KANSAS CITY SOUTHERN 1991 AMENDED AND RESTATED STOCK OPTION AND PERFORMANCE AWARD PLAN (As Amended and Restated Effective as of May 5, 2005) RESTRICTED SHARES AWARD AND PERFORMANCE SHARES AWARD AGREEMENT
EXHIBIT 10.5.4
KANSAS CITY SOUTHERN
1991 AMENDED AND RESTATED STOCK OPTION
AND PERFORMANCE AWARD PLAN
(As Amended and Restated Effective as of May 5, 2005)
1991 AMENDED AND RESTATED STOCK OPTION
AND PERFORMANCE AWARD PLAN
(As Amended and Restated Effective as of May 5, 2005)
By this Agreement, Kansas City Southern, a Delaware corporation (the “Company”), awards to
you, [Name], an employee of the Company or of a Subsidiary, as Grantee, the number of Restricted
Shares of the Company’s Common Stock, $.01 par value, set forth below (“Restricted Shares”), and
the number of Performance Shares set forth below for each specified Performance Period, which
Performance Shares represent a conditional right to receive a number of shares of the Company’s
Common Stock, $.01 par value, determined by the satisfaction of target performance goals for a
applicable Performance Period (“Performance Shares”). This Award of Restricted Shares and this
Award of target Performance Shares are subject to the terms and conditions set forth below and in
the attached Exhibit A hereto and in the Kansas City Southern 1991 Amended and Restated Stock
Option and Performance Award Plan (As Amended and Restated Effective as of May 5, 2005), as may
from time to time be amended (the “Plan”), all of which are an integral part of this Agreement.
RESTRICTED SHARES
Grant Date
|
[Date] | |
Period of Restriction
|
3 Years, ending on [Date] | |
Number of Restricted Shares
|
[No. of Shares] |
TARGET PERFORMANCE SHARES
Grant Date
|
[Date] | |
Vesting Date
|
[Date] | |
Number of Target Performance Shares |
||
and CorrespondingPerformance Periods: |
[No. of Shares]
|
[Beginning Date and Ending Date or Calendar Year] | |
[No. of Shares]
|
[Beginning Date and Ending Date or Calendar Year] | |
[No. of Shares]
|
[Beginning Date and Ending Date or Calendar Year] |
The Awards evidenced by this Agreement shall not be effective until you have indicated your
acceptance of this Agreement by signing one copy of this Agreement in the space provided below and
returning it to the Corporate Secretary’s Office, in the envelope provided, within ten (10) days
after your receipt of this Agreement from the Company. You should retain one copy of this
Agreement for your records.
| Kansas City Southern | ||||
| By: | ||||
| Name and Title: | ||||
ACCEPTED AND AGREED:
[Address] |
||
[City, State, Zip] |
||
Dated: , 200___ |
You receive two Awards under this Agreement: an Award of Restricted Shares and an Award
of Performance Shares. This Exhibit A of this Agreement consists of three sections. The first
section applies to your Award of Restricted Shares. The second section applies to your Award of
Performance Shares. The third section contains provisions that apply to both your Award of
Restricted Shares and your Award of Performance Shares. This Exhibit A of this Agreement also
includes the attached Schedule of Performance Goals
Restricted Shares Award
1. Payment. The Restricted Shares are awarded to you without requirement of payment.
2. Transfer Restrictions. Until the restrictions lapse, the Restricted Shares may not
be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by you, and
any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall
be void and unenforceable; provided that the designation of a beneficiary pursuant to Article 11 of
the Plan shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or
encumbrance. Certificates will be transferred to you only as provided in paragraph 3 of this
Restricted Shares Award section.
3. Certificates. You will receive certificates for the number of your Restricted
Shares with respect to which the restrictions have lapsed. Until the restrictions lapse, your
Restricted Shares either will be evidenced by certificates held by or on behalf of the Company (in
which case you will sign and deliver to the Company a stock power relating to the Restricted Shares
so that the Company may cancel the Restricted Shares in the event of forfeiture), or the Restricted
Shares will be reflected in a book-entry form or other account maintained by the Company, as
determined by the Company.
4. Rights as Stockholder. During the Period of Restriction you will have all of the
rights of a stockholder of the Company with respect to the Restricted Shares subject to the
provisions of paragraph 2 of this Restricted Shares Award Section.
5. Lapse of Restrictions Other than Upon Retirement or Disability. The Restricted
Shares will vest and no longer be subject to restrictions upon the first of the following events to
occur:
(a) The end of the Period of Restriction, provided your Termination of Affiliation does not
occur prior to that date; or
(b) Your Termination of Affiliation due to your death; or
(c) A Change in Control.
6. Lapse of Restrictions Upon Retirement or Disability. If, prior to the occurrence
of any of the events specified in paragraph 5 of this Restricted Shares Award section, you have a
Termination of Affiliation due to your Retirement or due to your Disability, then upon such
Termination of Affiliation, for every consecutive 12-month period of employment completed beginning
on the Restricted Shares Grant Date and ending on the date of such Termination of
2
Affiliation, one third (1/3) of the number of your Restricted Shares will vest and no longer
be subject to restrictions.
7. Acceleration of Vesting. The Committee may at any time or times in its discretion
accelerate the vesting of some or all of your Restricted Shares by specifying a date, other than
what is provided in this Agreement, on which the Period of Restriction ends and such Shares will no
longer be subject to restrictions. Any such Shares that are then vested under this paragraph 7
will not be forfeited under paragraph 8 of this Restricted Shares Award section.
8. Forfeiture. If you have a Termination of Affiliation prior to any of the events
specified in paragraph 5 and paragraph 6 of this Restricted Shares Award section, then you will
forfeit all of your Restricted Shares upon such Termination of Affiliation. If you have a
Termination of Affiliation due to your Retirement or due to your Disability under the provisions of
paragraph 6 of this Restricted Shares Award section, then you will forfeit that number of your
Restricted Shares that are not vested under the provisions of paragraph 6 of this Restricted Shares
Award section. All of your rights to and interest in any Restricted Shares that are forfeited
under this paragraph 8 will terminate upon forfeiture. You agree to immediately repay to the
Company all dividends, if any, paid in cash or in stock with respect to your forfeited Restricted
Shares.
Performance Shares Award
1. Payment. The Performance Shares are awarded to you without requirement of payment
by you.
2. Transfer Restrictions. The Performance Shares are rights that may not be assigned,
alienated, pledged, attached, sold or otherwise transferred or encumbered by you, and any such
purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void
and unenforceable; provided that the designation of a beneficiary pursuant to Article 11 of the
Plan shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or
encumbrance.
3. Number of Shares Earned. Your Award of Performance Shares specifies a number of
Performance Shares awarded with respect to each of three different Performance Periods. The number
of Performance Shares designated for a Performance Period represents a target number of Shares to
be earned if the Company performance goals (the “Performance Goals”) are met during the Performance
Period. As of the last day of each Performance Period, the Committee will determine, in accordance
with this paragraph 3, the number of Shares, if any, earned by you with respect to that Performance
Period. The earned Shares will be paid as provided in paragraph 7 of this Performance Shares Award
section subject to satisfaction of the vesting requirements and forfeiture provisions of paragraph
4 and paragraph 11 of this Performance Shares Award section. The number of Shares earned by you
for a Performance Period will equal the percentage determined under this paragraph 3 (the
“Applicable Percentage”) multiplied by the number of Performance Shares awarded to you for the
Performance Period. The Committee will determine the Applicable Percentage as soon as practicable
after the audited financial statements are received for the final year of the Performance Period,
or for the Performance Period year if only one year. To determine the Applicable Percentage, the
Committee will compare the Company’s actual performance for the Performance Period to the
Performance Goals for the Performance Period as set forth on the schedule of Performance Goals
attached to this Exhibit A (the “Schedule”). The Schedule describes and defines three levels of
Performance Goals: Threshold, Target and Maximum. The Schedule also specifies the Applicable
Percentage for each Performance Period if the actual performance for the Performance Period is at
3
Threshold, Target or Maximum. If the actual performance is between Threshold and Target, then
the Applicable Percentage will be prorated between the specified Applicable Percentage for
Threshold and the specified Applicable Percentage for Target. If the actual performance is between
Target and Maximum, then the Applicable Percentage will be prorated between the specified
Applicable Percentage for Target and the specified Applicable Percentage for Maximum. If the
actual performance is below Threshold, then the Applicable Percentage will be 0%. If the actual
performance is above Maximum, then the Applicable Percentage will be 200%.
4. Vesting. The number of Shares earned as determined under paragraph 3 of this
Performance Shares Award section will be paid to you only if you become vested in the Shares. You
will become vested in the Shares on the Vesting Date provided you do not have a Termination of
Affiliation prior to the Vesting Date except as otherwise provided in paragraph 5 and paragraph 6
of this Performance Shares Award section, and subject to any other forfeiture of Shares under
paragraph 10 of this Performance Shares Award section. If you have a Termination of Affiliation
prior to the Vesting Date, then except as provided in paragraph 5 and paragraph 6 of this
Performance Shares Award section, you will forfeit all Performance Shares, and will have no right
to earn or receive payment of any Shares under this Agreement.
5. Termination of Affiliation Due to Disability or Retirement. If you have a
Termination of Affiliation prior to the Vesting Date due to Disability or Retirement, then upon
such Termination of Affiliation: (a) you will become vested in Shares earned, as determined under
paragraph 3 of this Performance Shares Award section, with respect to all Performance Periods
completed as of the date of your Termination of Affiliation; and (b) you will forfeit all
Performance Shares awarded to you with respect to any Performance Period that is uncompleted as of
the date of your Termination of Affiliation and you will have no right to earn or receive payment
of any Shares with respect to any Performance Period that is uncompleted as of the date of your
Termination of Affiliation.
6. Termination of Affiliation Due to Change in Control or Death. If you have a
Termination of Affiliation prior to the Vesting Date due to a Change in Control or due to your
death, then upon such Termination of Affiliation: (a) you will become vested in Shares earned, as
determined under paragraph 3 of this Performance Shares Award section, with respect to all
Performance Periods completed as of the date of your Termination of Affiliation; and (b) with
respect to any Performance Period that is uncompleted as of the date of your Termination of
Affiliation, you will be deemed to have earned a number of Shares determined under paragraph 3 of
this Performance Shares Award section as if the Performance Goals were at Target, subject to any
adjustment by the Committee under the last sentence of paragraph 3.
7. Payment of Shares. Except as provided in the following sentence, the Shares, if
any, earned by you under this Agreement, and not forfeited under this Agreement, will be paid to
you, or your beneficiary if you are deceased, by issuing certificates to you or your beneficiary
for the number of Shares earned as soon as practicable after the latest to occur of (a) the Vesting
Date, or (b) the determination of the number of all Shares, if any, earned by you under this
Agreement with respect to all Performance Periods. Notwithstanding the preceding sentence, in the
event of vesting prior to the Vesting Date under the provisions of paragraph 5 or paragraph 6 of
this Performance Shares Award section, then the Shares, if any, earned by you for a Performance
Period will be paid to you or your beneficiary as soon as practicable after the latest to occur of
(a) your Termination of Affiliation, or (b) the determination of the number of Shares, if any,
earned by you under this Agreement with respect to all Performance Periods.
4
8. Deferral of Payment of Shares. You may elect to defer the time your earned Shares
are otherwise to be paid under paragraph 7 of this Performance Shares Award section in accordance
with the provisions of a deferral policy established by the Committee at any time or times. Any
such deferral policy established by the Committee may be amended from time to time. If you make an
authorized election to defer the payment of earned Shares pursuant to such a policy, and if the
Company declares a dividend payable to shareholders of record as of a date during such period of
deferral, then the Company will pay to you a cash amount equal to the dividend amount (a “dividend
equivalent payment”) you would have received with respect to such deferred Shares had the payment
of such Shares not been deferred and had you been the owner of such Shares on the record and
payment dates of such dividend. Any dividend equivalent payment to be made to you under the
preceding sentence will be made on the payment date of the dividend.
9. Rights as Stockholder. Prior to the time you receive a payment of Shares under
this Agreement, you will have no rights of a stockholder of the Company with respect to your
Performance Shares or any Shares which may be or have been earned by you. Accordingly, with
respect to the Performance Shares or any unearned or earned but unpaid Shares, in addition to the
restrictions under paragraph 2 of this Performance Shares Award section, you will not have the
right to vote, you will not receive or be entitled to receive cash or non-cash dividends, and you
will not have any other beneficial rights as a shareholder of the Company. The provisions of this
paragraph 9 do not affect your right, if any, to receive dividend equivalent payments under
paragraph 8 of this Performance Shares Award section.
10. Acceleration of Vesting Date. The Committee may at any time or times in its
discretion accelerate the Vesting Date. The Committee will accelerate the Vesting Date by
specifying an earlier Vesting Date. Acceleration of the Vesting Date under this paragraph 10 will
not result in an earlier payment of any Shares.
11. Additional Forfeiture Provision and Repayment Obligation. Notwithstanding any
provisions of this Agreement to the contrary, if the Committee determines that you have engaged in
Gross Misconduct as defined in this paragraph 11, then: (a) you will immediately forfeit all
Performance Shares awarded to you, and all earned or unearned Shares, for all Performance Periods
under this Agreement, and you will have no right to receive payment of any Shares under this
Agreement and (b) you will repay to the Company a number of Shares, or a dollar amount equal to the
current Fair Market Value of a number of Shares, equal to the number of Shares previously paid to
you under this Agreement. For purposes of this paragraph 11, Gross Misconduct means intentional
conduct in disregard of the Company’s expectations of someone in your position with the Company
that has caused significant financial harm to the Company, whether occurring before or after your
Termination of Affiliation.
Provisions Applicable to Both Restricted Shares Award and Performance Shares Award
1. Plan Governs. The Restricted Shares Award and the Performance Shares Award and
this Agreement are subject to the terms and conditions of the Plan. The Plan is incorporated in
this Agreement by this reference. All capitalized terms used in this Agreement have the meaning
set forth in the Plan unless otherwise defined in this Agreement. By executing this Agreement, you
acknowledge receipt of a copy of the Plan and the prospectus covering the Plan and you acknowledge
that the Award is subject to all the terms and provisions of the Plan. You further agree to accept
as binding, conclusive and final all decisions and interpretations by the Plan Committee with
respect to any questions arising under the Plan.
5
2. Tax Withholding. As of any date that a Required Withholding liability occurs, you
must remit the minimum amount necessary to satisfy the Required Withholding. The Committee may
require you to satisfy the Required Withholding by any (or a combination) of the following means:
(a) a cash payment; (b) withholding from compensation otherwise payable to you; (c) authorizing the
Company to withhold from any of your Restricted Shares that are no longer subject to forfeiture or
from any Shares payable to you a number of Shares having a Fair Market Value less than or equal to
the Required Withholding; or (d) delivering to the Company Mature Shares having a Fair Market Value
less than or equal to the amount of the Required Withholding. The Committee may, but is not
required to, approve your irrevocable election made prior to the time the Required Withholding
liability occurs to have the Company withhold from any of your Restricted Shares that are no longer
subject to forfeiture or from any Shares payable to you, a number of Shares having a Fair Market
Value less than or equal to the Required Withholding. The Company will not deliver certificates
for Shares to you under this Agreement unless you remit (or in appropriate cases agree to remit)
the Required Withholding as described above.
3. No Right to Employment. Nothing in this Agreement shall interfere with or limit in
any way the right of the Company or a Subsidiary to terminate your employment or service at any
time, nor confer upon you the right to continue in the employ of the Company or a Subsidiary.
4. Notices. Any notice to be given under the terms of this Agreement to the Company
shall be addressed to the Company in care of its Secretary. Any notice to be given to you shall be
addressed to you at the address listed in the Company’s records. By written notice referencing
this paragraph of this Agreement, either party may designate a different address for notices. Any
notice under this Agreement to the Company shall become effective upon receipt by the Company. Any
notice under this Agreement to you will be deemed to have been delivered to you when delivered in
person or when deposited in the United States mail, addressed to you at your address on the
shareholder records of the Company, or such other address as you have designated under this
paragraph.
5. Tax Consultation. Your signature on this Agreement means that you agree to consult
with any tax consultants you think advisable in connection with your Restricted Shares Award and
your Performance Shares Award and this Agreement, and you acknowledge that you are not relying, and
will not rely, on the Company or any Subsidiary for any tax advice.
6. Amendment. The Company reserves the right to amend the Plan at any time. The
Committee reserves the right to amend this Agreement at any time.
7. Severability. If any part of this Agreement is declared by any court or
governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not serve
to invalidate any part of this Agreement not declared to be unlawful or invalid. Any part so
declared unlawful or invalid shall, if possible, be construed in a manner which gives effect to the
terms of such part to the fullest extent possible while remaining lawful and valid.
8. Applicable Law. This Agreement shall be governed by the laws of the State of
Delaware other than its laws respecting choice of law.
9. Headings. Headings are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of this Agreement.
6
SCHEDULE OF PERFORMANCE GOALS
| Earned Percentage of | ||||||||
| Performance Level | Operating Ratio (50%) | EBITDA (25%) | ROCE (25%) | Incentive Target | ||||
2007 |
||||||||
Threshold
|
79.99% | $500 million | 7.9% | 50% | ||||
Target
|
79.8% | $549 million | 8.6% | 100% | ||||
Maximum
|
78.5% | $649 million | 10.1% | 200% | ||||
2008 |
||||||||
Threshold
|
Better of 2007 Operating Ratio Target (79.8%) or 2007 Actual Operating Ratio | Better of 2007 EBITDA Target ($549 million) or 2007 Actual EBITDA | Better of 2007 ROCE Target (8.6%) or 2007 Actual ROCE | 0% | ||||
Target
|
78.5% | $649 million | 10.1% | 100% | ||||
Maximum
|
76.8% | $776 million | 11.7% | 200% | ||||
2009 |
||||||||
Threshold
|
Better of 2008 Operating Ratio Target (78.5%) or 2008 Actual Operating Ratio | Better of 2008 EBITDA Target ($649 million) or 2008 Actual EBITDA | Better of 2008 ROCE Target (10.1%) or 2008 Actual ROCE | 0% | ||||
Target
|
76.8% | $776 million | 11.7% | 100% | ||||
Maximum
|
75.4% | $921 million | 13.4% | 200% |
7
Illustrative Example
If actual performance is between performance levels, the Applicable Percentage will be prorated
between such performance levels. The following example illustrates the method of such proration.
Assume that in the year 2007 the actual Operating Ratio was 79.6%, actual EBITDA was $551 million
and actual ROCE was 8.8%. The difference between the 2007 Target Operating Ratio and the actual
2007 Operating Ratio is .2, representing 15.4% of the difference between the 2007 Target Operating
Ratio and the 2007 Maximum Operating Ratio (i.e., .2/(79.8-78.5)). Thus, the Operating Ratio
earned percentage before weighting would be 115%. The difference between the 2007 Target EBITDA
and the actual 2007 EBITDA would be $2 million, representing 2% of the difference between the 2007
Target EBITDA and the 2007 Maximum EBITDA (i.e., 2/(649-549)). Thus, the EBITDA earned percentage
before weighting would be 102%. The difference between the 2007 Target ROCE and the actual 2007
ROCE would be .2, representing 13% of the difference between the 2007 Target ROCE and the 2007
Maximum ROCE (i.e., .2/(10.1-8.6)). Thus, the ROCE earned percentage before weighting would be
113%. Finally, each metric would be multiplied by the appropriate weighting factor and the
weighted earned percentages would be added together to determine the earned percentage. In this
example the weighted earned percentage would be 111.25%, as demonstrated in the table below:
| Earned | ||||||||||
| Operating Ratio | EBITDA | ROCE | Percentage | |||||||
A. 2007 Actual
|
78.6% | $551 million | 8.8% | |||||||
B. 2007 Target
|
79.6% | $549 million | 8.6% | |||||||
C. 2007 Difference
|
.2% | $2 million | .2% | |||||||
X. Xxxxxxxxxx between 2007
Target Goal and 2007 Maximum
Goal
|
79.8%-78.5%=1.3% | $649 million — $549 million = $100 million | 10.1%-8.6%=1.5% | |||||||
E. Quotient of C divided by D
|
15% | 2% | 13% | |||||||
F.
Unweighted Earned Percentage [Target Earned Percentage (i.e., 100%) plus E] |
115% | 102% | 113% | |||||||
G. Weighting Factor
|
50% | 25% | 25% | |||||||
H. Weighted Earned
Percentage (Product of F
times G)
|
57.5% | 25.5% | 28.25 | 111.25% | ||||||
8
