Exhibit 10.51
EMPLOYMENT AGREEMENT
     THIS AGREEMENT, made and entered into as of the 1st day of April, 2003, by
and between The Kansas City Southern Railway Company, a Missouri corporation
(“Railway”), Kansas City Southern, a Delaware corporation (“KCS”) and Larry M.
Lawrence, an individual (“Executive”).
     WHEREAS, Railway, KCS and Executive desire for Railway 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
Railway or KCS, 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, KCS and Executive as
follows:
     1. Employment. Railway hereby employs Executive as its Assistant to the CEO
– Staff Studies and Planning 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.
     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 KCS
Compensation

 

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Committee. Such rate shall not be increased prior to January 1, 2004 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.
     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 KCS (the “KCS Board”)
or the Compensation Committee of the KCS 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 neither
Railway nor KCS 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

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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, KCS or any subsidiary
of Railway or KCS;
          (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
          (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

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     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
(1/12th) of the annual base salary referenced in Paragraph 2(a) above, at the
rate in effect immediately prior to termination, and, (b) to reimburse Executive
for the cost (including state and federal income taxes payable with respect to
this reimbursement) of continuing the health insurance coverage provided
pursuant to this Agreement or obtaining health insurance coverage comparable to
the health insurance provided pursuant to this Agreement, and obtaining coverage
comparable to the life insurance provided pursuant to this Agreement, unless
Executive is provided comparable health or life insurance coverage in connection
with other employment. The foregoing obligations of 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 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

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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 KCS Employee Stock
Ownership Plan and the KCS 401(k) and Profit Sharing 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 benefits
under Paragraph 4(d)(ii) and shall be entitled to pursue such other legal and
equitable remedies as may be available.

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     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 the
Control Change Date or at any other location less than 40 miles from such former
location.

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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 Railway or KCS 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 KCS shall use their best efforts to cause all
outstanding options held by Executive under any stock option plan of KCS or its
affiliates to become immediately exercisable on the Control Change Date and to
the extent that such options are not vested and are subsequently forfeited, the
Executive shall receive a lump-sum cash payment within 5 days after the options
are forfeited equal to the difference between the fair market value of the
shares of stock subject to the non-vested, forfeited options determined as of
the date such options are forfeited and the exercise price for such options.
During the Three-Year Period Executive shall be entitled to participate, on the
basis of his executive position, in any incentive compensation

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plan of Railway or KCS in accordance with the terms thereof at the Control
Change Date; provided that if under Railway or KCS 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.
          (d) Change in Control. For purposes of this Agreement, a “Change in
Control” shall be deemed to have occurred if:

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          (i) for any reason at any time less than seventy-five percent (75%) of
the members of the KCS Board shall be individuals who fall into any of the
following categories: (a) individuals who were members of the KCS Board on the
date of the Agreement; or (b) individuals whose election, or nomination for
election by KCS’s stockholders, was approved by a vote of at least seventy-five
percent (75%) of the members of the KCS Board then still in office who were
members of the KCS Board on the date of the Agreement; or (c) individuals whose
election, or nomination for election, by KCS’s stockholders, was approved by a
vote of at least seventy-five percent (75%) of the members of the KCS 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 KCS
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 Railway or KCS 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
Railway’s or KCS’s then outstanding voting securities; or
          (iii) the stockholders of Railway or KCS shall have approved a merger,
consolidation or dissolution of Railway or KCS or a sale, lease, exchange or
disposition of all or substantially all of Railway’s or KCS’s assets, if persons
who were the beneficial owners of the combined voting power of Railway’s or
KCS’s voting securities immediately before any such merger, consolidation,
dissolution, sale, lease, exchange or

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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.
          (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 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 Railway or KCS) 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

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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 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

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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
          (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

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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 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

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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 or KCS 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.
          (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

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(“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 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

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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 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.

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          (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
          (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,

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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.
          (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

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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 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),

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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. KCS Not an Obligor. Notwithstanding that KCS 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 KCS, to Railway or KCS at 427 West 12th Street, Kansas City,
Missouri 64105, Attention: Secretary, or, in the case of the Executive, to him
at 427 West 12th Street, Kansas City, Missouri 64105, 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 and the President of Railway and the
President of KCS. 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

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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 Railway and KCS
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 Railway and
KCS, regardless of the manner in which such successors or assigns shall succeed
to the interest of Railway and KCS hereunder, and this Agreement shall not be
terminated by the voluntary or involuntary dissolution of Railway or KCS or by
any merger or consolidation or acquisition involving Railway or KCS, or upon any
transfer of all or substantially all of Railway’s or KCS’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.
     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

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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 Agreement as of
the 1st day of April, 2003.

            THE KANSAS CITY SOUTHERN RAILWAY COMPANY
      By  /s/ Michael R. Haverty         Michael R. Haverty, Chairman, President
& CEO            KANSAS CITY SOUTHERN
      By  /s/ Michael R. Haverty         Michael R. Haverty, Chairman, President
& CEO     EXECUTIVE
      /s/ Larry M. Lawrence         Larry M. Lawrence         

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