THIS AGREEMENT, (“Agreement”) made and entered into as of this 7th day of June, 2006, by and between The Kansas City Southern Railway Company, a Missouri corporation (“Railway”), and Michael K. Borrows, an individual (“Executive”).
WHEREAS, Executive has been offered employment by Railway, and Railway 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 Kansas City Southern, a Delaware corporation (“KCS”), or Railway, 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 and Executive as follows:
1. Employment. Railway hereby employs Executive as its Vice President Financial Reporting & Tax, 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 stockholders of Railway. Executive shall faithfully perform Executive’s duties under this Agreement to the best of Executive’s ability and Executive shall devote substantially all of Executive’s working time and efforts to the business and affairs of Railway and its affiliates. For purposes of this Agreement, an “affiliate” of Railway is KCS and any United States or foreign corporation or partnership or other similar entity with respect to which Railway or KCS owns, directly or indirectly, at least 15% of the voting power of such entity.
2. Compensation. Railway shall pay Executive as compensation for Executive’s services hereunder an annual base salary at the rate approved by the Compensation and Organization Committee of the Board of Directors of KCS (the “KCS Board”). Such rate shall not be reduced except as agreed by the parties hereto or except as part of a general salary reduction program imposed by Railway for non-union employees and applicable to all officers of Railway, not related to a Change of Control.
3. Benefits. During the period of Executive’s 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 any stock or equity participation awards (including by way of example, but not limited to, stock options or restricted stock) are granted in the discretion of the KCS Board or the Compensation and Organization Committee of the KCS Board and that Executive has no right to receive any such stock or equity participation awards or any particular number or level of such stock or equity participation awards, if any. In determining contributions, coverage and benefits under any disability insurance policy and under any cash compensation-based plan provided to Executive pursuant to this Agreement, it shall be assumed that the value of Executive’s annual compensation 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. Term and Termination. The “Term” of this Agreement shall begin on the date first written above and continue until terminated as provided in (a) through (d) of this Section 4.