TAX DISAFFILIATION AGREEMENT
THIS AGREEMENT dated as of this 16th day of August 1999, by and between
Kansas City Southern Industries, Inc., a Delaware corporation ("KCSI") and
Stilwell Financial, Inc., a Delaware corporation ("Stilwell"):
WHEREAS, KCSI owns all of the issued and outstanding common stock of
Stilwell ("Stilwell shares"), which was incorporated as FAM Holdings, Inc. on
January 23, 1998 and which changed its name to Stilwell Financial, Inc. on
July 8, 1999;
WHEREAS, KCSI is the common parent of an affiliated group of corporations
within the meaning of Section 1504(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and the members of the affiliated group, which include
Stilwell and its subsidiaries beginning in 1998, have prior to 1999 joined in
filing consolidated federal income tax returns which would have included
Stilwell if Stilwell had been in existence and in its current position in the
affiliated group of corporations;
WHEREAS, KCSI plans to distribute all or substantially all of the Stilwell
shares to the stockholders of KCSI in a tax-free transaction pursuant to Code
Section 355 (the "Spin-off") which will reduce KCSI's ownership of Stilwell, so
that Stilwell and its subsidiaries will no longer be members of the KCSI
affiliated group for federal income tax purposes;
WHEREAS, KCSI submitted a private letter ruling request to the Internal
Revenue Service (the "IRS") to the effect that, for United States federal
income tax purposes, no gain or loss will be recognized by KCSI or Stilwell
from the Spin-off or by the holders of KCSI common stock upon receipt of
Stilwell shares in the Spin-off (the initial submission on January 26, 1999
(the "Initial Submission") and all supplements thereto referred to herein as
the "Ruling Request");
WHEREAS, KCSI and Stilwell desire on behalf of themselves, their
subsidiaries and their successors to set forth their rights and obligations with
respect to taxes due for periods before and after the date of the Spin-off (the
"Disaffiliation Date") upon which Disaffiliation Date Stilwell and its
subsidiaries will no longer be members of the KCSI affiliated group, including
obligations with respect to any adjustments to the consolidated federal income
tax returns and any consolidated or combined state tax returns of KCSI through
the Disaffiliation Date.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, the parties agree as follows:
ARTICLE I. PREPARATION AND FILING OF TAX RETURNS
Section 1.1 RESPONSIBILITY FOR PREPARATION OF CONSOLIDATED AND COMBINED
RETURNS. KCSI shall timely file or cause to be filed all Tax Returns which
are filed on a consolidated or combined basis including Stilwell and its U.S.
Subsidiaries (a) for all periods ending on or prior to the Disaffiliation
Date and (b) that are required to be filed for the taxable year of the KCSI
affiliated group that begins before and ends on or after the Disaffiliation
Date. In the absence of a change in controlling law, all Tax Returns filed
after the date of this Agreement shall be prepared on a basis consistent with
the elections, accounting methods, conventions, and principles of taxation
used for the most recent taxable periods for which Tax Returns involving
similar tax items have been filed except to the extent that an inconsistent
position would not result in an increase in the taxes paid or payable by
either Stilwell or KCSI or if mutually agreed between Stilwell and KCSI.
Subject to the provisions of this Agreement, all decisions relating to the
preparation of Tax Returns shall be made in the reasonable good faith
judgment of the party responsible under this Agreement for such preparation.
For purposes of this Agreement, "Tax Returns" shall mean any return,
report, filing, declaration, questionnaire or other document required to be
filed, including requests for extensions of time, filings made with estimated
tax payments, claims for refund and amended returns that may be filed, for any
period with any taxing authority (whether domestic or foreign) in connection
with any tax or taxes (whether or not a payment is required to be made with
respect to such filing). For purposes of this Agreement, (i) "Subsidiary" shall
mean any entity taxable as a corporation as to which the ownership test of Code
Section 1504(a)(2) (or any predecessor provision) is now or was in the past met,
but including any such entity only for the period or periods as to which such
ownership test was met; (ii) the "Stilwell Group" shall mean the Stilwell Group
as defined in the Intercompany Agreement between KCSI and Stilwell (the
"Intercompany Agreement") and shown on Exhibit D thereto, except where the
context of this Agreement shall indicate a discussion of consolidated or
combined Tax Returns, in which case the Stilwell Group shall mean Stilwell and
its U.S. Subsidiaries only; and (iii) the "KCSI Group" shall mean the KCSI Group
as defined in the Intercompany Agreement and shown on Exhibit E thereto (except
the KCSI Group also shall include KCSI for actions, occurrences or omissions