Exhibit 10.50
EMPLOYMENT AGREEMENT
     THIS AGREEMENT, made and entered into as of this 1st day of May, 2000, by
and between The Kansas City Southern Railway Company, a Missouri corporation
(“Railway”), Kansas City Southern Industries, Inc., a Delaware corporation
(“KCSI”) and Scott E. Arvidson, an individual (“Executive”).
     WHEREAS, Executive is now employed by Railway, and Railway, KCSI and
Executive desire for Railway to continue to employ Executive on the terms and
conditions set forth in this Agreement and to provide an incentive to Executive
to remain in the employ of Railway hereafter, particularly in the event of any
change in control (as herein defined) of KCSI, Railway or Kansas City Southern
Lines, Inc., thereby establishing and preserving continuity of management of
Railway.
     NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, it is agreed by and between Railway, KCSI and Executive as
follows:
     1. Employment. Railway hereby continues the employment of Executive as its
Chief Information Officer, to serve at the pleasure of the Board of Directors of
Railway (the “Railway Board”) and to have such duties, powers and
responsibilities as may be prescribed or delegated from time to time by the
President or other officer to whom Executive reports, subject to the powers
vested in the Railway Board and in the stockholder of Railway. Executive shall
faithfully perform his duties under this Agreement to the best of his ability
and shall devote substantially all of his working time and efforts to the
business and affairs of Railway and its affiliates.

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     2. Compensation.
          (a) Base Compensation. Railway shall pay Executive as compensation for
his services hereunder an annual base salary at the rate approved by the KCSI
Compensation Committee. Such rate shall not be increased prior to January 1,
2001 and shall not be reduced except as agreed by the parties or except as part
of a general salary reduction program imposed by Railway for non-union employees
and applicable to all officers of Railway.
          (b) Incentive Compensation. For the year 2000, Executive shall not be
entitled to participate in the Railway Incentive Compensation Plan.
     3. Benefits. During the period of his employment hereunder, Railway shall
provide Executive with coverage under such benefit plans and programs as are
made generally available to similarly situated employees of Railway, provided
(a) Railway shall have no obligation with respect to any plan or program if
Executive is not eligible for coverage thereunder, and (b) Executive
acknowledges that stock options and other stock and equity participation awards
are granted in the discretion of the Board of Directors of KCSI (the “KCSI
Board”) or the Compensation Committee of the KCSI Board and that Executive has
no right to receive stock options or other equity participation awards or any
particular number or level of stock options or other awards. In determining
contributions, coverage and benefits under any disability insurance policy and
under any cash compensation-based plan provided to Executive by Railway, it
shall be assumed that the value of Executive’s annual compensation, pursuant to
this Agreement, is 145% of Executive’s annual base salary. Executive
acknowledges that all rights and benefits under benefit plans and programs shall
be governed by the official text of each plan or program and not by any summary
or description thereof or any provision of this Agreement (except to the extent
that this Agreement expressly modifies such benefit plans or programs) and that
none of KCSI,

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KCSL nor Railway is under any obligation to continue in effect or to fund any
such plan or program, except as provided in Paragraph 7 hereof.
     4. Termination.
          (a) Termination by Executive. Executive may terminate this Agreement
and his employment hereunder by at least thirty (30) days advance written notice
to Railway, except that in the event of any material breach of this Agreement by
Railway, Executive may terminate this
Agreement and his employment hereunder immediately upon notice to Railway.
          (b) Death or Disability. This Agreement and Executive’s employment
hereunder shall terminate automatically on the death or disability of Executive,
except to the extent employment is continued under Railway’s disability plan.
For purposes of this Agreement, Executive shall be deemed to be disabled if he
qualifies for disability benefits under Railway’s long-term disability plan.
          (c) Termination by Railway For Cause. Railway may terminate this
Agreement and Executive’s employment “for cause” immediately upon notice to
Executive. For purposes of this Agreement (except for Paragraph 7), termination
“for cause” shall mean termination based upon any one or more of the following:
               (i) Any material breach of this Agreement by Executive;
               (ii) Executive’s dishonesty involving Railway, KCSI, KCSL or any
subsidiary of Railway, KCSI or KCSL;
               (iii) Gross negligence or willful misconduct in the performance
of Executive’s duties as determined in good faith by the Railway Board;
               (iv) Willful failure by Executive to follow reasonable
instructions of the President or other officer to whom Executive reports;
               (v) Executive’s fraud or criminal activity; or

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               (vi) Embezzlement or misappropriation by Executive.
          (d) Termination by Railway Other Than For Cause.
               (i) Railway may terminate this Agreement and Executive’s
employment other than for cause immediately upon notice to Executive, and in
such event, Railway shall provide severance benefits to Executive in accordance
with Paragraph 4(d)(ii) below.
               (ii) Unless the provisions of Paragraph 7 of this Agreement are
applicable, if Executive’s employment is terminated under Paragraph 4(d)(i),
Railway shall continue, for a period of one (1) year following such termination,
(a) to pay to Executive as severance pay a monthly amount equal to one-twelfth
(l/12th) of the annual base salary referenced in Paragraph 2(a) above, at the
rate in effect immediately prior to termination, and, (b) to reimburse Executive
for the cost (including state and federal income taxes payable with respect to
this reimbursement) of continuing the health insurance coverage provided
pursuant to this Agreement or obtaining health insurance coverage comparable to
the health insurance provided pursuant to this Agreement, and obtaining coverage
comparable to the life insurance provided pursuant to this Agreement, unless
Executive is provided comparable health or life insurance coverage in connection
with other employment. The foregoing obligations of Railway shall continue until
the end of such one (1) year period notwithstanding the death or disability of
Executive during said period (except, in the event of death, the obligation to
reimburse Executive for the cost of life insurance shall not continue). In the
year in which termination of employment occurs, Executive shall be eligible to
receive benefits under the Railway Incentive Compensation Plan and any Executive
Plan in which Executive participates (the “Executive Plan”) (if such Plans then
are in existence and Executive was entitled to participate immediately prior to
termination) in accordance with the provisions of such plans then applicable,
and severance

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pay received in such year shall be taken into account for the purpose of
determining benefits, if any, under the Railway Incentive Compensation Plan but
not under the Executive Plan. After the year in which termination occurs,
Executive shall not be entitled to accrue or receive benefits under the Railway
Incentive Compensation Plan or the Executive Plan with respect to the severance
pay provided herein, notwithstanding that benefits under such plan then are
still generally available to executive employees of Railway. After termination
of employment, Executive shall not be entitled to accrue or receive benefits
under any other employee benefit plan or program, except that Executive shall be
entitled to participate in the KCSI Profit Sharing Plan, the KCSI Employee Stock
Ownership Plan and the KCSI Section 401 (k) Plan (if Railway employees then
still participate in such plans) in the year of termination of employment only
if Executive meets all requirements of such plans for participation in such
year.
     5. Non-Disclosure. During the term of this Agreement and at all times after
any termination of this Agreement, Executive shall not, either directly or
indirectly, use or disclose any Railway trade secret, except to the extent
necessary for Executive to perform his duties for Railway while an employee. For
purposes of this Agreement, the term “Railway trade secret” shall mean any
information regarding the business or activities of Railway or any subsidiary or
affiliate, including any formula, pattern, compilation, program, device, method,
technique, process, customer list, technical information or other confidential
or proprietary information, that (a) derives independent economic value, actual
or potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from its disclosure or use, and (b) is the subject of efforts of Railway or its
subsidiary or affiliate that are reasonable under the circumstance to maintain
its secrecy. In the event of any breach of this Paragraph 5 by Executive,
Railway shall be entitled to terminate any and all remaining severance

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benefits under Paragraph 4(d)(ii) and shall be entitled to pursue such other
legal and equitable remedies as may be available.
     6. Duties Upon Termination; Survival.
          (a) Duties. Upon termination of this Agreement by Railway or Executive
for any reason, Executive shall immediately return to Railway all Railway trade
secrets which exist in tangible form and shall sign such written resignations
from all positions as an officer, director or member of any committee or board
of Railway and all direct and indirect subsidiaries and affiliates of Railway as
may be requested by Railway and shall sign such other documents and papers
relating to Executive’s employment, benefits and benefit plans as Railway may
reasonably request.
          (b) Survival. The provisions of Paragraphs 5, 6(a) and 7 of this
Agreement shall survive any termination of this Agreement by Railway or
Executive, and the provisions of Paragraph 4(d)(ii) shall survive any
termination of this Agreement by Railway under Paragraph 4(d)(i).
     7. Continuation of Employment Upon Change in Control
          (a) Continuation of Employment. Subject to the terms and conditions of
this Paragraph 7, in the event of a Change in Control (as defined in
Paragraph 7(d)) at any time during the term of this Agreement, Executive agrees
to remain in the employ of Railway for a period of three years (the “Three-Year
Period”) from the date of such Change in Control (the “Control Change Date”).
Railway agrees to continue to employ Executive for the Three-Year Period. During
the Three-Year Period, (i) the Executive’s position (including offices, titles,
reporting requirements and responsibilities), authority and duties shall be at
least commensurate in all material respects with the most significant of those
held, exercised and assigned at any time during the 12 month period immediately
before the Control Change Date and (ii) the Executive’s services shall be
performed at the location where Executive was employed immediately before

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the Control Change Date or at any other location less than 40 miles from such
former location. During the Three-Year Period, Railway shall continue to pay to
Executive an annual base salary on the same basis and at the same intervals as
in effect prior to the Control Change Date at a rate not less than 12 times the
highest monthly base salary paid or payable to the Executive by Railway in
respect of the 12-month period immediately before the Control Change Date.
          (b) Benefits. During the Three-Year Period, Executive shall be
entitled to participate, on the basis of his executive position, in each of the
following KCSI, KCSL or Railway plans (together, the “Specified Benefits”) in
existence, and in accordance with the terms thereof, at the Control Change Date:
               (i) any benefit plan, and trust fund associated therewith,
related to (A) life, health, dental, disability, accidental death and
dismemberment insurance or accrued but unpaid vacation time, (B) profit sharing,
thrift or deferred savings (including deferred compensation, such as under Sec.
401(k) plans), (C) retirement or pension benefits, (D) ERISA excess benefits and
similar plans and (E) tax favored employee stock ownership (such as under ESOP,
and Employee Stock Purchase programs); and
               (ii) any other benefit plans hereafter made generally available
to executives of Executive’s level or to the employees of Railway generally.
     In addition, Railway and KCSI shall use their best efforts to cause all
outstanding options held by Executive under any stock option plan of KCSI or its
affiliates to become immediately exercisable on the Control Change Date and to
the extent that such options are not vested and are subsequently forfeited, the
Executive shall receive a lump-sum cash payment within 5 days after the options
are forfeited equal to the difference between the fair market value of the
shares of stock subject to the non-vested, forfeited options determined as of
the date such options are forfeited and the exercise price for such options.
During the Three-Year Period Executive shall

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be entitled to participate, on the basis of his executive position, in any
incentive compensation plan of KCSI, KCSL or Railway in accordance with the
terms thereof at the Control Change Date; provided that if under KCSI, KCSL or
Railway programs or Executive’s Employment Agreement in existence immediately
prior to the Control Change Date, there are written limitations on participation
for a designated time period in any incentive compensation plan, such
limitations shall continue after the Control Change Date to the extent so
provided for prior to the Control Change Date.
     If the amount of contributions or benefits with respect to the Specified
Benefits or any incentive compensation is determined on a discretionary basis
under the terms of the Specified Benefits or any incentive compensation plan
immediately prior to the Control Change Date, the amount of such contributions
or benefits during the Three-Year Period for each of the Specified Benefits
shall not be less than the average annual contributions or benefits for each
Specified Benefit for the three plan years ending prior to the Control Change
Date and, in the case of any incentive compensation plan, the amount of the
incentive compensation during the Three-Year Period shall not be less than 75%
of the maximum that could have been paid to the Executive under the terms of the
incentive compensation plan.
          (c) Payment. With respect to any plan or agreement under which
Executive would be entitled at the Control Change Date to receive Specified
Benefits or incentive compensation as a general obligation of Railway which has
not been separately funded (including specifically, but not limited to, those
referred to under Paragraph 7(b)(i)(d) above), Executive shall receive within
five (5) days after such date full payment in cash (discounted to the then
present value on the basis of a rate of seven percent (7%) per annum) of all
amounts to which he is then entitled thereunder.

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          (d) Change in Control. Except as provided in the last sentence of this
Paragraph 7(d), for purposes of this Agreement, a “Change in Control” shall be
deemed to have occurred if:
               (i) for any reason at any time less than seventy-five percent
(75%) of the members of the KCSI Board shall be individuals who fall into any of
the following categories: (A) individuals who were members of the KCSI Board on
the date of the Agreement; or (B) individuals whose election, or nomination for
election by KCSI’s stockholders, was approved by a vote of at least seventy-five
percent (75%) of the members of the KCSI Board then still in office who were
members of the KCSI Board on the date of the Agreement; or (C) individuals whose
election, or nomination for election, by KCSI’s stockholders, was approved by a
vote of at least seventy-five percent (75%) of the members of the KCSI Board
then still in office who were elected in the manner described in (A) or
(B) above, or
               (ii) any “person” (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934 (the “Exchange Act”)) other than
KCSI shall have become after September 18, 1997, according to a public
announcement or filing, the “beneficial owner” (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of KCSL, Railway or
KCSI representing thirty percent (30%) (or, with respect to Paragraph 7(c)
hereof, 40%) or more (calculated in accordance with Rule 13d-3) of the combined
voting power of KCSL’s, Railway’s or KCSI’s then outstanding voting securities;
or
               (iii) the stockholders of KCSL, Railway or KCSI shall have
approved a merger, consolidation or dissolution of KCSL, Railway or KCSI or a
sale, lease, exchange or disposition of all or substantially all of KCSL’s,
Railway’s or KCSI’s assets,

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if persons who were the beneficial owners of the combined voting power of
KCSL’s, Railway’s or KCSI’s voting securities immediately before any such
merger, consolidation, dissolution, sale, lease, exchange or disposition do not
immediately thereafter, beneficially own, directly or indirectly, in
substantially the same proportions, more than 60% of the combined voting power
of any corporation or other entity resulting from any such transaction.
Notwithstanding the foregoing provisions of this Paragraph 7(d) to the contrary,
the sale of shares of stock of KCSL pursuant to an initial public offering of
shares of stock of KCSL shall not constitute a Change in Control.
          (e) Termination After Control Change Date. Notwithstanding any other
provision of this Paragraph 7, at any time after the Control Change Date,
Railway may terminate the employment of Executive (the “Termination”), but
unless such Termination is for Cause as defined in subparagraph (g) or for
disability, within five (5) days of the Termination Railway shall pay to
Executive his full base salary through the Termination, to the extent not
theretofore paid, plus a lump sum amount (the “Special Severance Payment”) equal
to the product (discounted to the then present value on the basis of a rate of
seven percent (7%) per annum) of (i) 160% of his annual base salary specified in
Paragraph 7(a) multiplied by (ii) Two; and Specified Benefits (excluding any
incentive compensation) to which Executive was entitled immediately prior to
Termination shall continue until the end of the 3-year period (“Benefits
Period”) beginning on the date of Termination. If any plan pursuant to which
Specified Benefits are provided immediately prior to Termination would not
permit continued participation by Executive after Termination, then Railway
shall pay to Executive within five (5) days after Termination a lump sum payment
equal to the amount of Specified Benefits Executive would have received under
such plan if Executive had been fully vested in the average annual

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contributions or benefits in effect for the three plan years ending prior to the
Control Change Date (regardless of any limitations based on the earnings or
performance of KCSI, KCSL or Railway) and a continuing participant in such plan
to the end of the Benefits Period. Following the end of the Benefits Period,
Railway shall continue to provide to the Executive and the Executive’s family
the following benefits (“Post-Period Benefits”): (1) prior to the Executive’s
attainment of age sixty (60), health, prescription and dental benefits
equivalent to those then applicable to active peer executives of Railway) and
their families, as the same may be modified from time to time, and (2) following
the Executive’s attainment of age sixty (60) (and without regard to the
Executive’s period of service with Railway) health and prescription benefits
equivalent to those then applicable to retired peer executives of Railway and
their families, as the same may be modified from time to time. The cost to the
Executive of such Post-Period Benefits shall not exceed the cost of such
benefits to active or retired (as applicable) peer executives, as the same may
be modified from time to time. Notwithstanding the preceding two sentences of
this Paragraph 7(e), if the Executive is covered under any health, prescription
or dental plan provided by a subsequent employer, then the corresponding type of
plan coverage (i.e., health, prescription or dental), required to be provided as
Post-Period Benefits under this Paragraph 7(e) shall cease. The Executive’s
rights under this Paragraph 7(e) shall be in addition to, and not in lieu of,
any post-termination continuation coverage or conversion rights the Executive
may have pursuant to applicable law, including without limitation continuation
coverage required by Section 4980 of the Code. Nothing in this Paragraph 7(e)
shall be deemed to limit in any manner the reserved right of Railway, in its
sole and absolute discretion, to at any time amend, modify or terminate health,
prescription or dental benefits for active or retired employees generally.
          (f) Resignation After Control Change Date. In the event of a Change in
Control as defined in Paragraph 7(d), thereafter, upon good reason (as defined
below), Executive

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may, at any time during the 3-year period following the Change in Control, in
his sole discretion, on not less than thirty (30) days’ written notice (the
“Notice of Resignation”) to the Secretary of Railway and effective at the end of
such notice period, resign his employment with Railway (the “Resignation”).
Within five (5) days of such a Resignation, Railway shall pay to Executive his
full base salary through the effective date of such Resignation, to the extent
not theretofore paid, plus a lump sum amount equal to the Special Severance
Payment (computed as provided in the first sentence of Paragraph 7(e), except
that for purposes of such computation all references to “Termination” shall be
deemed to be references to “Resignation”). Upon Resignation of Executive,
Specified Benefits to which Executive was entitled immediately prior to
Resignation shall continue on the same terms and conditions as provided in
Paragraph 7(e) in the case of Termination (including equivalent payments
provided for therein), and Post-Period Benefits shall be provided on the same
terms and conditions as provided in Paragraph 7(e) in the case of Termination.
For purposes of this Agreement, “good reason” means any of the following:
               (i) the assignment to the Executive of any duties inconsistent in
any respect with the Executive’s position (including offices, titles, reporting
requirements or responsibilities), authority or duties as contemplated by
Section 7(a)(i), or any other action by Railway which results in a diminution or
other material adverse change in such position, authority or duties;
               (ii) any failure by Railway to comply with any of the provisions
of Paragraph 7;
               (iii) Railway’s requiring the Executive to be based at any office
or location other than the location described in Section 7(a)(ii);
               (iv) any other material adverse change to the terms and
conditions of the Executive’s employment; or

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               (v) any purported termination by Railway of the Executive’s
employment other than as expressly permitted by this Agreement (any such
purported termination shall not be effective for any other purpose under this
Agreement).
A passage of time prior to delivery of the Notice of Resignation or a failure by
the Executive to include in the Notice of Resignation any fact or circumstance
which contributes to a showing of Good Reason shall not waive any right of the
Executive under this Agreement or preclude the Executive from asserting such
fact or circumstance in enforcing rights under this Agreement.
          (g) Termination for Cause After Control Change Date. Notwithstanding
any other provision of this Paragraph 7, at any time after the Control Change
Date, Executive may be terminated by Railway “for cause.” Cause means commission
by the Executive of any felony or willful breach of duty by the Executive in the
course of the Executive’s employment; except that Cause shall not mean:
               (i) bad judgment or negligence;
               (ii) any act or omission believed by the Executive in good faith
to have been in or not opposed to the interest of Railway (without intent of the
Executive to gain, directly or indirectly, a profit to which the Executive was
not legally entitled);
               (iii) any act or omission with respect to which a determination
could properly have been made by the Railway Board that the Executive met the
applicable standard of conduct for indemnification or reimbursement under
Railway’s by-laws, any applicable indemnification agreement, or applicable law,
in each case in effect at the time of such act or omission; or
               (iv) any act or omission with respect to which Notice of
Termination of the Executive is given more than 12 months after the earliest
date on which any member

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     of the Railway Board, not a party to the act or omission, knew or should
have known of such act or omission.
Any Termination of the Executive’s employment by Railway for Cause shall be
communicated to the Executive by Notice of Termination.
          (h) Gross-up for Certain Taxes. If it is determined (by the reasonable
computation of Railway’s independent auditors, which determinations shall be
certified to by such auditors and set forth in a written certificate
(“Certificate”) delivered to the Executive) that any benefit received or deemed
received by the Executive from Railway, KCSL or KCSI pursuant to this Agreement
or otherwise (collectively, the “Payments”) is or will become subject to any
excise tax under Section 4999 of the Code or any similar tax payable under any
United States federal, state, local or other law (such excise tax and all such
similar taxes collectively, “Excise Taxes”), then Railway shall, immediately
after such determination, pay the Executive an amount (the “Gross-up Payment”)
equal to the product of:
               (i) the amount of such Excise Taxes; multiplied by
               (ii) the Gross-up Multiple (as defined in Paragraph 7(k)).
               The Gross-up Payment is intended to compensate the Executive for
the Excise Taxes and any federal, state, local or other income or excise taxes
or other taxes payable by the Executive with respect to the Gross-up Payment.
               Railway shall cause the preparation and delivery to the Executive
of a Certificate upon request at any time. Railway shall, in addition to
complying with this Paragraph 7(h), cause all determinations and certifications
under Paragraphs 7(h)-(o) to be made as soon as reasonably possible and in
adequate time to permit the Executive to prepare and file the Executive’s
individual tax returns on a timely basis.
          (i) Determination by the Executive.

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               (i) If Railway shall fail (A) to deliver a Certificate to the
Executive or (B) to pay to the Executive the amount of the Gross-up Payment, if
any, within 14 days after receipt from the Executive of a written request for a
Certificate, or if at any time following receipt of a Certificate the Executive
disputes the amount of the Gross-up Payment set forth therein, the Executive may
elect to demand the payment of the amount which the Executive, in accordance
with an opinion of counsel to the Executive (“Executive Counsel Opinion”),
determines to be the Gross-up Payment. Any such demand by the Executive shall be
made by delivery to Railway of a written notice which specifies the Gross-up
Payment determined by the Executive and an Executive Counsel Opinion regarding
such Gross-up Payment (such written notice and opinion collectively, the
“Executive’s Determination”). Within 14 days after delivery of the Executive’s
Determination to Railway, Railway shall either (A) pay the Executive the
Gross-up Payment set forth in the Executive’s Determination (less the portion of
such amount, if any, previously paid to the Executive by Railway) or (B) deliver
to the Executive a Certificate specifying the Gross-up Payment determined by
Railway’s independent auditors, together with an opinion of Railway’s counsel
(“Railway Counsel Opinion”), and pay the Executive the Gross-up Payment
specified in such Certificate. If for any reason Railway fails to comply with
clause (B) of the preceding sentence, the Gross-up Payment specified in the
Executive’s Determination shall be controlling for all purposes.
               (ii) If the Executive does not make a request for, and Railway
does not deliver to the Executive, a Certificate, Railway shall, for purposes of
Paragraph 7(j), be deemed to have determined that no Gross-up Payment is due.
          (j) Additional Gross-up Amounts. If, despite the initial conclusion of
Railway and/or the Executive that certain Payments are neither subject to Excise
Taxes nor to be

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counted in determining whether other Payments are subject to Excise Taxes (any
such item, a “Non-Parachute Item”), it is later determined (pursuant to
subsequently-enacted provisions of the Code, final regulations or published
rulings of the IRS, final IRS determination or judgment of a court of competent
jurisdiction or Railway’s independent auditors) that any of the Non-Parachute
Items are subject to Excise Taxes, or are to be counted in determining whether
any Payments are subject to Excise Taxes, with the result that the amount of
Excise Taxes payable by the Executive is greater than the amount determined by
Railway or the Executive pursuant to Paragraph 7(h) or Paragraph 7(i), as
applicable, then Railway shall pay the Executive an amount (which shall also be
deemed a Gross-up Payment) equal to the product of:
           (i) the sum of (A) such additional Excise Taxes and (B) any interest,
fines, penalties, expenses or other costs incurred by the Executive as a result
of having taken a position in accordance with a determination made pursuant to
Paragraph 7(h); multiplied by
           (ii) the Gross-up Multiple.
          (k) Gross-up Multiple. The Gross-up Multiple shall equal a fraction,
the numerator of which is one (1.0), and the denominator of which is one (1.0)
minus the sum, expressed as a decimal fraction, of the rates of all federal,
state, local and other income and other taxes and any Excise Taxes applicable to
the Gross-up Payment; provided that, if such sum exceeds 0.8, it shall be deemed
equal to 0.8 for purposes of this computation. (If different rates of tax are
applicable to various portions of a Gross-up Payment, the weighted average of
such rates shall be used.)
          (l) Opinion of Counsel. “Executive Counsel Opinion” means a legal
opinion of nationally recognized executive compensation counsel that there is a
reasonable basis to support a conclusion that the Gross-up Payment determined by
the Executive has been calculated

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in accord with this Paragraph 7 and applicable law. “Company Counsel Opinion”
means a legal opinion of nationally recognized executive compensation counsel
that (i) there is a reasonable basis to support a conclusion that the Gross-up
Payment set forth in the Certificate of Railway’s independent auditors has been
calculated in accord with this Paragraph 7 and applicable law, and (ii) there is
no reasonable basis for the calculation of the Gross-up Payment determined by
the Executive.
          (m) Amount Increased or Contested. The Executive shall notify Railway
in writing of any claim by the IRS or other taxing authority that, if
successful, would require the payment by Railway of a Gross-up Payment. Such
notice shall include the nature of such claim and the date on which such claim
is due to be paid. The Executive shall give such notice as soon as practicable,
but no later than 10 business days, after the Executive first obtains actual
knowledge of such claim; provided, however, that any failure to give or delay in
giving such notice shall affect Railway’s obligations under this Paragraph 7
only if and to the extent that such failure results in actual prejudice to
Railway. The Executive shall not pay such claim less than 30 days after the
Executive gives such notice to Railway (or, if sooner, the date on which payment
of such claim is due). If Railway notifies the Executive in writing before the
expiration of such period that it desires to contest such claim, the Executive
shall:
           (i) give Railway any information that it reasonably requests relating
to such claim;
           (ii) take such action in connection with contesting such claim as
Railway reasonably requests in writing from time to time, including, without
limitation, accepting legal representation with respect to such claim by an
attorney reasonably selected by Railway;
           (iii) cooperate with Railway in good faith to contest such claim; and

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           (iv) permit Railway to participate in any proceedings relating to
such claim; provided, however, that Railway shall bear and pay directly all
costs and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax, including
related interest and penalties, imposed as a result of such representation and
payment of costs and expenses. Without limiting the foregoing, Railway shall
control all proceedings in connection with such contest and, at its sole option,
may pursue or forego any and all administrative appeals, proceedings, hearings
and conferences with the taxing authority in respect of such claim and may, at
its sole option, either direct the Executive to pay the tax claimed and sue for
a refund or contest the claim in any permissible manner. The Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as Railway
shall determine; provided, however, that if Railway directs the Executive to pay
such claim and sue for a refund, Railway shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify the
Executive, on an after-tax basis, for any Excise Tax or income tax, including
related interest or penalties, imposed with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount. The
Railway’s control of the contest shall be limited to issues with respect to
which a Gross-up Payment would be payable. The Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the IRS or
other taxing authority.

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          (n) Refunds. If, after the receipt by the Executive of an amount
advanced by Railway pursuant to Paragraph 7(m), the Executive receives any
refund with respect to such claim, the Executive shall (subject to Railway’s
complying with the requirements of Paragraph 7(m)) promptly pay Railway the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by Railway pursuant to Paragraph 7(m), a determination is made that the
Executive shall not be entitled to a full refund with respect to such claim and
Railway does not notify the Executive in writing of its intent to contest such
determination before the expiration of 30 days after such determination, then
the applicable part of such advance shall be forgiven and shall not be required
to be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-up Payment required to be paid. Any contest of a denial of
refund shall be controlled by Paragraph 7(m).
          (o) Expenses. If any dispute should arise under this Agreement after
the Control Change Date involving an effort by Executive to protect, enforce or
secure rights or benefits claimed by Executive hereunder, Railway shall pay
(promptly upon demand by Executive accompanied by reasonable evidence of
incurrence) all reasonable expenses (including attorneys’ fees) incurred by
Executive in connection with such dispute, without regard to whether Executive
prevails in such dispute except that Executive shall repay Railway any amounts
so received if a court having jurisdiction shall make a final, nonappealable
determination that Executive acted frivolously or in bad faith by such dispute.
To assure Executive that adequate funds will be made available to discharge
Railway’s obligations set forth in the preceding sentence, Railway has
established a trust and upon the occurrence of a Change in Control shall
promptly deliver to the trustee of such trust to hold in accordance with the
terms and conditions

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thereof that sum which the Railway Board shall have determined is reasonably
sufficient for such purpose.
          (p) Prevailing Provisions. On and after the Control Change Date, the
provisions of this Paragraph 7 shall control and take precedence over any other
provisions of this Agreement which are in conflict with or address the same or a
similar subject matter as the provisions of this Paragraph 7.
     8. Mitigation and Other Employment. After a termination of Executive’s
employment pursuant to Paragraph 4(d)(i) or a Change in Control as defined in
Paragraph 7(d), Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise,
and except as otherwise specifically provided in Paragraph 4(d)(ii) with respect
to health and life insurance and in Paragraph 7(e) with respect to health,
prescription and dental benefits, no such other employment, if obtained, or
compensation or benefits payable in connection therewith shall reduce any
amounts or benefits to which Executive is entitled hereunder. Such amounts or
benefits payable to Executive under this Agreement shall not be treated as
damages but as severance compensation to which Executive is entitled because
Executive’s employment has been terminated.
     9. KCSI Not An Obligor. Notwithstanding that KCSI has executed this
Agreement, it shall have no obligation for the payment of salary, benefits, or
other compensation hereunder, and all such obligations shall be the sole
responsibility of Railway.
     10. Notice. Notices and all other communications to either party pursuant
to this Agreement shall be in writing and shall be deemed to have been given
when personally delivered, delivered by facsimile or deposited in the United
States mail by certified or registered mail, postage prepaid, addressed, in the
case of Railway or KCSI, to Railway or KCSI at 114 West 11th Street, Kansas
City, Missouri 64105, Attention: Secretary, or, in the case of the Executive, to
him at [on file with company],

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or to such other address as a party shall designate by notice to the other
party.
     11. Amendment. No provision of this Agreement may be amended, modified,
waived or discharged unless such amendment, waiver, modification or discharge is
agreed to in writing signed by Executive, the President of Railway and the
President of KCSI. No waiver by any party hereto at any time of any breach by
another party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the time or at any prior or
subsequent time.
     12. Successors in Interest. The rights and obligations of KCSI and Railway
under this Agreement shall inure to the benefit of and be binding in each and
every respect upon the direct and indirect successors and assigns of KCSI and
Railway, regardless of the manner in which such
successors or assigns shall succeed to the interest of KCSI or Railway
hereunder, and this Agreement shall not be terminated by the voluntary or
involuntary dissolution of KCSI or Railway or by any merger or consolidation or
acquisition involving KCSI or Railway, or upon any transfer of all or
substantially all of KCSI’s or Railway’s assets, or terminated otherwise than in
accordance with its terms. In the event of any such merger or consolidation or
transfer of assets, the provisions of this Agreement shall be binding upon and
shall inure to the benefit of the surviving corporation or the corporation or
other person to which such assets shall be transferred. Neither this Agreement
nor any of the payments or benefits hereunder may be pledged, assigned or
transferred by Executive either in whole or in part in any manner, without the
prior written consent of Railway.
     13. Severability. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provisions were omitted.

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     14. Controlling Law and Jurisdiction. The validity, interpretation and
performance of this Agreement shall be subject to and construed under the laws
of the State of Missouri, without regard to principles of conflicts of law.
     15. Entire Agreement. This Agreement constitutes the entire agreement among
the parties with respect to the subject matter hereof and terminates and
supersedes all other prior agreements and understandings, both written and oral,
between the parties with respect to the terms of Executive’s employment or
severance arrangements.
     IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Agreement as of the 1st day of May, 2000.

            THE KANSAS CITY SOUTHERN RAILWAY COMPANY
      By /s/ Michael R. Haverty         Michael R. Haverty, President           
  KANSAS CITY SOUTHERN INDUSTRIES, INC.
      By /s/ Landon H. Rowland         Landon H. Rowland, President             
EXECUTIVE
      /s/ Scott E. Arvidson           Scott E. Arvidson         

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