SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of |
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[ ] | Soliciting Material Pursuant to §240.14a-12 |
DST SYSTEMS, INC. |
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(Name of Registrant as Specified In Its Charter) |
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
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1. | Election of three directors; and |
2. | Such other matters which are now unknown to DST as may properly be brought before the Annual Meeting or any adjournment thereof. |
The Board of Directors has set the close of business on March 14, 2003 as the record date for determining which stockholders are entitled to notice of and to vote at this meeting or any adjournment thereof. A list of such stockholders will be available during the Annual Meeting for examination by any stockholder for any purpose germane to the meeting and will be available during regular business hours at the corporate offices of DST, 333 West 11th Street, Kansas City, Missouri, for the 10-day period prior to the Annual Meeting. It is important that your shares be represented at the meeting. Please vote your shares, regardless of whether you plan to attend the Annual Meeting. You may cast your votes by telephone or through the Internet as described on the Voting Card. Alternatively, please date the Voting Card, sign it and promptly return it in the envelope provided, which requires no postage if mailed in the United States. If you own shares registered in the name of a broker, you should receive a card from the broker on which you may direct the broker to vote such shares. Please promptly complete the card and return it to the broker. Any stockholder or stockholders representative who may need special assistance or accommodation to participate in the Annual Meeting because of a disability should contact DSTs Corporate Secretary at the above address, or by phone at (816) 435-4636. To provide DST sufficient time to arrange for reasonable assistance, please submit all such requests by May 1, 2003.
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By
Order of the Board of Directors, |
Randall
D. Young Vice President, General Counsel and Secretary |
The date of this Notice is March 31, 2003. DST Systems, Inc. 333 West 11th Street
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Page | |||
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Voting | 1 | ||
Principal Stockholders and Stockholdings of Management | 3 | ||
Proposal - Election of Three Directors | 5 | ||
The Board of Directors | 6 | ||
Audit Matters | 9 | ||
Executive Compensation Matters | 12 | ||
Other Matters | 25 |
Name and Address | Shares of | Percent | |||
---|---|---|---|---|---|
DST Common | of Class2 | ||||
Stock1 | |||||
Janus Capital Group Inc. (JCG) 3 | 39,724,052 | 33.4 | |||
George L. Argyros4 | 9,479,240 | 8.0 | |||
A. Edward Allinson5 | 56,249 | * | |||
DST Director | |||||
Michael G. Fitt6 | 37,575 | * | |||
DST Director | |||||
Donald J. Kenney7 | 111,534 | * | |||
President and Chief Executive Officer (CEO) of EquiServe, Inc. (EquiServe)8 | |||||
Thomas A. McCullough9 | 499,659 | * | |||
Executive Vice President and Chief Operating Officer (COO) of DST, DST Director | |||||
Thomas A. McDonnell10 | 991,379 | * | |||
President and CEO of DST, DST Director | |||||
William C. Nelson11 | 45,940 | * | |||
DST Director | |||||
Travis E. Reed 12 | 9,175 | * | |||
DST Director | |||||
Charles W. Schellhorn13 | 422,130 | * | |||
President and CEO of DST Output, Inc. (DST Output)14; President of Argus Health | |||||
Systems, Inc. (Argus)15 | |||||
M. Jeannine Strandjord16 | 33,491 | * | |||
DST Director | |||||
J. Michael Winn | 140,493 | * | |||
Managing Director of DST International Limited (DSTi)17 | |||||
All Executive Officers and Directors as a Group (16 Persons)18 | 2,955,809 | 2.5 | |||
_________________
* | Less than 1% of the outstanding DST Common Stock. |
1 | Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the Exchange Act), share amounts shown for DSTs executive officers and directors include shares of DST Common Stock they may acquire upon the exercise of options which are exercisable at the Record Date or will become exercisable within 60 days of such date and shares of DST Common Stock they hold indirectly under the Plans or otherwise. An executive officer has disclaimed beneficial ownership of certain shares which are owned by a family member. |
2 | The percentage for each person or group is based on the number of shares outstanding as of the Record Date plus securities of such stockholder(s) deemed outstanding pursuant to Rule 13d-3(d)(1) under the Exchange Act. |
3 |
3 | The address of JCG is 100 Fillmore Street, Suite 300 Denver, Colorado 80206-4923. The information is based on Amendment No. 2 filed January 10, 2003, to Schedule 13D filed July 10, 2000. |
4 | Mr. Argyros formerly served as a director of DST. Mr. Argyros address is 949 South Coast Drive, Suite 600, Costa Mesa, California 92626. The number of shares of DST Common Stock is based on information in a Form 4 for November 2001 filed by Mr. Argyros, and on information provided by Mr. Argyros to DST on February 27, 2002. The shares consist of 4,679,152 shares held by Mr. Argyros, 900 shares held by the Leon and Olga Argyros 1986 Trust, 536,502 shares held by the Argyros Foundation, 4,261,000 shares held by HBI Financial, Inc., and 1,686 shares held by GLA Financial Corporation. Mr. Argyros disclaims beneficial ownership of the shares held by the Argyros Foundation and the Leon and Olga Argyros 1986 Trust. |
5 | Mr. Allinsons beneficial ownership includes 14,000 shares that may be acquired through options that are exercisable or will become exercisable within 60 days of the Record Date. |
6 | Mr. Fitts beneficial ownership includes 7,500 shares that may be acquired through options that are exercisable or will become exercisable within 60 days of the Record Date and 27,327 shares held in a trust. |
7 | Mr. Kenneys beneficial ownership includes 100,000 shares that may be acquired through options that are exercisable or will become exercisable within 60 days of the Record Date. |
8 | EquiServe is a wholly-owned subsidiary of DST. |
9 | Mr. McCulloughs beneficial ownership includes 204,668 shares that may be acquired through options that are exercisable or will become exercisable within 60 days of the Record Date. |
10 | Mr. McDonnells beneficial ownership includes 365,215 shares that may be acquired through options that are exercisable or will become exercisable within 60 days of the Record Date and 41,022 shares allocated to his account in the DST ESOP. |
11 | Mr. Nelsons beneficial ownership includes 30,294 shares that may be acquired through options that are exercisable or will become exercisable within 60 days of the Record Date and 200 shares held in an individual retirement account. |
12 | Mr. Reeds beneficial ownership includes 5,000 shares that may be acquired through options that are exercisable or will become exercisable within 60 days of the Record Date, 2,500 shares held in a trust, and 675 shares held by Glendon Triverton, Inc. of which Mr. Reed is the president and sole shareholder. |
13 | Mr. Schellhorns beneficial ownership includes 223,806 shares that may be acquired through options that are exercisable or will become exercisable within 60 days of the Record Date and 27,206 shares allocated to his account in the DST ESOP. |
14 | DST Output is an indirect wholly-owned subsidiary of DST. |
15 | DST is a 50% owner of Argus. |
16 | Ms. Strandjords beneficial ownership includes 7,500 shares that may be acquired through options that are exercisable or will become exercisable within 60 days of the Record Date and 1,000 shares held in a trust. |
17 | DSTi is a wholly-owned subsidiary of DST. |
18 | The beneficial ownership of all executive officers and directors as a group includes 1,375,795 shares that may be acquired by the executive officers and directors through options that are exercisable or will become exercisable within 60 days of the Record Date. It also includes 126,458 shares allocated to the DST ESOP accounts of executive officers and the spouse of an executive officer, and 37,835 shares otherwise held indirectly. Individuals in the group have disclaimed beneficial ownership as to a total of 5,385 of the shares. |
December 31, 1997 | December 31, 1998 | December 31, 1999 | December 31, 2000 | December 31, 2001 | December 31, 2002 | ||||||||
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DST Common | 100.00 | 133.68 | 178.77 | 313.91 | 233.56 | 166.56 | |||||||
Stock Value | |||||||||||||
S&P 400 MidCap | 100.00 | 119.12 | 136.65 | 160.57 | 159.60 | 136.44 | |||||||
Index Value | |||||||||||||
Current Peer | 100.00 | 136.54 | 170.10 | 216.84 | 245.18 | 178.03 | |||||||
Group Value | |||||||||||||
2002 Peer | 100.00 | 126.61 | 163.60 | 195.03 | 225.38 | 173.86 | |||||||
Group Value | |||||||||||||
1 | Standard & Poors Corporation, an independent company, prepares the S&P 400 MidCap Index. |
2 | DST updated the 2002 Peer Group to include other companies in DSTs industry. DST selected the Current Peer Group based on information on comparable companies in DSTs industry developed by independent compensation consultants with the input of DSTs Chief Financial Officer. The companies in the Current Peer Group are: Acxiom Corporation; Affiliated Computer Services; Alliance Data Systems Corporation; Automatic Data Processing, Inc.; Bisys Group, Inc.; Concord EFS, Inc.; CSG Systems Intl. Inc.; First Data Corporation; Fiserv, Inc.; NCR Corporation; SEI Investments Co.; SunGard Data Systems, Inc.; and TeleTech Holdings Inc. |
3 | The 2002 Peer Group was based upon a group of comparable companies in DSTs industry comprised of: Automatic Data Processing, Inc.; Bisys Group, Inc.; First Data Corporation; Fiserv, Inc.; SunGard Data Systems, Inc., and MYND Corp. (through December 31, 2000, the date it was acquired by Computer Sciences Corporation). |
16 Summary Compensation TableThe following table sets forth for the calendar years indicated the total compensation paid to or for the account of the Named Officers. |
Annual Compensation | Long Term Compensation Awards | ||||||||||||||
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Other | Restricted | Number of | |||||||||||||
annual | Stock | Securities | All Other | ||||||||||||
Salary | Bonus | compensation | Awards | Underlying | Compensation | ||||||||||
Name and Principal Position | Year | ($) | ($) | ($) | ($)3 | Options/SARs4 | ($)5 | ||||||||
Thomas A. McDonnell | 2002 | 575,000 | 977,500 | 83,283 | 2 | 487,164 | 767,570 | 111,151 | |||||||
DST President and CEO | 2001 | 575,000 | 920,000 | | | 623,860 | 108,300 | ||||||||
2000 | 500,000 | 700,000 | | | 574,137 | 86,369 | |||||||||
Thomas A. McCullough | 2002 | 475,000 | 665,000 | | 331,427 | 480,161 | 81,368 | ||||||||
DST Executive Vice | 2001 | 475,000 | 617,500 | | 304,825 | 259,720 | 79,058 | ||||||||
President and COO | 2000 | 400,000 | 400,000 | | 202,150 | 304,390 | 57,449 | ||||||||
Charles W. Schellhorn | 2002 | 340,000 | 340,000 | | 169,429 | 150,000 | 48,156 | ||||||||
DST Output President; | 2001 | 340,000 | 340,000 | | 167,830 | 252,055 | 49,029 | ||||||||
Argus President | 2000 | 340,000 | 272,000 | | | 225,859 | 43,857 | ||||||||
Donald J. Kenney | 2002 | 350,000 | 203,220 | | 28,776 | 100,000 | 14,126 | ||||||||
EquiServe President and | 2001 | 262,500 | 337,500 | | | 150,000 | 2,125 | ||||||||
CEO | 2000 | | | | | | | ||||||||
J. Michael Winn1 | 2002 | 289,800 | 408,618 | | | 150,000 | 64,443 | ||||||||
DSTi Managing Director | 2001 | 240,009 | 381,614 | | | 0 | 54,702 | ||||||||
2000 | 246,345 | 391,689 | | | 80,000 | 56,746 | |||||||||
1 | Amounts for Mr. Winn are converted from pounds to dollars on December 31 of the applicable year. The bonus amount for 2002 includes the minimum amount of the deferred portion of the 2002 bonus, which is $104,328. The total amount of the deferred bonus, which could grow by $52,164, is based on DSTis pre-tax earnings for 2003 as explained in the section Winn Personal Retirement and Bonus Arrangements herein. The bonus amount for each of 2001 and 2000 includes the portion of the bonus for such year which was deferred and paid based on DSTis pre-tax earnings in the following year. |
2 | This includes compensation of $72,160 to Mr. McDonnell for his personal use of aircraft leased by DST during 2002. |
3 | The Restricted Stock Grant Table following this table gives additional information about the restricted stock awards. |
4 | The numbers shown in this column (a) reflect the adjustment to options that occurred as a result of the two-for-one split of DST Common Stock in the form of a dividend of one share of DST Common Stock for every share held of record on October 6, 2000 (October 2000 Two-for-One Stock Split) and (b) for 2002 include (i) New Upfront Options granted November 1, 2002 in lieu of 2003, 2004 and 2005 annual grants for the Named Officers other than Mr. Kenney and in lieu of 2004 and 2005 annual grants for Mr. Kenney, (ii) Matching Options granted during 2002 under the Matching Stock Option Grant Program, and (iii) Replacement Options granted during 2002, all as described herein in the DST Compensation Committee Report on Executive Compensation. |
5 | All other compensation for Messrs. McDonnell, McCullough, Schellhorn, and Kenney for 2002 includes (i) employer matching contributions to their respective accounts under the DST 401(k) of $5,500, and (ii) employer discretionary profit sharing contributions to their respective accounts under the DST 401(k) of $8,000. All other compensation for Messrs. McDonnell, McCullough and Schellhorn for 2002 also includes respective contributions of $97,651, $67,868, and $34,656 to their accounts under the DST Systems, Inc. Supplemental Executive Retirement Plan (Executive Retirement Plan). All other compensation for Mr. McCullough for 2002 also includes a grant of 15 shares of DST Common Stock under the DST Systems, Inc. 1991 Stock Bonus Plan, Amended and Restated as of October 7, 2002 (DST Stock Bonus Plan), under which employees receive stock awards based upon years of service with DST. The closing price of DST Common Stock on the NYSE on the date of the grant under the DST Stock Bonus Plan to Mr. McCullough was $44.71. All other compensation for Mr. Kenney for 2002 also includes a contribution of $626 to his account under the EquiServe L.P. Cash Balance Retirement Plan (EquiServe Retirement Plan). All other compensation for Mr. Winn for 2002 is comprised of a contribution of $49,554 to his qualified retirement plan account, a payment of $13,976 for amounts Mr. Winn could not contribute to such account as a result of statutory limits, and $913 in term life insurance premiums. |
Total Restricted Stock | Shares of | Number of Shares | |||||||||||
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Held at End of Last | Restricted Stock | Shown in this | Date Restrictions Will Lapse if | ||||||||||
Completed Fiscal Year and | Granted in 2003 | Table on Which | Shares Shown in this Table are Not | ||||||||||
12/31/02 | for 2002 | Restrictions Have | Forfeited and Number of Shares | ||||||||||
Market Value | Compensation | Lapsed | |||||||||||
Named Officer | Total | Market Value | 1/1/2005 | 1/1/2006 | |||||||||
Shares | ($) | ||||||||||||
Thomas A. McDonnell | 0 | 0 | 17,505 | 0 | | 17,505 | |||||||
Thomas A. McCullough | 7,256 | 257,951 | 11,909 | 0 | 7,256 | 11,909 | |||||||
Charles W. Schellhorn | 7,843 | 278,819 | 6,088 | 3,848 | 3,995 | 6,088 | |||||||
Donald J. Kenney | 0 | 0 | 1,034 | 0 | | 1,034 | |||||||
18 Option/SAR Grants in Last Fiscal YearThe following table sets forth information about the options to acquire DST Common Stock granted the Named Officers during 2002. |
Number of | Percent of Total | ||||||||||
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Securities | Options/SARs | ||||||||||
Underlying | Granted to | Exercise or | |||||||||
Options/SARs | Employees in | Base Price | Expiration | Grant Date | |||||||
Name | Granted1 | Fiscal Year2 | ($/Sh)1 | Date1 | Present Value($)3 | ||||||
Thomas A. McDonnell | 16,620 | .002 | 47.155 | See note 1 | 400,376 | ||||||
32,430 | .004 | 42.550 | 2/26/12 | 699,515 | |||||||
318,175 | .042 | 46.875 | 2/28/10 | 7,572,565 | |||||||
44,700 | .006 | 48.230 | See note 1 | 1,102,749 | |||||||
388,075 | .051 | 31.045 | See note 1 | 5,918,144 | |||||||
Thomas A. McCullough | 12,430 | .002 | 47.155 | See note 1 | 299,439 | ||||||
105,728 | .014 | 46.875 | 2/28/10 | 2,516,326 | |||||||
61,170 | .008 | 48.230 | See note 1 | 1,509,064 | |||||||
25,833 | .003 | 43.905 | 2/28/10 | 565,226 | |||||||
275,000 | .036 | 31.045 | See note 1 | 4,193,750 | |||||||
Charles W. Schellhorn | 150,000 | .020 | 31.045 | See note 1 | 2,287,500 | ||||||
Donald J. Kenney | 100,000 | .013 | 31.045 | See note 1 | 1,525,000 | ||||||
J. Michael Winn | 150,000 | .020 | 31.045 | See note 1 | 2,287,500 | ||||||
1 | The options granted during 2002 consist of Equity Award Options, Replacement Options, New Upfront Options and Matching Options, each category of which is described below and in the DST Compensation Committee Report on Executive Compensation: |
a. | Equity Awards Options. The $42.55 options granted to Mr. McDonnell are his Equity Award Options for 2001. Replacement Options are granted on these Equity Award Options if Reload Conditions occur. The Equity Award Options become exercisable December 31, 2004, subject to earlier exercisability upon a change in control of DST, retirement, death, disability or termination of employment by DST without cause. They have a term of ten years from the date of grant but terminate earlier as a result of voluntary termination of employment by Mr. McDonnell or termination of employment with cause by DST. |
b. | Replacement Options. The $46.875 and $43.905 options are Replacement Options. Additional Replacement Options are granted on these Replacement Options if Reload Conditions occur. Replacement Options become exercisable one year from the date of grant, subject to earlier exercisability upon a change in control of DST. They have the same term as the underlying options upon which they were granted but terminate earlier as a result of termination of employment, disability or death. |
c. | New Upfront Options. The $31.045 options are New Upfront Options. Replacement Options are granted on New Upfront Options if Reload Conditions occur. Upfront Options become exercisable March 1, 2008 subject to earlier exercisability if DST achieves an earnings per share goal set by the DST Compensation Committee when it made the grant or upon a change of control of DST. If accelerated exercisability applies, the term of the options is ten years from the grant date; otherwise the term expires April 30, 2008. The options terminate early for reasons of termination of employment, disability or death. |
d. | Matching Options. The $47.155 and $48.23 options are Matching Options. Replacement Options are granted on Matching Options if Reload Conditions occur. Matching Options become exercisable in three years and have a term of ten years if the Newly Acquired Shares upon which the matching grant was based are held for three years; otherwise, the options become exercisable in seven years and have a term of seven years and sixty days. They are earlier exercisable upon a change in control of DST. They are subject to earlier termination upon termination of employment, disability, or death. |
19 |
The exercise price of each option granted in 2002 is equal to the average of the high and low price of DST Common Stock on the NYSE as of the date of the grant, and the Named Officers may pay the exercise price in cash or, subject to certain restrictions, with DST Common Stock. They may satisfy their minimum statutory tax withholding obligations by authorizing DST to withhold shares of DST Common Stock which would otherwise have been issuable on exercise, and, subject to certain restrictions, they may have additional shares withheld for withholding above the minimum requirement. Change in control of DST is defined in the Stock Award Plan, and in such event certain limited rights related to the options and defined in the Stock Award Plan also become immediately exercisable. |
2 | Options for a total of 7,659,948 shares of DST Common Stock were granted in 2002. |
3 | In accordance with SEC rules, the Black-Scholes option pricing model was chosen to estimate the Grant Date Present Value of the options set forth in this table. DSTs use of this model should not be construed as an endorsement of its accuracy at valuing options. All stock option models require a prediction about the future movement of the stock price. The assumptions used to determine Grant Date Present Value varied depending on the date of the grant and on the type of grant. Each option granted was valued based on the assumption that the optionee held the option for a period of seven years. Assumptions of volatility ranged from 40.35% to 41.73% (based on the historical average weekly fair market value of DST Common Stock since October 1995), and assumptions of the risk free rates of return rate ranged from 3.54% to 5.06% (United States Government Zero Coupon Bonds on dates of grant with a seven year maturity). Each determination assumed a dividend yield of 0%. No adjustments were made for non-transferability or risk of forfeiture of the options. The real value of the options in this table depends upon the actual performance of DST Common Stock during the applicable period and upon the date the options are exercised. |
Number of Securities | |||||||||||||
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Underlying | Value of Unexercised | ||||||||||||
Shares | Value | Unexercised Options/SARs | In-the-Money Options/SARs | ||||||||||
Acquired on | Realized | At | At | ||||||||||
Exercise | December 31, 2002 | December 31, 2002 ($) | |||||||||||
Name | (#) | ($) | Exercisable | Unexercisable | Exercisable | Unexercisable | |||||||
Thomas A. McDonnell | 545,414 | 10,164,143 | 0 | 1,565,567 | 0 | 1,682,305 | |||||||
Thomas A. McCullough | 336,463 | 6,364,685 | 75,480 | 804,271 | 499,247 | 1,192,125 | |||||||
Charles W. Schellhorn | 0 | 0 | 199,906 | 365,049 | 636,213 | 650,250 | |||||||
Donald J. Kenney | 0 | 0 | 50,000 | 200,000 | 0 | 433,500 | |||||||
J. Michael Winn | 0 | 0 | 140,000 | 150,000 | 1,026,944 | 650,250 | |||||||
Employment Agreements. All of the Named Officers other than Mr. Kenney have employment agreements. An agreement between DST and Mr. McDonnell (the McDonnell Agreement) dated as of January 1, 2001 provides for employment at the base salary set by the DST Compensation Committee and subject to upward adjustment. The McDonnell Agreement is effective through December 31, 2005, unless earlier terminated as provided in the agreement. An agreement between DST and Mr. McCullough (the McCullough Agreement) dated as of January 1, 2001 provides for employment at the base salary set by the DST Compensation Committee and subject to upward adjustment. The McCullough Agreement is effective through December 31, 2003, unless earlier terminated as provided in the agreement. An agreement between DST and Mr. Schellhorn dated as of April 1, 1992 and amended as of October 9, 1995 (the Schellhorn Agreement), provides for Mr. Schellhorns employment at his base salary in effect at the date of execution of his agreement subject to adjustment from time to time by agreement of the parties. 20 The McDonnell and McCullough Agreements provide for certain fringe benefits. They also provide for the early lifting of restrictions on certain Restricted Stock. The agreements provide that Messrs. McDonnell and McCullough shall hold such stock through the term of their respective agreements and shall not dispose of it except for the purpose of exercising options to purchase DST Common Stock. The agreements set the percentage of the salaries of Messrs. McDonnell and McCullough to be awarded as bonuses at each level of Goals set under the Executive Incentive Plan. Under each of the McDonnell, McCullough and Schellhorn Agreements (collectively, the DST Employment Agreements), employment may be terminated by the officer on at least 30 days notice to DST and by DST with or without cause. If DST terminates the employment without cause, the DST Employment Agreements entitle Messrs. McDonnell and McCullough to severance pay equal to 24 months base salary and 24 months reimbursement of costs of obtaining comparable life and health insurance benefits unless another employer provides such benefits, and the Schellhorn Agreement provides for such severance pay based on a 12 month period. Each DST Employment Agreement contains certain non-compete limitations in effect for a three-year period after the executives termination of employment. The DST Employment Agreements provide that the officers are eligible to participate in any DST incentive compensation plan and to receive other benefits DST generally makes available to its executive officers. The DST Employment Agreements also govern the officers employment after a change in control* of DST. If a change in control occurs during the term of any of the DST Employment Agreements, the officer would be entitled to the following: (a) continuation of the officers employment, executive capacity, salary, incentive compensation and benefits for a three-year period at levels in effect on the control change date*; (b) with respect to unfunded employer obligations under benefit plans, to a discounted cash payment of amounts to which the officer is entitled; (c) if the officers employment is terminated after the control change date other than for cause*, to payment of his base salary through termination plus a discounted cash severance payment based on his salary for the remainder of the three-year period and to continuation of benefits to the end of that period; (d) if the officer resigns after a change in control upon good reason* and advance written notice, to receive the same payments and benefits as if his employment had been terminated other than for cause; and (e) the placement in trust of funds to secure the obligations to pay any legal expense of the officer in connection with disputes arising with respect to the agreement. Each of the DST Employment Agreements provide for the relief in certain circumstances if amounts received by the executive constitute Parachute Payments under Section 4999 of the Internal Revenue Code. Mr. Winn, the Managing Director of DSTi, is subject to an employment agreement dated as of June 23, 1993. DSTi may terminate the agreement without notice for cause*, and either DSTi or Mr. Winn may terminate the agreement for any other reason by giving notice of not less than twelve months. The agreement permits DSTi to place Mr. Winn in an executive capacity other than Managing Director. It provides that Mr. Winn shall receive pension contributions, medical insurance, and certain fringe benefits and that Mr. Winns base salary shall be reviewed annually and is subject to increase by the board of directors of DSTi. The agreement contains certain non-compete limitations in effect for one year after Mr. Winns termination of employment. Mr. Winns bonus arrangements are discussed in the section Winn Personal Retirement and Bonus Arrangements herein. _________________ * Each of the employment agreements define these terms. 21 Other Compensation Plans and Arrangements. In addition to certain compensatory plans and arrangements generally available to employees, the Named Officers participate as indicated in the following plans and arrangements: Stock Award Plan. All of the Named Officers have received awards under the Stock Award Plan. Stockholders from time to time have approved the plan and certain amendments to it and have approved and reapproved the performance-based criteria described in the plan as required for certain exclusions from the 162(m) Limitation. The Stock Award Plan provides for the automatic, periodic grant of stock options to Outside Directors and gives the DST Compensation Committee the discretion to award incentives to selected DST employees and Outside Directors in the form of options, reload options, restricted stock, stock appreciation rights, limited rights, performance shares, performance units (including performance-based cash awards), dividend equivalents, stock, or any other right, interest or option relating to shares of DST Common Stock granted pursuant to the Stock Award Plan. In the event of a change in control of DST (as defined in the Stock Award Plan), vesting of awards (including options) will be automatically accelerated and all conditions on awards shall be deemed satisfactorily completed without any action required by the DST Compensation Committee so that such award may be exercised or realized in full on or before a date fixed by the DST Compensation Committee. Subject to the terms of the Stock Award Plan, the DST Compensation Committee has discretion with respect to the terms of any agreements documenting such awards. DST Systems, Inc. Executive Plan (Excess ERISA Plan). Messrs. McDonnell, McCullough and Schellhorn participated in the Excess ERISA Plan, a non-qualified deferred compensation plan terminated effective December 31, 1995. Account balances for each participant remain subject to the terms of the Excess ERISA Plan. Prior to termination of the Excess ERISA Plan, DST credited each participants account with the value of contributions DST would have made to the various qualified plans maintained by DST without regard to statutory contribution limits and eligibility requirements, less the amount actually contributed to such qualified plans on the participants behalf. The accounts, which became fully vested upon termination of the Excess ERISA Plan, become distributable after termination of employment or in certain instances as approved by the DST Compensation Committee. Executive Retirement Plan. Credits have been made to the accounts of Messrs. McDonnell, McCullough, Kenney and Schellhorn under an Executive Retirement Plan adopted by the DST Compensation Committee. The credits equal the value of contributions DST would have made to various qualified plans maintained by DST and of forfeiture amounts that would have been credited to such accounts but for the application of certain statutory contribution limits. The accounts are adjusted annually by a rate of return on a hypothetical investment selected by the participant among certain participant-elected investment choices allowed by the plan, or, if investment choices are not elected as to all or a portion of the account, by an interest factor equal to a rate of return selected by DST as provided in the plan. The accounts vest based on years of service or upon a change in control, as defined in the plan. Executive Incentive Plan. Messrs. McDonnell, McCullough, Kenney and Schellhorn have received awards under the Executive Incentive Plan. Incentive awards issued under the Executive Incentive Plan are subject to restrictions and limitations imposed under the terms of the Stock Award Plan. Participants in the Executive Incentive Plan are all DST officers, DST employees holding the managerial title of director and such employees of more than 50% subsidiaries or at least 50% owned affiliates as hold officer or managerial director positions and have been designated as participants by the DST Compensation Committee. If for a given plan year DST achieves diluted earnings per share, segment pre-tax earnings or other goals set by the DST Compensation Committee, participants may receive awards based on percentages of annual base salaries. Under the Executive Incentive Plan, Equity Awards which may be granted as part of compensation, if goals set by the DST Compensation Committee are met, consist of either Equity Award Options or Restricted Stock. Restricted Stock and the vesting and term of Equity Award Options are described in the DST Compensation Committee Report on Executive Compensation herein. The Restricted Stock is not transferable during the period of restriction except to family members or trusts for family members, and the stock remains subject to the restrictions after such permitted transfers. The Equity Award Options are not transferable. In the event of retirement after age 60, termination because of disability or without cause, or a change in control, as defined in the Executive Incentive Plan, the restrictions on the Restricted Stock are released and the Equity Award Options are exercisable. 22 Matching Stock Option Grant Program. All of the Named Officers other than Mr. Kenney participated in this program, under which the DST Compensation Committee at its discretion through January 2003 could grant options to purchase DST Common Stock based on a Named Officers Newly Acquired Shares. The program and the vesting and term of options granted thereunder are described in the DST Compensation Committee Report on Executive Compensation. Boston EquiServe L.P. Deferred Compensation Plan (Deferred Compensation Plan). Mr. Kenney participates in this plan. Within the parameters of the plan, participants can elect to defer participant-designated percentages of base salary and bonus. Prior to 2002, the plan also provided for matching contributions and/or discretionary contributions to be made at the sole discretion of EquiServe. Participant accounts are credited with earnings based on hypothetical investments in certain mutual funds designated by the participant. Participants are fully vested in salary deferral contributions and vest in employer contributions based on years of service or upon death, disability, retirement or a change in control, as defined in the plan. The account balance can be withdrawn upon termination of employment, death, or disability, at a fixed date pre-selected by the participant, or for healthcare or educational needs. Officer Trusts. DST has established trusts that are intended to secure the rights of its officers, directors, employees, and former employees under the employment continuation commitments of certain employment agreements, the Directors Deferred Fee Plan, the Executive Incentive Plan, the Excess ERISA Plan and the Executive Retirement Plan. The function of each trust is to receive contributions by DST and, in the event of a change in control of DST where DST fails to honor covered obligations to a beneficiary, the trust shall distribute to the beneficiary amounts sufficient to discharge DSTs obligation to such beneficiary. The trusts require DST to be solvent as a condition of making distributions. The trusts are revocable until a change in control of DST (as defined in the trusts) and terminate automatically if no such change in control occurs prior to December 31, 2004, unless the trusts are extended prior to such date. EquiServe has established a similar trust to secure the rights of its eligible employees under the Deferred Compensation Plan. The function of the trust is to receive contributions by EquiServe and to honor covered obligations to beneficiaries. The trust requires EquiServe to be solvent as a condition of making distributions. The trust securing the Deferred Compensation Plan is irrevocable unless amended by EquiServe and the trustee per the terms of the trust. EquiServe Retirement Plan. Mr. Kenney participated in this plan, which was terminated effective June 30, 2002, prior to which it was generally available to all EquiServe employees. All benefits under the plan have been distributed. Mr. Kenney received full distribution of his benefit of $2,216 in cash on October 31, 2002. The plan was a defined benefit qualified retirement plan that described a participants accrued benefit as a hypothetical account balance. Each calendar quarter, participants were credited with an annual pay-based amount based upon their years of service as follows: |
Years of Service | Pay-Based Credits as a | ||
---|---|---|---|
Percentage of Compensation | |||
1-4 | 3.0% | ||
5-9 | 4.0% | ||
10-14 | 5.5% | ||
15 or more | 7.0% |
By
Order of the Board of Directors, |
Randall
D. Young Vice President, General Counsel and Secretary |
Kansas City, Missouri 26 |
DST SYSTEMS, INC.
Voter Control Number
Your vote is important. Please vote immediately. |
Vote-by-Internet | OR | Vote-by-Telephone | ||||
1. |
Log on to the Internet and go to http://www.eproxyvote.com/dst |
1. |
Call toll-free 1-877-PRX-VOTE (1-877-779-8683) |
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2. |
Enter your Voter Control Number listed above and follow the easy steps outlined on the secured website. |
2. |
Enter your Voter Control Number listed above and follow the easy recorded instructions. |
If you vote over the Internet or by telephone, please do not mail your card. |
DETACH HERE |
ý |
Please mark votes as in this example. |
DST SYSTEMS, INC. By signing this card, you are authorizing the Proxy Committee (if you own Cert and ESPP shares) and the Trustee of the DST Benefit Plan(s) (if you own Benefit Plan Shares) to vote your shares as you specify on the proposal presented at the Annual Meeting or any adjournment thereof and to vote in their respective discretion on other proposals that may properly come before such meeting. To vote in accordance with all of the DST Board of Directors recommendations, please sign and date; you need not mark any boxes. The DST Board of Directors recommends that you vote FOR the proposal. |
1. | Election of Three Directors | |
(01) | Thomas A. McCullough | |
(02) | William C. Nelson | |
(03) | Travis E. Reed |
For All Nominees |
o |
o |
Withhold For All Nominees |
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For All Except |
o |
(INSTRUCTION: To withhold authority to vote for any individual nominee, write that nominees name in the space provided above.) |
SEE IMPORTANT INFORMATION ON THE REVERSE SIDE OF THIS CARD. |
Mark box at right if you plan to attend the Annual Meeting of Stockholders. |
o | Mark box at right if an address change has been noted on the reverse side of this card |
o |
Please be sure to sign exactly as your name appears on this card and to date this Voting Card. For Cert and ESPP shares, all joint owners must sign, and executors, administrators, trustees, officers of corporate stockholders, guardians and attorneys-in-fact must indicate the capacity in which they are signing. For Benefit Plan Shares, the Plan Participant must sign. |
Stockholder/ Plan Participant sign here |
Date | Co-owner sign here |
Date |
DETACH HERE DST SYSTEMS, INC. Annual Meeting of Stockholders - May 13, 2003 THE DST BOARD OF DIRECTORS SOLICITS YOUR VOTE The DST Board is making the proposal, and it is not related to or conditioned on the approval of any other proposals which may come before the Annual Meeting. The Cert number shown on the front of the card is the number of shares you held in certificate form as of the close of business on the Record Date (March 14, 2003). The ESPP number shown on the front of the card is the number of shares you held of record as of the close of business on the Record Date through your DST Employee Stock Purchase Plan book entry account with DSTs transfer agent. The Proxy Committee appointed by the DST Board that will vote your Cert and ESPP shares is comprised of Thomas A. McDonnell, Randall D. Young and Kenneth V. Hager. If you do not specify how you authorize the Proxy Committee to vote your Cert and ESPP shares, you authorize it to vote FOR the proposal. The ESOP, 401k and C401 numbers shown on the front of the card (Benefit Plan Shares) are the total number of shares you held as of the close of business on the Record Date through your participation in any of the DST Employee Stock Ownership Plan, the DST 401(k) Profit Sharing Plan, or the DST Systems of California 401(k) Plan. If you fail to return this Voting Card or do not specify your vote, the Trustee of the applicable plan will vote the shares allocated to your benefit plan account(s) in the same proportion as the shares held by the plan for which the Trustee receives voting instructions. You may revoke this proxy in the manner described in the Proxy Statement dated March 31, 2003, receipt of which you hereby acknowledge. PLEASE DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE OR MAKE YOUR IF YOUR ADDRESS HAS CHANGED, PLEASE NOTE THE NEW ADDRESS BELOW. |