect
for 1999 through December 31, 2001 and they did not participate in any KCSI
incentive compensation plan during that period. As part of a cost reduction plan
announced by KCSI on March 26, 2001, KCSI implemented a voluntary, temporary
annual salary reduction for middle and senior management and suspended
temporarily certain benefits for its management employees. Certain management
employees, including the Chief Executive Officer and the four other most highly
compensated executive officers, agreed to a voluntary temporary salary
reduction. This voluntary temporary salary reduction ended December 31, 2001.
STOCK COMPENSATION. The key component of the Committee's strategy is to
make stock-based incentives a significant portion of the executives' total
compensation package, primarily through stock options. By using primarily stock
options, the Committee seeks to ensure that the executives will be compensated
only if KCSI's stockholders also experience an increase in the value of their
investment and that any such compensation is linked directly to such increases
in KCSI's stock price.
To determine how many options to grant in connection with the compensation
packages, the Committee first considers each individual's targeted total
compensation for the period in question using the compensation surveys mentioned
above, including estimated potential earnings under KCSI's annual cash incentive
compensation plan. Targeted total incentive compensation is approximately the
total of the 75th percentile of the range of potential short-term incentives
foregone plus median long-term incentive compensation shown in the observed
market practices. These amounts are then adjusted by the Committee to take into
account the individual's contribution and performance, level of responsibility,
experience and KCSI's corporate performance. The Committee does not give any
specific weighting to any of these factors. An option valuation model is
utilized to calculate the risk-adjusted value of each stock option to determine
the number of options to be awarded. Each executive's total option grant value
is intended to cover the year or years to which the grant relates and to
approximate the value of a competitive median long-term incentive opportunity
plus the value of the foregone annual cash incentive opportunity.
Under the compensation package, which became effective upon the Spin-off,
the executive officers did not participate in any KCSI incentive compensation
plan and did not receive grants of stock-based or other long-term incentive
compensation through December 31, 2001, except for the special grant of stock
options in 2000 in connection with the Spin-off. Consistent with the Committee's
compensation strategy, on July 13, 2000, the executive officers were granted
performance stock options, became eligible to purchase a specified number of
restricted shares of KCSI Common Stock and were granted a specified number of
options for each of the restricted shares purchased. The grants were intended to
cover the period during which the executives do not participate in any KCSI
incentive compensation plan and were designed to result in total compensation at
the 75th percentile of the range of total compensation indicated in the surveys.
The number of performance options granted, restricted shares available and the
number of options granted in connection with restricted shares purchased were
determined based on the compensation level of the executive. The performance
stock options were structured to reward the executives only when KCSI's market
value reached certain predetermined levels and remained at or above those levels
for twenty consecutive trading days. Each of these predetermined levels was
established by assuming appreciation in the market price for KCSI Common Stock
from the date of grant at a rate above the average historical return of the S&P
500. The target stock prices established in the performance stock option grants
have been met. Mr. Pinamont joined the Company in December 2000 and was granted
options during 2001 designed to result in total compensation at the 75th
percentile of the range of total compensation indicated in the surveys.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The compensation package for Mr. Haverty, the Chief Executive Officer of
KCSI, is based upon the same compensation strategy, and utilizes compensation
surveys of the same types of companies, used by the Committee for the other
executives of KCSI and KCSR discussed above. Under the compensation package for
2001 adopted by the Committee effective upon the Spin-off, Mr. Haverty's base
salary was frozen at the rates in effect for 1999 through December 31, 2001 and
he was not entitled to participate in any KCSI incentive compensation plan
during that period. In addition, pursuant to that compensation package, Mr.
Haverty did not receive grants of stock-based or other long-term incentive
compensation in 2001. The special grant of stock options in 2000 in connection
with the Spin-off was intended to cover the period during which Mr. Haverty did
not participate in any KCSI incentive compensation plan and was designed to
result in total compensation at the 75th percentile of the range of total
compensation indicated in the surveys. As part of a cost reduction plan
announced by KCSI on March 26, 2001, Mr. Haverty agreed to a voluntary temporary
reduction of his annual salary by 15%. This voluntary temporary salary reduction
ended on December 31, 2001.
DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code generally limits the deduction
by publicly held corporations for federal income tax purposes of compensation in
excess of $1 million paid to any of the executive officers listed in the summary
compensation table (the "Named Executive Officers") unless it is
"performance-based."
Except as otherwise set forth, the Committee intends to qualify all
compensation expense as deductible for federal income tax purposes. The
compensation packages of the Named Executive Officers include base salary and,
subject to the limitations under the compensation package discussed above,
stock, and the highest total base salary is within the $1 million limit. The
stock compensation awarded to those officers has the potential to result in
total compensation in excess of the $1 million limit of Section 162(m). Except
with respect to certain stock options granted in 2000 to Mr. Haverty as part of
his executive compensation package, KCSI believes it has taken all steps
necessary, including obtaining stockholder approval, so that any compensation
expense that KCSI may incur as a result of awards under its stock option and
performance award plan with respect to those Named Executive Officers whose
compensation might present an issue qualifies as performance-based compensation
for purposes of Section 162(m) so that any portion of this component of the
executive compensation packages will be deductible for federal income tax
purposes. Mr. Haverty has indicated that he intends to manage the exercise of
such options so that the number of options he exercises in any given year will
not result in his total compensation exceeding the $1 million limit of Section
162(m).
The Committee will review from time to time in the future the potential
impact of Section 162(m) on the deductibility of executive compensation.
However, the Committee intends to maintain the flexibility to take actions that
it considers to be in the best interests of the Company and its stockholders and
which may be based on considerations in addition to tax deductibility.
The Compensation and Organization Committee.
A. Edward Allinson
Michael G. Fitt
James R. Jones, Chairman
STOCK PERFORMANCE GRAPH
-----------------------
The following graph shows the changes in value over the five years ending
December 31, 2001 of an assumed investment of $100 in: (i) KCSI's Common Stock;
(ii) the stocks that comprise the Dow Jones Transportation Average Index (1);
and (iii) the stocks that comprise the S&P 500 Index(2). The table following the
graph shows the value of those investments as of December 31 of each of the
years indicated. The value for the assumed investments depicted on the graph and
in the table has been calculated assuming that cash dividends are reinvested.
The 2000 dividend includes the Stilwell Financial Inc. stock dividend
distributed on July 12, 2000, which for purposes of this graph and table was
treated as a cash dividend and as reinvested.
KANSAS CITY SOUTHERN INDUSTRIES, INC.
RELATIVE MARKET PERFORMANCE
TOTAL RETURN 1997-2001
[Graphic presentation of Stock Performance Graph appears here]
YEAR ENDED DECEMBER 31, 1996 1997 1998 1999 2000 2001
--------------------------------------------------------------------------------
KCSI Total Return $100.00 $212.97 $331.27 $504.03 $529.31 $738.68
Dow Jones Transportation
Average Total Return $100.00 $148.07 $144.44 $137.92 $138.47 $125.59
S&P 500 Index Total Return $100.00 $133.36 $171.47 $207.56 $188.66 $166.24
--------------------------------------------------------------------------------
(1) The Dow Jones Transportation Average is an index prepared by Dow Jones &
Co., Inc., an independent company.
(2) The S&P 500 is an index prepared by Standard and Poor's Corporation, an
independent company. The S&P 500 Index reflects the change in weighted
average market value for 500 companies whose shares are traded on the New
York Stock Exchange, American Stock Exchange and in the over-the-counter
market. Information concerning Standard and Poor's Corporation and the S&P
500 Index is available on the Internet at www.stockinfo.standardpoor.com.
SUMMARY COMPENSATION TABLE
--------------------------
The Summary Compensation Table shows certain information concerning the
compensation earned in the fiscal years ended December 31, 2001, 2000 and 1999
by the Chief Executive Officer of KCSI and the four other most highly
compensated executive officers (collectively, the "Named Executive Officers").
The table shows amounts earned by such persons for all services rendered in all
capacities to KCSI and its subsidiaries during the past three years.
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------------------------------------- ------------------------------------
RESTRICTED SECURITIES UNDERLYING
OTHER ANNUAL STOCK OPTIONS/SARS ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARDS($)(1) (#) COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) KCSI(2)STILWELL(3) ($)
---------------------------------------------------------------------------------------------------------------------------------
Michael R. Haverty 2001 540,180 --- --- --- 12,363 --- 8,052(4)
Chairman of the Board, 2000 608,652 --- --- 49,500 1,189,366 1,888,106 16,484
President and Chief 1999 608,652 --- --- --- 2,032 --- 18,952
Executive Officer
Gerald K. Davies 2001 284,250 --- --- --- 5,160 --- 8,052(5)
Executive Vice President 2000 300,000 --- --- 19,250 462,595 102,374 14,852
and Chief Operating 1999 300,000 --- --- --- 25,000 --- 18,952
Officer
Robert H. Berry 2001 222,678 --- --- --- 3,507 --- 8,052(6)
Senior Vice President 2000 235,008 --- --- 12,000 288,409 484,706 14,852
and Chief Financial 1999 235,008 --- --- --- 572 --- 18,952
Officer
Albert W. Rees 2001 213,192 --- --- --- 3,253 --- 8,052(7)
Senior Vice President-- 2000 225,000 --- --- 12,500 290,394 549,518 14,852
Operations of KCSR 1999 225,000 --- --- --- 570 --- 14,152
William J. Pinamont 2001 156,067 --- 8,824(8) --- 35,000 --- 5,453(8)
Vice President and 2000 1,091(8) --- --- --- --- --- ---
General Counsel 1999 N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
(1) The number and value of the aggregate restricted stock holdings of each of
the Named Executive Officers at the end of fiscal year 2001 are as follows:
Mr. Haverty - 99,000 shares with a value of $829,620; Mr. Davies - 38,500
shares with a value of $322,630; Mr. Berry - 24,000 shares with a value of
$201,120; and Mr. Rees - 25,000 shares with a value of $209,500. Mr.
Pinamont held no restricted shares at the end of fiscal year 2001. The
value (net of any consideration paid by such Named Executive Officers) of
these restricted shares is based on the closing market price of KCSI Common
Stock on December 31, 2001. Dividends will only be paid on the restricted
stock when, as and if declared and paid on KCSI Common Stock.
(2) Option grant information for options to purchase KCSI Common Stock is
provided on a post-reverse stock split basis.
(3) Shares of Stilwell common stock underlying options granted by Stilwell in
connection with the Spin-off, as part of an equitable adjustment of KCSI
options granted prior to the Spin-off.
(4) All other compensation for Mr. Haverty for 2001 is comprised of: (a) a
contribution to his account under KCSI's 401(k) plan of $5,100; (b)
premiums on group term life insurance of $2,160, accidental death and
dismemberment insurance of $240 and long-term disability insurance of $552.
(5) All other compensation for Mr. Davies for 2001 is comprised of: (a) a
contribution to his account under KCSI's 401(k) plan of $5,100; and (b)
premiums on group term life insurance of $2,160, accidental death and
dismemberment insurance of $240 and long-term disability insurance of $552.
(6) All other compensation for Mr. Berry for 2001 is comprised of: (a) a
contribution to his account under KCSI's 401(k) plan of $5,100; and (b)
premiums on group term life insurance of $2,160, accidental death and
dismemberment insurance of $240 and long-term disability insurance of $552.
(7) All other compensation for Mr. Rees for 2001 is comprised of: (a) a
contribution to his account under KCSI's 401(k) plan of $5,100; and (b)
premiums on group term life insurance of $2,160, accidental death and
dismemberment insurance of $240 and long-term disability insurance of $552.
(8) Mr. Pinamont joined the Company on December 28, 2000. Other annual
compensation for Mr. Pinamont for 2001 is comprised of a relocation
transfer allowance. All other compensation for Mr. Pinamont for 2001 is
comprised of: (a) a contribution to his account under KCSI's 401(k) plan of
$3,399; and (b) premiums on group term life insurance of $1,352, accidental
death and dismemberment insurance of $150 and long-term disability
insurance of $552.
KCSI OPTION/SAR GRANTS IN LAST FISCAL YEAR
------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(3)
--------------------------------------------------------------------------------------------------------------------------
NUMBER OF % OF TOTAL EXERCISE
SECURITIES OPTIONS/SARS OR BASE
UNDERLYING GRANTED TO PRICE
OPTIONS/SARS EMPLOYEES IN ($ PER EXPIRATION
NAME GRANTED (#) FISCAL YEAR(1) SHARE)(2) DATE 5% ($) 10% ($)
--------------------------------------------------------------------------------------------------------------------------
Michael R. Haverty 12,363(4) 6.4% $14.34 02/26/11 111,494 282,547
Gerald K. Davies 5,160(5) 2.7% $14.34 02/26/11 46,535 117,928
Robert H. Berry 3,507(6) 1.8% $14.34 02/26/11 31,627 80,150
Albert W. Rees 3,253(4) 1.7% $14.34 02/26/11 29,337 74,345
William J. Pinamont 10,000(7) 5.2% $ 9.75 01/01/11 61,317 155,390
15,000(7) 7.7% $13.90 04/01/11 131,125 332,295
10,000(7) 5.2% $13.85 07/31/11 87,102 220,733
--------------------------------------------------------------------------------------------------------------------------
(1) Total options granted in 2001 to eligible employees of KCSI and its
subsidiaries covered a total of 193,654 shares of KCSI Common Stock.
(2) Average of the high and low prices of the KCSI Common Stock on the date of
grant as reported on the New York Stock Exchange.
(3) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission and do not
represent our estimate or projection of future prices of KCSI's Common
Stock. The actual value realized may be greater or less than the potential
realizable values set forth in the table.
(4) The options were granted on February 27, 2001 under KCSI's 1991 Amended and
Restated Stock Option and Performance Award Plan (the "1991 Plan") in
connection with KCSI's Executive Plan and were immediately exercisable.
Participants in KCSI's Executive Plan may elect cash or non-qualified stock
options with an estimated value (using the Black-Scholes valuation model)
equal to 125% of the annual cash benefit. If there is a change in control
of KCSI that is approved by the incumbent board of KCSI (as such terms are
defined in the 1991 Plan), however, the options become immediately
exercisable, provided the individual has been continuously employed by KCSI
or a consolidated subsidiary from the grant date until the change in
control. Limited stock appreciation rights ("LSARs") were granted in tandem
with these options. All of the LSARs are automatically exercised upon a
change in control that is not approved by the incumbent board of KCSI (as
such terms are defined in the 1991 Plan) and the related options are
cancelled. All the options expire at the end of ten years, subject to
earlier termination as provided in the option agreement. The options are
subject to voluntary tax withholding rights.
(5) The options were granted under the 1991 Plan in connection with KCSI's
Executive Plan. These options were granted on February 27, 2001. Options
for 1,290 shares became exercisable on June 23, 2001. Options for 1,290
shares become exercisable on June 23, 2002. Options for 2,580 shares become
exercisable on June 23, 2003. If there is a change in control of KCSI that
is approved by the incumbent board of KCSI (as such terms are defined in
the 1991 Plan), however, the options become immediately exercisable,
provided the individual has been continuously employed by KCSI or a
consolidated subsidiary from the grant date until the change in control.
LSARs were granted in tandem with these options. All of the LSARs are
automatically exercised upon a change in control that is not approved by
the incumbent board of KCSI (as such terms are defined in the 1991 Plan)
and the related options are cancelled. All the options expire at the end of
ten years, subject to earlier termination as provided in the option
agreement. The options are subject to voluntary tax withholding rights.
(6) The options were granted under the 1991 Plan in connection with KCSI's
Executive Plan. These options were granted on February 27, 2001. Options
for 1,754 shares were immediately exercisable. Options for 1,753 shares
became exercisable on June 23, 2001. If there is a change in control of
KCSI that is approved by the incumbent board of KCSI (as such terms are
defined in the 1991 Plan), however, the options become immediately
exercisable, provided the individual has been continuously employed by KCSI
or a consolidated subsidiary from the grant date until the change in
control. LSARs were granted in tandem with these options. All of the LSARs
are automatically exercised upon a change in control that is not approved
by the incumbent board of KCSI (as such terms are defined in the 1991 Plan)
and the related options are cancelled. All the options expire at the end of
ten years, subject to earlier termination as provided in the option
agreement. The options are subject to voluntary tax withholding rights.
(7) These options were granted under the 1991 Plan. Options for 10,000 shares
were granted on January 2, 2001; options for 15,000 shares were granted on
April 2, 2001, and options for 10,000 shares were granted on August 1,
2001. All of the options become exercisable one year after the date of
grant. If there is a change in control of KCSI that is approved by the
incumbent board of KCSI (as such terms are defined in the 1991 Plan),
however, the options become immediately exercisable, provided the
individual has been continuously employed by KCSI or a consolidated
subsidiary from the grant date until the change in control. LSARs were
granted in tandem with these options. All of the LSARs are automatically
exercised upon a change in control that is not approved by the incumbent
board of KCSI (as such terms are defined in the 1991 Plan) and the related
options are cancelled. All the options expire at the end of ten years,
subject to earlier termination as provided in the option agreement. The
options are subject to voluntary tax withholding rights.
2001 AGGREGATED KCSI OPTION EXERCISES AND YEAR-END OPTION VALUES(1)
----------------------------------------------------------------
The following table sets forth information with respect to the aggregate
KCSI option exercises during 2001 by the Named Executive Officers and the number
and value of options held by such officers as of December 31, 2001.
--------------------- --------------- ----------- --------------------------------- --------------------------------
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
ACQUIRED VALUE OPTIONS/SARS AT OPTIONS/SARS AT
ON REALIZED FISCAL YEAR-END FISCAL YEAR-END
NAME EXERCISE (#) ($)(2) (#) ($)(3)
--------------------- --------------- ----------- --------------- ----------------- --------------- ----------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------------- --------------- ----------- --------------- ----------------- --------------- ----------------
Michael R. Haverty N/A N/A 1,002,363 198,000 $8,694,549 $1,738,440
Gerald K. Davies N/A N/A 386,439 81,316 $3,381,942 $680,973
Robert H. Berry N/A N/A 244,687 48,000 $2,120,802 $421,440
Albert W. Rees N/A N/A 243,253 50,000 $2,107,818 $439,000
William J. Pinamont N/A N/A 0 35,000 $0 $64,050
--------------------- --------------- ----------- --------------- ----------------- --------------- ----------------
(1) All information is provided on a post-reverse stock split basis.
(2) The dollar values in this column are calculated by multiplying (a) the
difference between the fair market value of the shares of KCSI Common Stock
underlying the options on the date of exercise and the exercise price of
the options by (b) the number of options exercised.
(3) The dollar values in this column are calculated by multiplying (a) the
difference between the fair market value of the shares of KCSI Common Stock
underlying the options on December 31, 2001 (the last trading day of the
year) and the exercise price of the options by (b) the number of options
held at year-end.
2001 AGGREGATED STILWELL OPTION EXERCISES AND YEAR-END OPTION VALUES
--------------------------------------------------------------------
In connection with the Spin-off and as part of an equitable adjustment of
KCSI non-qualified stock options previously granted and outstanding as of June
28, 2000 (the record date for the Spin-off), the exercise price of such options
was adjusted as allowed by the 1991 Plan and holders of such options received
separately exercisable options to purchase Stilwell common stock ("Stilwell
options") in the proportion of two Stilwell options for each KCSI non-qualified
stock option held.
The following table sets forth information regarding the shares of Stilwell
common stock received upon exercise of Stilwell options, which were granted in
2000 as discussed above, by the Named Executive Officers in 2001, the aggregate
dollar value realized upon exercise and the value of unexercised options to
purchase Stilwell common stock held by the Named Executive Officers as of
December 31, 2001.
--------------------- --------------- ------------- --------------------------------- --------------------------------
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
ACQUIRED VALUE OPTIONS/SARS AT OPTIONS/SARS AT
ON REALIZED FISCAL YEAR-END FISCAL YEAR-END
NAME EXERCISE (#) ($)(1) (#) ($)(2)
--------------------- --------------- ------------- --------------- ----------------- -------------- -----------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------------- --------------- ------------- --------------- ----------------- -------------- -----------------
Michael R. Haverty N/A N/A 1,438,106 0 $26,559,731 $0
Gerald K. Davies N/A N/A 50,594 1,780 $218,780 $0
Robert H. Berry N/A N/A 84,706 0 $987,174 $0
Albert W. Rees 300,000 $6,545,070 49,518 0 $334,159 $0
William J. Pinamont N/A N/A N/A N/A N/A N/A
--------------------- --------------- ------------- --------------- ----------------- -------------- -----------------
(1) The dollar values in this column are calculated by multiplying (a) the
difference between the fair market value of the shares of Stilwell common
stock underlying the options on the date of exercise and the exercise price
of the options by (b) the number of options exercised.
(2) The dollar values in this column are calculated by multiplying (a) the
difference between the fair market value of the shares of Stilwell common
stock underlying the options on December 31, 2001 (the last trading day of
the year) and the exercise price of the options by (b) the number of
options held at year-end.
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS WITH NAMED EXECUTIVE OFFICERS
EMPLOYMENT AGREEMENTS WITH THE NAMED EXECUTIVE OFFICERS
All of the Named Executive Officers have employment agreements which remain
in effect until terminated or modified. KCSI and KCSR entered into an Amended
and Restated Employment Agreement with Mr. Haverty, dated as of January 1, 2001,
an Employment Agreement with Mr. Davies, dated as of January 1, 1999, as amended
by an Amendment to Employment Agreement dated as of January 1, 2001, an Amended
and Restated Employment Agreement effective as of January 1, 2001 with Mr. Rees
and an Employment Agreement with Mr. Pinamont, effective as of August 1, 2001,
as amended by an Amendment to Employment Agreement, effective as of August 1,
2001. KCSI entered into an Amended and Restated Employment Agreement, dated as
of January 1, 2001, with Mr. Berry. Mr. Haverty's employment agreement provides
for his continued employment as President and Chief Executive Officer of KCSR.
KCSI also agreed to continue to cause Mr. Haverty to be elected and retained as
President and Chief Executive Officer of KCSI and as a director and Chairman of
the Board of KCSR and to use its best efforts to enable Mr. Haverty to continue
to be elected as a director and Chairman of the Board of KCSI. Mr. Davies'
employment agreement, as amended, provides for his employment as Executive Vice
President and Chief Operating Officer of KCSR. Mr. Berry's employment agreement
provides for his continued employment as Senior Vice President and Chief
Financial Officer of KCSI. Mr. Rees' employment agreement provides for his
employment as Senior Vice President Operations of KCSR. Mr. Pinamont's
employment agreement, as amended, provides for his continued employment as Vice
President and General Counsel of KCSR. KCSI also agreed to cause Mr. Pinamont to
continue to be elected and retained as Vice President and General Counsel of
KCSI. Each of these employment agreements is subject to termination under
certain circumstances.
Pursuant to their respective employment agreements, Messrs. Haverty,
Davies, Berry and Rees receive as compensation for their services an annual base
salary at the rate approved by the Compensation Committee, which for 2001 was
$600,000 for Mr. Haverty, $300,000 for Mr. Davies, $235,008 for Mr. Berry, and
$225,000 for Mr. Rees. Pursuant to his employment agreement, Mr. Pinamont
receives as compensation for his services an annual base salary of $175,000. The
salaries for Messrs. Haverty, Davies, Berry and Rees were frozen at the rates in
effect for 1999 through December 31, 2001. Under his employment agreement, the
salary for Mr. Pinamont could not be increased prior to January 1, 2002. The
salaries for these executive officers shall not be reduced except as agreed to
by the parties or as part of a general salary reduction by KCSR applicable to
all officers of KCSR, with respect to Messrs. Haverty, Davies, Rees and
Pinamont, and by KCSI applicable to all officers of KCSI, with respect to Mr.
Berry. Effective March 26, 2001, each of Messrs. Haverty, Davies, Berry and Rees
agreed to a voluntary temporary salary reduction. Mr. Haverty agreed to a 15%
reduction, and each of Messrs. Davies, Berry and Rees agreed to a 7% reduction.
Effective April 1, 2001, Mr. Pinamont agreed to a 3% voluntary temporary salary
reduction. These voluntary temporary salary reductions ended December 31, 2001.
Neither Mr. Haverty nor Mr. Davies was entitled to participate in any KCSI or
KCSR incentive compensation plans for 2001, but both are eligible to participate
in other benefit plans or programs generally available to executive employees of
KCSR. Mr. Berry was not entitled to participate in any KCSI incentive
compensation plans for 2001, and Mr. Rees was not entitled to participate in the
KCSI Incentive Compensation Plan for 2001, but both are eligible to participate
in other benefit plans or programs generally available to executive employees of
KCSI. Mr. Pinamont was not entitled to participate in the KCSR Incentive
Compensation Plan for 2001, but is eligible to participate in other benefit
plans or programs generally available to executive employees of KCSR. Each of
the employment agreements provides that the value of the respective Named
Executive Officer's annual compensation is fixed at a percentage of base salary
for purposes of cash compensation benefit plans as follows: 167.76% for Mr.
Haverty; 175% for each of Messrs. Davies, Berry and Rees and 145% for Mr.
Pinamont.
In the event of termination without cause by KCSI or KCSR, as applicable,
each of Messrs. Haverty, Davies, Berry, Rees and Pinamont would be entitled to
twelve months of severance pay at an annual rate equal to his base salary and
for reimbursement for the costs of continuing or obtaining comparable health and
life insurance benefits unless such benefits are provided by another employer.
In the year in which termination occurs, each of Messrs. Haverty, Davies, Berry,
Rees and Pinamont would remain eligible to receive benefits under the KCSI
Incentive Compensation Plan or the KCSR Incentive Compensation Plan, as
applicable, and any Executive Plan in which they participate, if such plans are
then in existence and the executive officer was entitled to participate
immediately prior to termination. After termination, the officers would not be
entitled to accrue or receive benefits under any other employee benefit plan,
except the officers would be entitled to participate in the KCSI 401(k) and
Profit Sharing Plan and the KCSI Employee Stock Ownership Plan in the year of
termination if such officer were to meet the requirements for participation in
such termination year. In addition, Mr. Davies' employment agreement provides
that if he terminates his employment agreement within 90 days after Mr. Haverty
has discontinued all association with KCSI and KCSR or within 90 days after
there is any significant reduction in his responsibilities for KCSR, he shall be
entitled to the payments and benefits described above as if terminated by KCSR
other than for cause. As part of his employment agreement, each of Messrs.
Haverty, Davies, Berry, Rees and Pinamont has agreed not to use or disclose any
trade secret of KCSI or KCSR, as applicable (as defined in his employment
agreement), after any termination of his employment and shall, immediately upon
termination of employment, return to KCSI or KCSR, as applicable, any trade
secrets in his possession which exist in tangible form.
If there were a change in control (as defined in the officer's employment
agreement) of KCSI or KCSR during the term of that employment agreement, that
officer's employment, executive capacity, salary and benefits would be continued
for a three-year period at levels in effect on the control change date (as that
term is defined in his employment agreement). During that three-year period,
salary would be paid at a rate not less than twelve times the highest monthly
base salary paid or payable to that officer in the twelve months immediately
prior to the change in control. During that three-year period, the officer also
would be eligible to participate in all benefit plans made generally available
to executives of their level or to the employees of KCSI or KCSR, as applicable,
generally, would be eligible to participate in any KCSI or KCSR incentive
compensation plan and would be entitled to immediately exercise all outstanding
stock options and receive a lump-sum cash payment equal to the difference
between the fair market value of the shares of Common Stock underlying the
non-vested options and the exercise price of such options. If the amounts
payable were determined on a discretionary basis immediately prior to the change
of control, the benefits continued would not be less than the average annual
amount for the three years prior to the change in control and incentive
compensation would not be less than 75% of the maximum amount which could have
been paid to the officer under the terms of the incentive compensation plan.
With respect to unfunded employer obligations under benefit plans, the officer
would be entitled to a discounted cash payment of amounts to which he would be
entitled. The officer's employment may be terminated after the control change
date, but where it were other than "for cause" (as defined in his employment
agreement) or disability, he would be entitled to payment of his base salary
through termination plus a discounted cash severance payment equal to a
percentage (167.67% for Mr. Haverty, 175% for each of Messrs. Davies, Berry and
Rees, and 180% for Mr. Pinamont) of three times his annual base salary for each
of Messrs. Haverty, Davies, Berry and Rees, and two times his annual base salary
for Mr. Pinamont, continuation or payment of benefits for a three-year period at
levels in effect on the control change date and certain health, prescription and
dental benefits until attainment of age 60, and certain health and prescription
benefits for the remainder of his life unless such benefits are otherwise
provided by a subsequent employer. Each of the officers is also permitted to
resign employment after a change in control upon "good reason" (as that term is
defined in his employment agreement) and advance written notice, and to receive
the same payments and benefits as if his employment had been terminated. The
employment agreements also provide for payments to such officers necessary to
relieve them of certain adverse federal income tax consequences if amounts
received under the agreements were determined to involve "parachute payments"
under Section 4999 of the Internal Revenue Code.
INDEMNIFICATION AGREEMENTS
KCSI has entered into indemnification agreements with its officers and
directors. Such agreements are intended to supplement KCSI's officer and
director liability insurance and to provide the officers and directors with
specific contractual assurance that the protection provided by KCSI's Bylaws
will continue to be available regardless of, among other things, an amendment to
the Bylaws or a change in management or control of KCSI. The indemnification
agreements provide for indemnification "to the fullest extent permitted by the
Delaware General Corporation Law" and for the prompt advancement of expenses,
including attorney's fees and all other costs and expenses incurred in
connection with any action, suit or proceeding in which the director or officer
was or is a party, is threatened to be made a party or is otherwise involved, or
to which the director or officer was or is a party, is threatened to be made a
party or is otherwise involved by reason of service in certain capacities. Under
the indemnification agreements, if required by the Delaware General Corporation
Law, an advancement of expenses incurred will be made only upon delivery to KCSI
of an undertaking to repay all advanced amounts if it is ultimately determined
by final adjudication that the officer or director is not entitled to be
indemnified for such expenses. The indemnification agreements also provide a
mechanism to seek court relief if indemnification or expense advances are not
received within specified periods. Indemnification and advancement of expenses
would also be provided with respect to a court proceeding initiated for a
determination of rights under the indemnification agreement or of certain other
matters.
CHANGE IN CONTROL ARRANGEMENTS
KCSI has established a series of trusts that are intended to secure the
rights of its officers, directors, employees, former employees and others (the
"Beneficiaries") under various contracts, benefit plans, agreements,
arrangements and commitments. The function of each trust is to receive
contributions from KCSI and, following a change in control of KCSI (as defined
by the trust), in the event that KCSI fails to honor certain obligations to a
Beneficiary, the trust shall distribute to the Beneficiary amounts accumulated
in such Beneficiary's trust account sufficient to discharge KCSI's obligation as
such amounts become due and payable. Most of the trusts require KCSI to be
solvent, as a condition to making distributions, and certain trusts allow
distributions upon the Board of Directors' approval prior to a change in
control. Trusts have been instituted with respect to the employment continuation
commitments under the employment agreements, the Executive Plan, the Directors'
Deferred Fee Plan, the indemnification agreements, stock option plan, and KCSI's
charitable contribution commitments in addition to certain other agreements,
commitments and arrangements. The trusts are revocable until a change in control
of KCSI and will terminate automatically if no such change in control occurs
prior to December 31, 2002.
KCSR has established similar trusts relating to its employment continuation
commitments under employment agreements and incentive compensation arrangements,
in addition to certain other agreements, commitments and arrangements. KCSR also
established a similar trust with respect to its participation in the Executive
Plan. As with the KCSI trusts, distributions under the KCSR trust are tied to
failures by the respective companies to honor their obligations to their
respective Beneficiaries following a change in control of KCSI.
OTHER COMPENSATORY PLANS
KCSI and its subsidiaries maintain compensation plans for certain of their
officers and employees. Certain of those plans have vesting provisions under
which the plan participants do not have the right to receive all of the plan
benefits allocated to their accounts until certain conditions have been
satisfied. Described below are the portions of those plans in which the accounts
of the officers named in the Summary Compensation Table become vested as a
result of (a) their retirement or termination of employment or (b) a change in
control of KCSI, or change in the Named Executive Officer's responsibilities
following such a change of control.
THE EMPLOYEE STOCK OWNERSHIP PLAN
The KCSI Employee Stock Ownership Plan and Trust Agreement (the "ESOP") is
designed to be a qualified employee stock ownership plan under the Internal
Revenue Code of 1986, as amended (the "Code"), for purposes of investing in
shares of KCSI Common Stock and, as of January 1, 2001, a qualified stock bonus
plan with respect to the remainder of the ESOP not invested in KCSI Common
Stock. With respect to the shares of common stock of Stilwell ("Stilwell
shares") held in participants' ESOP accounts, a participant may: (a) keep the
Stilwell shares in the participant's account; (b) dispose of the Stilwell shares
and reinvest the proceeds in one or more of the diversified investment funds
that are available under the ESOP; (c) dispose of the Stilwell shares and
reinvest the proceeds in KCSI Common Stock; or (d) select any combination of the
foregoing. Allocations of shares of KCSI Common Stock, if any, to participant
accounts in the ESOP for any plan year are based upon each participant's
proportionate share of the total eligible compensation paid during the plan year
to all participants in the ESOP, subject to Code-prescribed maximum allocation
limitations. As of the date of this Proxy Statement, all shares held by the ESOP
have been allocated to participants' accounts. Forfeitures are similarly
allocated. For this purpose, compensation includes only compensation received
during the period the individual was actually a participant in the ESOP.
A participant with less than five years of service is not vested in the
ESOP's contributions, forfeitures and earnings. However, a participant becomes
100% vested upon completion of five years of service. In addition, a participant
becomes 100% vested at his or her retirement at age 65, death or disability or
upon a change in control of KCSI (as defined in the ESOP). Distributions of
benefits under the ESOP may be made in connection with a participant's death,
disability, retirement or other termination of employment. A participant in the
ESOP has the right to select whether payment of his or her benefit will take the
form of cash, whole shares of KCSI Common Stock, Stilwell shares (to the extent
Stilwell shares are held in the participant's account) or a combination thereof.
In the event no election is made, the plan provides that the payment shall be
made in KCSI Common Stock to the extent a participant's account holds KCSI
Common Stock and cash to the extent cash or other non-KCSI Common Stock
investments are held. A participant may further opt to receive payment in a lump
sum or in installments.
1991 AMENDED AND RESTATED STOCK OPTION AND PERFORMANCE AWARD PLAN
Under the provisions of the 1991 Plan and subject to the terms of the
pertinent award agreement, the retirement, death or disability (as such terms
are defined in the 1991 Plan) of a Grantee of an Award or a change of control of
KCSI (as defined in the 1991 Plan) may accelerate the exercisability of an award
as follows. Upon the death or disability of a grantee of an award under the 1991
Plan, the unexercisable options become exercisable and the grantee (or his or
her personal representative or transferee under a will or the laws of descent
and distribution) may exercise such options up to the earlier of the expiration
of the option term or 12 months. Upon the retirement of a grantee of an award
under the 1991 Plan, the unexercisable options become exercisable and the
grantee (or his or her personal representative or transferee under a will or the
laws of descent and distribution) may exercise such options up to the earlier of
the expiration of the option term or five years from the date of retirement.
Upon a change of control of KCSI (as defined in the 1991 Plan), the
unexercisable options become immediately exercisable. LSAR's are granted in
tandem with options. All of the LSAR's are automatically exercised upon a change
of control that is not approved by the incumbent board of KCSI (as such terms
are defined in the 1991 Plan).
KCSI 401(K) AND PROFIT SHARING PLAN
The KCSI 401(k) and Profit Sharing Plan is a qualified defined contribution
plan. KCSI originally established the KCSI 401(k) Plan effective as of January
1, 1996 and the KCSI Profit Sharing Plan as of January 1, 1990. Effective as of
January 1, 2001, the Profit Sharing Plan was merged with the 401(k) Plan, which
was renamed the KCSI 401(k) and Profit Sharing Plan (the "Plan"). Upon the
merger of the plans, participant accounts in the Profit Sharing Plan were
transferred to the Plan.
Eligible employees of KCSI and other participating subsidiaries of KCSI
(the "Employer") may elect to make pre-tax contributions, called 401(k)
contributions, to the Plan up to 10% of compensation and subject to certain
limits under the Internal Revenue Code of 1986, as amended (the "Code"). The
Employer will make matching contributions to the Plan equal to 100% of a
participant's 401(k) contributions and up to a maximum of 3% of a participant's
compensation. Matching contributions vest at the rate of 20% at two years of
service, 40% at three years of service, 60% at four years of service and 100% at
five years of service. A participant becomes 100% vested upon retirement at age
65, death or disability or upon a change in control of KCSI (as defined in the
Plan). The Employer may, in its discretion, make special contributions on behalf
of participants to satisfy certain nondiscrimination requirements imposed by the
Code, which are 100% vested.
The Employer may also make, in its discretion, annual profit sharing
contributions in an amount not to exceed the maximum allowable deduction for
federal income tax purposes and certain limits under the Code. Only employees
who have met certain standards as to hours of service are eligible to receive
profit sharing contributions. No minimum contribution is required. Each eligible
participant, subject to maximum allocation limitations under the Code, is
allocated the same percentage of the total contribution as the participant's
compensation bears to the total compensation of all participants. Profit sharing
contributions, including a participant's account in the Profit Sharing Plan
transferred to the Plan, are 100% vested.
Participants may direct the investment of their accounts under the Plan by
selecting from one or more of the diversified investment funds that are
available under the Plan, including a fund consisting of KCSI common stock.
Distribution of benefits under the Plan will be made in connection with a
participant's death, disability, retirement or other termination of employment.
A participant may elect whether payment of his or her benefits will be in a lump
sum or in installments.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION; CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
On September 29, 2000, KCSI and Manatt, Phelps & Phillips entered into an
agreement commencing October 1, 2000 and ending October 31, 2002, under which
the law firm of Manatt, Phelps & Phillips and James R. Jones agreed to provide
KCSI with advice and assistance with reference to issues and transactions in
Mexico and other international venues. In consideration of the services
provided, KCSI agreed to pay Manatt, Phelps & Phillips the sum of $10,000 per
month. Mr. Jones, a director of KCSI who serves on the Compensation Committee,
acts as Senior Counsel to Manatt, Phelps & Phillips and receives a salary from
such law firm for his services as Senior Counsel. The fees paid by KCSI to such
law firm did not exceed 5% of the law firm's gross revenues for that firm's last
full fiscal year.
STOCKHOLDER PROPOSALS
To be properly brought before the Annual Meeting, a proposal must be either
(i) specified in the notice of the meeting (or any supplement thereto) given by
or at the direction of the Board of Directors, (ii) otherwise properly brought
before the meeting by or at the direction of the Board of Directors, or (iii)
otherwise properly brought before the meeting by a stockholder.
If a holder of KCSI Common Stock wishes to present a proposal for inclusion
in KCSI's Proxy Statement for next year's annual meeting of stockholders, such
proposal must be received by KCSI on or before November 29, 2002. Such proposal
must be made in accordance with the applicable laws and rules of the Securities
and Exchange Commission and the interpretations thereof as well as KCSI's
Bylaws. Any such proposal should be sent to the Corporate Secretary of KCSI at
427 West 12th Street, Kansas City, Missouri 64105.
As described below, in order for a stockholder proposal that is not
included in KCSI's Proxy Statement for next year's annual meeting of
stockholders to be properly brought before the meeting, such proposal must be
delivered to the Corporate Secretary and received at KCSI's executive offices no
earlier than January 31, 2003 and no later than March 17, 2003 (assuming a
meeting date of May 1, 2003) and such proposal must also comply with the
procedures outlined below, which are set forth in KCSI's Bylaws. The
determination that any such proposal has been properly brought before such
meeting is made by the officer presiding over such meeting.
DIRECTOR NOMINATIONS
With respect to stockholder nominations of candidates for KCSI's Board of
Directors, KCSI's Bylaws provide that not less than 45 days nor more than 90
days prior to the date of any meeting of the stockholders at which directors are
to be elected (the "Election Meeting") any stockholder who intends to make a
nomination at the Election Meeting shall deliver a notice in writing (the
"Stockholder's Notice") to the Secretary of KCSI setting forth (a) as to each
nominee whom the stockholder proposes to nominate for election or re-election as
a director, (i) the name, age, business address and residence address of the
nominee, (ii) the principal occupation or employment of the nominee, (iii) the
class and number of shares of capital stock of KCSI that are beneficially owned
by the nominee, and (iv) any other information concerning the nominee that would
be required, under the rules of the Securities and Exchange Commission, in a
proxy statement soliciting proxies for the election of such nominee; and (b) as
to the stockholder giving the notice, (i) the name and address of the
stockholder and (ii) the class and number of shares of capital stock of KCSI
which are beneficially owned by the stockholder and the name and address of
record under which such stock is held; provided, however, that in the event that
the Election Meeting is designated by the Board of Directors to be held at a
date other than the first Tuesday in May and less than 60 days' notice or prior
public disclosure of the date of the Election Meeting is given or made to
stockholders, to be timely, the Stockholder's Notice must be so delivered not
later than the close of business on the 15th day following the day on which such
notice of the date of the meeting was mailed or such public disclosure was made,
whichever first occurs. The Stockholder's Notice shall include a signed consent
of each such nominee to serve as a director of KCSI, if elected. KCSI may
require any proposed nominee or stockholder proposing a nominee to furnish such
other information as may reasonably be required by KCSI to determine the
eligibility of such proposed nominee to serve as a director of KCSI or to
properly complete any proxy or information statement used for the solicitation
of proxies in connection with such Election Meeting.
MATTERS OTHER THAN DIRECTOR NOMINATIONS
In addition to any other applicable requirements, for a proposal to be
properly brought before the meeting by a stockholder, the stockholder must have
given timely notice thereof in writing to the Secretary of KCSI. To be timely,
such a stockholder's notice must be delivered to or mailed and received at the
principal executive offices of KCSI, not less than 45 days nor more than 90 days
prior to the meeting; provided, however, that in the event that the meeting is
designated by the Board of Directors to be held at a date other than the first
Tuesday in May and less than 60 days' notice or prior public disclosure of the
date of the meeting is given or made to stockholders, to be timely, the notice
by the stockholder must be so received not later than the close of business on
the 15th day following the day on which such notice of the date of the meeting
was mailed or such public disclosure was made, whichever first occurs. A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the meeting (i) a brief description of the
business desired to be brought before the meeting and the reasons for conducting
such business at the meeting, (ii) the name and address of the stockholder
proposing such business, (iii) the class and number of shares of capital stock
of KCSI which are beneficially owned by the stockholder and the name and address
of record under which such stock is held and (iv) any material interest of the
stockholder in such business.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
KCSI's directors, executive officers and certain other officers, and persons,
legal or natural, who own more than 10 percent of KCSI's Common Stock or
Preferred Stock (collectively "Reporting Persons"), to file reports of their
ownership of such stock, and the changes therein, with the Securities and
Exchange Commission, the New York Stock Exchange and KCSI (the "Section 16
Reports"). Based solely on a review of the Section 16 reports for 2001 and any
amendments thereto furnished to KCSI and written representations from certain of
the Reporting Persons, no Reporting Person other than James R. Jones, was late
in filing such Section 16 Reports for fiscal year 2001. Mr. Jones, a director of
KCSI, purchased 3,050 shares on August 9, 2000, and reported the purchase on a
Form 5 for the year ended December 31, 2001.
HOUSEHOLDING OF ANNUAL MEETING MATERIALS
Pursuant to the rules of the Securities and Exchange Commission, services
that deliver KCSI's communications to stockholders that hold their stock through
a bank, broker or other nominee holder of record may deliver to multiple
stockholders sharing the same address a single copy of KCSI's Annual Report and
Proxy Statement. KCSI will promptly deliver upon written or oral request a
separate copy of the Annual Report and/or Proxy Statement to any stockholder at
a shared address to which a single copy of the documents was delivered. Written
requests should be made to Kansas City Southern Industries, Inc., 114 West 11th
Street, Kansas City, Missouri 64105, (816) 983-1538 before April 5 2002 and at
427 West 12th Street, Kansas City, Missouri 64105, (816) 983-1538 on and after
April 5, 2002, Attention: Corporate Secretary's Office, and oral requests may be
made by calling the KCSI's Corporate Secretary's Office at (816) 460-1237. Any
stockholder who wants to receive separate copies of the Proxy Statement or
Annual Report in the future, or any stockholder who is receiving multiple copies
and would like to receive only one copy per household, should contact the
stockholder's bank, broker or other nominee holder of record, or the stockholder
may contact KCSI at the above address or telephone number.
OTHER MATTERS
The Board of Directors knows of no other matters that are expected to be
presented for consideration at the Annual Meeting. KCSI's Bylaws require that
stockholders intending to bring business before an Annual Meeting, including the
nomination of candidates for election to the Board of Directors, give timely and
sufficient notice thereof to the Secretary of KCSI, not more than 90 and no less
than 45 days before an Annual Meeting held on the date specified in KCSI's
Bylaws and provide certain additional information; provided, however, that in
the event the Annual Meeting is to be held at a date other than the first
Tuesday in May and less than 60 days' notice or prior public disclosure of the
date of the meeting is given or made to stockholders, to be timely, such notice
must be delivered not later than the close of business on the 15th day following
the day on which such notice of the date of the meeting was mailed or such
public disclosure was made, which first occurs. As of the date of this Proxy
Statement, no such notice has been received. However, if other matters properly
come before the meeting, it is intended that persons named in the accompanying
proxy will vote on them in accordance with their best judgment.
Notwithstanding anything to the contrary set forth in any of KCSI's
previous filings under the Securities Act of 1933, as amended, or the Exchange
Act that might incorporate future filings, including this Proxy Statement, in
whole or in part, the Compensation and Organization Committee Report on
Executive Compensation and the Performance Graph included herein shall not be
incorporated by reference into any such filings.
By Order of the Board of Directors
Michael R. Haverty
Chairman of the Board, President
and Chief Executive Officer
Kansas City, Missouri
March 29, 2002
KCSI's Annual Report includes KCSI's Annual Report on Form 10-K for the
year ended December 31, 2001 (without exhibits) as filed with the Securities and
Exchange Commission (the "SEC"). KCSI WILL FURNISH WITHOUT CHARGE UPON WRITTEN
REQUEST A COPY OF KCSI'S ANNUAL REPORT ON FORM 10-K. THE ANNUAL REPORT ON FORM
10-K INCLUDES A LIST OF ALL EXHIBITS THERETO. KCSI WILL FURNISH COPIES OF SUCH
EXHIBITS UPON WRITTEN REQUEST THEREFOR AND PAYMENT OF KCSI'S REASONABLE EXPENSES
IN FURNISHING SUCH EXHIBITS. EACH SUCH REQUEST MUST SET FORTH A GOOD FAITH
REPRESENTATION THAT, AS OF THE RECORD DATE, THE PERSON MAKING SUCH REQUEST WAS A
BENEFICIAL OWNER OF VOTING STOCK ENTITLED TO VOTE AT THE ANNUAL MEETING. SUCH
WRITTEN REQUEST SHOULD BE DIRECTED TO THE CORPORATE SECRETARY OF KCSI, 114 WEST
11TH STREET, KANSAS CITY, MISSOURI 64105-1804 BEFORE APRIL 5, 2002 AND AT 427
WEST 12TH STREET, KANSAS CITY, MISSOURI 64105, (816) 983-1538 ON AND AFTER APRIL
5, 2002. The Annual Report on Form 10-K for the year ended December 31, 2001
with exhibits, as well as other filings by KCSI with the SEC, are also available
through the SEC's Internet site at www.sec.gov.
APPENDIX A
GRAPHIC AND IMAGE MATERIAL
IN
PROXY STATEMENT
In accordance with Rule 304 of Regulation S-T, the following graphic and
image material is included in the KCSI proxy statement.
PHOTOGRAPHS OF EACH DIRECTOR
The proxy statement includes photographs of each director. A photograph of
a director is placed in the proxy statement next to the discussion of the
director's principal occupations in the section entitled "PROPOSAL 1 - ELECTION
OF TWO DIRECTORS" and "THE BOARD OF DIRECTORS."
STOCK PERFORMANCE GRAPH
The proxy statement also includes a stock performance graph, which is
supplemented by a table showing the dollar value of the points on the graph. The
table is set forth in this electronic format document in the section entitled
"Stock Performance Graph." Both the graph and the table will be included in the
paper format definitive proxy mailed to KCSI's Stockholders. In accordance with
a letter to EDGAR filers dated November 16, 1992 from Mauri L. Osheroff,
Associate Director of Regulatory Policy of the Division of Corporate Finance, no
further explanation of the graph is set forth in this appendix.
APPENDIX C
FORM OF PROXIES
KANSAS CITY SOUTHERN INDUSTRIES, INC.
ANNUAL MEETING OF SHAREHOLDERS
MAY 2, 2002
YOUR VOTE IS IMPORTANT!
YOU CAN VOTE IN ONE OF THREE WAYS:
1. VOTE BY INTERNET
2. VOTE BY PHONE
3. VOTE BY MAILING YOUR PROXY IN THE ENCLOSED ENVELOPE.
VOTE BY INTERNET
----------------
YOUR INTERNET VOTE IS QUICK, CONVENIENT AND YOUR VOTE IS IMMEDIATELY SUBMITTED.
JUST FOLLOW THESE EASY STEPS:
1. READ THE ACCOMPANYING PROXY STATEMENT.
2. VISIT OUR INTERNET VOTING SITE AT HTTP://WWW.EPROXYVOTE.COM/KSU AND
FOLLOW THE INSTRUCTIONS ON THE SCREEN.
PLEASE NOTE THAT ALL VOTES CAST BY INTERNET MUST BE SUBMITTED PRIOR TO 5:00 P.M.
CENTRAL TIME, MAY 1, 2002. YOUR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO
VOTE YOUR SHARES TO THE SAME EXTENT AS IF YOU MARKED, SIGNED, DATED AND RETURNED
THE PROXY CARD.
IF YOU VOTE BY INTERNET, PLEASE DO NOT RETURN YOUR PROXY BY MAIL.
VOTE BY TELEPHONE
-----------------
YOUR TELEPHONE VOTE IS QUICK, EASY AND IMMEDIATE. JUST FOLLOW THESE EASY STEPS:
1. READ THE ACCOMPANYING PROXY STATEMENT.
2. ON A TOUCH - TONE TELEPHONE CALL TOLL FREE 1-800-758-6973 AND FOLLOW
THE INSTRUCTIONS.
3. WHEN INSTRUCTED, ENTER THE CONTROL NUMBER, WHICH IS PRINTED ON THE
LOWER RIGHT-HAND CORNER OF YOUR PROXY CARD BELOW.
4. FOLLOW THE SIMPLE RECORDED INSTRUCTIONS.
PLEASE NOTE THAT ALL VOTES CAST BY TELEPHONE MUST BE SUBMITTED PRIOR TO 5:00
P.M. CENTRAL TIME, MAY 1, 2002. YOUR TELEPHONE VOTE AUTHORIZES THE NAMED PROXIES
TO VOTE YOUR SHARES TO THE SAME EXTENT AS IF YOU MARKED, SIGNED, DATED AND
RETURNED THE PROXY CARD.
IF YOU VOTE BY TELEPHONE, PLEASE DO NOT RETURN YOUR PROXY BY MAIL.
VOTE BY MAIL
------------
1. READ THE ACCOMPANYING PROXY STATEMENT.
2. MARK YOUR VOTE ON THE REVERSE SIDE OF THE ATTACHED PROXY CARD.
3. SIGN AND DATE THE PROXY CARD.
4. DETACH AND RETURN THE PROXY CARD IN THE POSTAGE PAID ENVELOPE
PROVIDED.
THANK YOU FOR YOUR VOTE
(TEAR HERE)
---------------------
KANSAS CITY SOUTHERN INDUSTRIES, INC. PROXY
This proxy confers discretionary authority as described, and may be revoked
in the manner described, in the Proxy Statement dated March 29, 2002, receipt of
which is hereby acknowledged.
Signature Date , 2002
---------------------------------- -------------
Signature Date , 2002
---------------------------------- -------------
Please sign exactly as name(s) appear. All joint owners should sign.
Executors, administrators, trustees, guardians, attorneys-in-fact, and
officers of corporate stockholders should indicate the capacity in
which they are signing. Please indicate whether you plan to attend the
Annual Meeting:
|_| WILL ATTEND |_| WILL NOT ATTEND
(CONTINUED ON OTHER SIDE)
(CONTINUED, AND TO BE SIGNED ON REVERSE SIDE)
(TEAR HERE)
--------------------
KANSAS CITY SOUTHERN INDUSTRIES, INC. PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. Michael G. Fitt, Michael R.
Haverty and Byron G. Thompson, or any one of them, are hereby authorized, with
full power of substitution, to vote the shares of stock of Kansas City Southern
Industries, Inc. entitled to be voted by the stockholder(s) signing this proxy
at the Annual Meeting of Stockholders to be held on May 2, 2002, or any
adjournment thereof, as specified herein and in their discretion on all other
matters that are properly brought before the Annual Meeting. IF NO CHOICE IS
SPECIFIED, SUCH PROXIES WILL VOTE "FOR" THE NOMINEES NAMED HEREON AND "FOR"
PROPOSALS 2 AND 3.
1. Election of two directors. 2. Approval of an amendment to the Certificate of Incorporation
Nominees: 01) Rodney E. Slater to change the Company's name from "Kansas City
and 02) Byron G. Thompson. Southern Industries, Inc." to "Kansas City Southern".
|_| FOR all nominees EXCEPT THOSE |_| FOR |_| AGAINST |_| ABSTAIN
INDICATED BELOW:
--------------------------------------- 3. Ratification of the Board of Directors' selection of KPMG
|_| WITHHOLD AUTHORITY to vote for LLP as KCSI's independent accountants for 2002.
all nominees.
|_| FOR |_| AGAINST |_| ABSTAIN
UNLESS AUTHORITY TO VOTE FOR ANY NOMINEE
IS WITHHELD, AUTHORITY TO VOTE
CUMULATIVELY FOR SUCH NOMINEE WILL BE DEEMED
GRANTED, AND IF OTHER PERSONS ARE NOMINATED,
THIS PROXY MAY BE VOTED FOR LESS THAN ALL
THE NOMINEES NAMED ABOVE, IN THE PROXY
HOLDERS' DISCRETION, TO ELECT THE MAXIMUM
NUMBER OF MANAGEMENT NOMINEES.
KANSAS CITY SOUTHERN INDUSTRIES, INC.
ANNUAL MEETING OF SHAREHOLDERS
MAY 2, 2002
YOUR VOTE IS IMPORTANT!
YOU CAN VOTE IN ONE OF THREE WAYS:
1. VOTE BY INTERNET
2. VOTE BY PHONE
3. VOTE BY MAILING YOUR VOTING INSTRUCTION CARD IN THE ENCLOSED ENVELOPE.
VOTE BY INTERNET
----------------
YOUR INTERNET VOTE IS QUICK, CONVENIENT AND YOUR VOTE IS IMMEDIATELY SUBMITTED.
JUST FOLLOW THESE EASY STEPS:
1. READ THE ACCOMPANYING PROXY STATEMENT.
2. VISIT OUR INTERNET VOTING SITE AT HTTP://WWW.EPROXYVOTE.COM/KSUEP AND
FOLLOW THE INSTRUCTIONS ON THE SCREEN.
PLEASE NOTE THAT ALL VOTES CAST BY INTERNET MUST BE SUBMITTED PRIOR TO 5:00 P.M.
CENTRAL TIME, APRIL 30, 2002. YOUR INTERNET VOTE INSTRUCTS THE TRUSTEE OF THE
PLAN HOW TO VOTE THE SHARES OF KANSAS CITY SOUTHERN INDUSTRIES, INC. ALLOCATED
TO YOUR ACCOUNT UNDER THE PLAN.
IF YOU VOTE BY INTERNET, PLEASE DO NOT RETURN YOUR VOTING
INSTRUCTION CARD BY MAIL.
VOTE BY TELEPHONE
-----------------
YOUR TELEPHONE VOTE IS QUICK, EASY AND IMMEDIATE. JUST FOLLOW THESE EASY STEPS:
1. READ THE ACCOMPANYING PROXY STATEMENT.
2. ON A TOUCH - TONE TELEPHONE CALL TOLL FREE 1-800-758-6973 AND FOLLOW
THE INSTRUCTIONS.
3. WHEN INSTRUCTED, ENTER THE CONTROL NUMBER, WHICH IS PRINTED ON THE
LOWER RIGHT-HAND CORNER OF YOUR VOTING INSTRUCTION CARD BELOW.
4. FOLLOW THE SIMPLE RECORDED INSTRUCTIONS.
PLEASE NOTE THAT ALL VOTES CAST BY TELEPHONE MUST BE SUBMITTED PRIOR TO 5:00
P.M. CENTRAL TIME, APRIL 30, 2002. YOUR TELEPHONE VOTE INSTRUCTS THE TRUSTEE OF
THE PLAN HOW TO VOTE THE SHARES OF KANSAS CITY SOUTHERN INDUSTRIES, INC.
ALLOCATED TO YOUR ACCOUNT UNDER THE PLAN.
IF YOU VOTE BY TELEPHONE, PLEASE DO NOT RETURN YOUR VOTING
INSTRUCTION CARD BY MAIL.
VOTE BY MAIL
------------
1. READ THE ACCOMPANYING PROXY STATEMENT.
2. MARK YOUR VOTE ON THE REVERSE SIDE OF THE ATTACHED VOTING INSTRUCTION
CARD.
3. SIGN AND DATE THE VOTING INSTRUCTION CARD.
4. DETACH AND RETURN THE VOTING INSTRUCTION CARD IN THE POSTAGE PAID
ENVELOPE PROVIDED.
THANK YOU FOR YOUR VOTE
(TEAR HERE)
---------------------
CONFIDENTIAL VOTING INSTRUCTIONS TO NATIONWIDE TRUST COMPANY AS TRUSTEE UNDER
THE EMPLOYEE STOCK OWNERSHIP PLAN OF KANSAS CITY SOUTHERN INDUSTRIES, INC.
Signature Date , 2002
--------------------------------- ------------
PLEASE SIGN EXACTLY AS NAME APPEARS.
(CONTINUED ON OTHER SIDE)
(CONTINUED, AND TO BE SIGNED ON REVERSE SIDE)
(TEAR HERE)
--------------------
THIS VOTING INSTRUCTION CARD IS SOLICITED BY THE TRUSTEE. I hereby direct that
the voting rights pertaining to shares of stock of Kansas City Southern
Industries, Inc. held by the Trustee and allocated to my account shall be
exercised at the Annual Meeting of Stockholders to be held on May 2, 2002, or
any adjournment thereof, as specified hereon and in its discretion on all other
matters that are properly brought before the Annual Meeting and matters
incidental to such meeting.
1. Election of two directors. 2. Approval of an amendment to the Certificate of Incorporation
Nominees: 01) Rodney E. Slater to change the Company's name from "Kansas City
and 02) Byron G. Thompson. Southern Industries, Inc." to "Kansas City Southern".
|_| FOR all nominees EXCEPT THOSE |_| FOR |_| AGAINST |_| ABSTAIN
INDICATED BELOW:
--------------------------------------- 3. Ratification of the Board of Directors' selection of KPMG
|_| WITHHOLD AUTHORITY to vote for LLP as KCSI's independent accountants for 2002.
all nominees.
|_| FOR |_| AGAINST |_| ABSTAIN
IF THE VOTING INSTRUCTION CARD IS NOT RETURNED, THE TRUSTEE MUST VOTE SUCH
SHARES IN THE SAME PROPORTIONS AS THE SHARES FOR WHICH VOTING INSTRUCTION
CARDS WERE RECEIVED FROM THE PLAN PARTICIPANTS.
KANSAS CITY SOUTHERN INDUSTRIES, INC.
ANNUAL MEETING OF SHAREHOLDERS
MAY 2, 2002
YOUR VOTE IS IMPORTANT!
YOU CAN VOTE IN ONE OF THREE WAYS:
1. VOTE BY INTERNET
2. VOTE BY PHONE
3. VOTE BY MAILING YOUR VOTING INSTRUCTION CARD IN THE ENCLOSED ENVELOPE.
VOTE BY INTERNET
----------------
YOUR INTERNET VOTE IS QUICK, CONVENIENT AND YOUR VOTE IS IMMEDIATELY SUBMITTED.
JUST FOLLOW THESE EASY STEPS:
1. READ THE ACCOMPANYING PROXY STATEMENT.
2. VISIT OUR INTERNET VOTING SITE AT HTTP://WWW.EPROXYVOTE.COM/KSU4K AND
FOLLOW THE INSTRUCTIONS ON THE SCREEN.
PLEASE NOTE THAT ALL VOTES CAST BY INTERNET MUST BE SUBMITTED PRIOR TO 5:00 P.M.
CENTRAL TIME, APRIL 30, 2002. YOUR INTERNET VOTE INSTRUCTS THE TRUSTEE OF THE
PLAN HOW TO VOTE THE SHARES OF KANSAS CITY SOUTHERN INDUSTRIES, INC. ALLOCATED
TO YOUR ACCOUNT UNDER THE PLAN.
IF YOU VOTE BY INTERNET, PLEASE DO NOT RETURN YOUR VOTING
INSTRUCTION CARD BY MAIL.
VOTE BY TELEPHONE
-----------------
YOUR TELEPHONE VOTE IS QUICK, EASY AND IMMEDIATE. JUST FOLLOW THESE EASY STEPS:
1. READ THE ACCOMPANYING PROXY STATEMENT.
2. ON A TOUCH - TONE TELEPHONE CALL TOLL FREE 1-800-758-6973 AND FOLLOW
THE INSTRUCTIONS.
3. WHEN INSTRUCTED, ENTER THE CONTROL NUMBER, WHICH IS PRINTED ON THE
LOWER RIGHT-HAND CORNER OF YOUR VOTING INSTRUCTION CARD BELOW.
4. FOLLOW THE SIMPLE RECORDED INSTRUCTIONS.
PLEASE NOTE THAT ALL VOTES CAST BY TELEPHONE MUST BE SUBMITTED PRIOR TO 5:00
P.M. CENTRAL TIME, APRIL 30, 2002. YOUR TELEPHONE VOTE INSTRUCTS THE TRUSTEE OF
THE PLAN HOW TO VOTE THE SHARES OF KANSAS CITY SOUTHERN INDUSTRIES, INC.
ALLOCATED TO YOUR ACCOUNT UNDER THE PLAN.
IF YOU VOTE BY TELEPHONE, PLEASE DO NOT RETURN YOUR VOTING
INSTRUCTION CARD BY MAIL.
VOTE BY MAIL
------------
1. READ THE ACCOMPANYING PROXY STATEMENT.
2. MARK YOUR VOTE ON THE REVERSE SIDE OF THE ATTACHED VOTING INSTRUCTION
CARD.
3. SIGN AND DATE THE VOTING INSTRUCTION CARD.
4. DETACH AND RETURN THE VOTING INSTRUCTION CARD IN THE POSTAGE PAID
ENVELOPE PROVIDED.
THANK YOU FOR YOUR VOTE
(TEAR HERE)
---------------------
CONFIDENTIAL VOTING INSTRUCTIONS TO NATIONWIDE TRUST COMPANY AS TRUSTEE UNDER
KANSAS CITY SOUTHERN INDUSTRIES, INC. 401K AND PROFIT SHARING PLAN.
Signature Date , 2002
---------------------------------- ------------
PLEASE SIGN EXACTLY AS NAME APPEARS.
(CONTINUED ON OTHER SIDE)
(CONTINUED, AND TO BE SIGNED ON REVERSE SIDE)
(TEAR HERE)
--------------------
THIS VOTING INSTRUCTION CARD IS SOLICITED BY THE TRUSTEE. I hereby direct that
the voting rights pertaining to shares of stock of Kansas City Southern
Industries, Inc. held by the Trustee and allocated to my account shall be
exercised at the Annual Meeting of Stockholders to be held on May 2, 2002, or
any adjournment thereof, as specified hereon and in its discretion on all other
matters that are properly brought before the Annual Meeting and matters
incidental to such meeting.
1. Election of two directors. 2. Approval of an amendment to the Certificate of Incorporation
Nominees: 01) Rodney E. Slater to change the Company's name from "Kansas City
and 02) Byron G. Thompson. Southern Industries, Inc." to "Kansas City Southern".
|_| FOR all nominees EXCEPT THOSE |_| FOR |_| AGAINST |_| ABSTAIN
INDICATED BELOW:
--------------------------------------- 3. Ratification of the Board of Directors' selection of KPMG
|_| WITHHOLD AUTHORITY to vote for LLP as KCSI's independent accountants for 2002.
all nominees.
|_| FOR |_| AGAINST |_| ABSTAIN
IF THE VOTING INSTRUCTION CARD IS NOT RETURNED, THE TRUSTEE MUST VOTE SUCH
SHARES IN THE SAME PROPORTIONS AS THE SHARES FOR WHICH VOTING INSTRUCTION
CARDS WERE RECEIVED FROM THE PLAN PARTICIPANTS.
KANSAS CITY SOUTHERN INDUSTRIES, INC.
ANNUAL MEETING OF SHAREHOLDERS
MAY 2, 2002
YOUR VOTE IS IMPORTANT!
YOU CAN VOTE IN ONE OF THREE WAYS:
1. VOTE BY INTERNET
2. VOTE BY PHONE
3. VOTE BY MAILING YOUR VOTING INSTRUCTION CARD IN THE ENCLOSED ENVELOPE.
VOTE BY INTERNET
----------------
YOUR INTERNET VOTE IS QUICK, CONVENIENT AND YOUR VOTE IS IMMEDIATELY SUBMITTED.
JUST FOLLOW THESE EASY STEPS:
1. READ THE ACCOMPANYING PROXY STATEMENT.
2. VISIT OUR INTERNET VOTING SITE AT HTTP://WWW.EPROXYVOTE.COM/KSUDE AND
FOLLOW THE INSTRUCTIONS ON THE SCREEN.
PLEASE NOTE THAT ALL VOTES CAST BY INTERNET MUST BE SUBMITTED PRIOR TO 5:00 P.M.
CENTRAL TIME, APRIL 30, 2002. YOUR INTERNET VOTE INSTRUCTS THE TRUSTEE OF THE
PLAN HOW TO VOTE THE SHARES OF KANSAS CITY SOUTHERN INDUSTRIES, INC. ALLOCATED
TO YOUR ACCOUNT UNDER THE PLAN.
IF YOU VOTE BY INTERNET, PLEASE DO NOT RETURN YOUR VOTING
INSTRUCTION CARD BY MAIL.
VOTE BY TELEPHONE
-----------------
YOUR TELEPHONE VOTE IS QUICK, EASY AND IMMEDIATE. JUST FOLLOW THESE EASY STEPS:
1. READ THE ACCOMPANYING PROXY STATEMENT.
2. ON A TOUCH - TONE TELEPHONE CALL TOLL FREE 1-800-758-6973 AND FOLLOW
THE INSTRUCTIONS.
3. WHEN INSTRUCTED, ENTER THE CONTROL NUMBER, WHICH IS PRINTED ON THE
LOWER RIGHT-HAND CORNER OF YOUR VOTING INSTRUCTION CARD BELOW.
4. FOLLOW THE SIMPLE RECORDED INSTRUCTIONS.
PLEASE NOTE THAT ALL VOTES CAST BY TELEPHONE MUST BE SUBMITTED PRIOR TO 5:00
P.M. CENTRAL TIME, APRIL 30, 2002. YOUR TELEPHONE VOTE INSTRUCTS THE TRUSTEE OF
THE PLAN HOW TO VOTE THE SHARES OF KANSAS CITY SOUTHERN INDUSTRIES, INC.
ALLOCATED TO YOUR ACCOUNT UNDER THE PLAN.
IF YOU VOTE BY TELEPHONE, PLEASE DO NOT RETURN YOUR VOTING
INSTRUCTION CARD BY MAIL.
VOTE BY MAIL
------------
1. READ THE ACCOMPANYING PROXY STATEMENT.
2. MARK YOUR VOTE ON THE REVERSE SIDE OF THE ATTACHED VOTING INSTRUCTION
CARD.
3. SIGN AND DATE THE VOTING INSTRUCTION CARD.
4. DETACH AND RETURN THE VOTING INSTRUCTION CARD IN THE POSTAGE PAID
ENVELOPE PROVIDED.
THANK YOU FOR YOUR VOTE
(TEAR HERE)
---------------------
CONFIDENTIAL VOTING INSTRUCTIONS TO UMB BANK, N.A. AS TRUSTEE UNDER
THE EMPLOYEE STOCK OWNERSHIP PLAN OF DST SYSTEMS, INC.
Signature Date , 2002
---------------------------------- ------------
PLEASE SIGN EXACTLY AS NAME APPEARS.
(CONTINUED ON OTHER SIDE)
(CONTINUED, AND TO BE SIGNED ON REVERSE SIDE)
(TEAR HERE)
--------------------
THIS VOTING INSTRUCTION CARD IS SOLICITED BY THE TRUSTEE. I hereby direct that
the voting rights pertaining to shares of stock of Kansas City Southern
Industries, Inc. held by the Trustee and allocated to my account shall be
exercised at the Annual Meeting of Stockholders to be held on May 2, 2002, or
any adjournment thereof, as specified hereon and in its discretion on all other
matters that are properly brought before the Annual Meeting and matters
incidental to such meeting.
1. Election of two directors. 2. Approval of an amendment to the Certificate of Incorporation
Nominees: 01) Rodney E. Slater to change the Company's name from "Kansas City
and 02) Byron G. Thompson. Southern Industries, Inc." to "Kansas City Southern".
|_| FOR all nominees EXCEPT THOSE |_| FOR |_| AGAINST |_| ABSTAIN
INDICATED BELOW:
--------------------------------------- 3. Ratification of the Board of Directors' selection of KPMG
|_| WITHHOLD AUTHORITY to vote for LLP as KCSI's independent accountants for 2002.
all nominees.
|_| FOR |_| AGAINST |_| ABSTAIN
IF THE VOTING INSTRUCTION CARD IS NOT RETURNED, THE TRUSTEE MUST VOTE SUCH
SHARES IN THE SAME PROPORTIONS AS THE SHARES FOR WHICH VOTING INSTRUCTION
CARDS WERE RECEIVED FROM THE PLAN PARTICIPANTS.
KANSAS CITY SOUTHERN INDUSTRIES, INC.
114 WEST 11TH STREET
KANSAS CITY, MISSOURI 64105-1804
March 29, 2002
Dear Participant in the Profit Sharing Plan portion of the Stilwell Financial
Inc. 401(K) Plan:
Enclosed is your voting instruction card in connection with the Annual
Meeting of Stockholders of KCSI to be held on May 2, 2002, which instructs
Charles Schwab Trust Company as Trustee of the Stilwell Profit Sharing Plan
portion of the 401(K) Plan, how to vote the shares of KCSI common stock
allocated to your 401(K) account.
Please DO NOT DELIVER THIS CARD TO THE COMPANY, as your vote is
confidential. Your card should be returned to UMB Bank, N.A., Securities
Transfer Division, P.O. Box 410064, Kansas City, Missouri 64179-0013, in the
enclosed postage-paid return envelope at your earliest convenience.
Thank you,
Michael R. Haverty
Chairman of the Board, President
and Chief Executive Officer
PLEASE SEE REVERSE SIDE FOR PROPOSALS TO BE VOTED
(Date, sign and return promptly in the prepaid envelope enclosed)
(TEAR HERE)
---------------------
CONFIDENTIAL VOTING INSTRUCTIONS TO CHARLES SCHWAB TRUST COMPANY
AS TRUSTEE UNDER THE STILWELL 401K AND PROFIT SHARING PLAN
Signature Date , 2002
---------------------------------- ------------
PLEASE SIGN EXACTLY AS NAME APPEARS.
(CONTINUED ON OTHER SIDE)
(CONTINUED, AND TO BE SIGNED ON REVERSE SIDE)
(TEAR HERE)
--------------------
THIS VOTING INSTRUCTION CARD IS SOLICITED BY THE TRUSTEE. I hereby direct that
the voting rights pertaining to shares of stock of Kansas City Southern
Industries, Inc. held by the Trustee and allocated to my account shall be
exercised at the Annual Meeting of Stockholders to be held on May 2, 2002, or
any adjournment thereof, as specified hereon and in its discretion on all other
matters that are properly brought before the Annual Meeting and matters
incidental to such meeting.
1. Election of two directors. 2. Approval of an amendment to the Certificate of Incorporation
Nominees: 01) Rodney E. Slater to change the Company's name from "Kansas City
and 02) Byron G. Thompson. Southern Industries, Inc." to "Kansas City Southern".
|_| FOR all nominees EXCEPT THOSE |_| FOR |_| AGAINST |_| ABSTAIN
INDICATED BELOW:
--------------------------------------- 3. Ratification of the Board of Directors' selection of KPMG
|_| WITHHOLD AUTHORITY to vote for LLP as KCSI's independent accountants for 2002.
all nominees.
|_| FOR |_| AGAINST |_| ABSTAIN
IF THE VOTING INSTRUCTION CARD IS NOT RETURNED, THE TRUSTEE MUST VOTE SUCH
SHARES IN THE SAME PROPORTIONS AS THE SHARES FOR WHICH VOTING INSTRUCTION
CARDS WERE RECEIVED FROM THE PLAN PARTICIPANTS.