UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 6, 2005
(November 30, 2005)
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DST SYSTEMS, INC.
(Exact Name of registrant as specified in its charter)
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Delaware
(State or other jurisdiction of incorporation)
1-14036 43-1581814
(Commission File Number) (IRS Employer Identification No.)
333 West 11th Street, Kansas City, Missouri 64105
(Address of principal executive offices) (Zip Code)
(816) 435-1000
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2.):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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ITEM 1.01 Entry into Material Definitive Agreements
On November 30, 2005, the Board of Directors (the "DST Board") of DST
Systems, Inc. (the "Company") approved Employment Agreements effective as of
November 30, 2005 between Thomas A. McDonnell, the Company's President and Chief
Executive Officer, and Thomas A. McCullough, the Company's Executive Vice
President and Chief Operating Officer, and the Company (the "Employment
Agreements"). The Employment Agreements replace existing employment agreements
dated January 1, 2001, which would have expired December 31, 2005.
Each of the Employment Agreements provide for employment at a stated base
salary for Mr. McDonnell and for Mr. McCullough, subject to upward adjustment by
the Compensation Committee of the DST Board (the "Committee"). Mr. McDonnell's
agreement is effective through December 31, 2010, and Mr. McCullough's agreement
is effective through December 31, 2008, each unless earlier terminated as
provided in the Employment Agreements.
The Employment Agreements provide for fringe benefits applicable to other
senior executives at DST; participation in the Company's incentive, savings,
retirement, and welfare benefit plans; paid vacation of at least four weeks per
year; and specified bonus opportunities based on DST's performance in meeting
specific goals set by the Committee under any annual incentive program adopted
in accordance with the Company's 2005 Equity Incentive Plan.
Mr. McDonnell or Mr. McCullough may terminate their respective Employment
Agreements on at least 30 days' notice to the Company, except that such
termination may be immediately effective upon the Company's material breach of
such Employment Agreement. If the Company terminates an Employment Agreement
without cause, the executive would receive severance pay equal to 24 months'
base salary and certain benefits, including continued group medical coverage for
the lesser of the statutory COBRA period or the 24-month severance period. The
Company may terminate an Employment Agreement for cause immediately upon notice
to the executive. Each Employment Agreement contains certain non-solicitation
and non-compete covenants in effect for a three-year period after the
executive's termination of employment.
The Employment Agreements also govern employment of Messrs. McDonnell and
McCullough after a Company "Change in Control" (as that term is defined in the
Employment Agreements). Upon a Change in Control, Messrs. McDonnell and
McCullough would be entitled for a three-year period following the Change in
Control to continued employment at the executive capacity and salary at levels
in effect on the date of a Change in Control and to participation in incentive
compensation plans and certain other benefit plans. In addition, with respect to
unfunded employer obligations under certain benefit plans, each of Mr. McDonnell
and Mr. McCullough would be entitled to receive within five days of the Change
in Control full payment in cash of all amounts to which he is entitled
thereunder. If the Company terminates the employment of Mr. McDonnell or Mr.
McCullough after the Change in Control date other than "for cause" or the
executive resigns for "good reason" (each term as defined in the Employment
Agreements), the executive is entitled to a cash severance payment based on his
salary over the remainder of the three-year period, to certain continued
benefits for the remainder of the three-year period or a payment based thereon,
and to a payment based on any annual incentive that would be payable if the
Company had met certain performance goals for the remainder of the three-year
period.
Each of the Employment Agreements provide for relief in certain
circumstances if amounts received by Mr. McDonnell or Mr. McCullough constitute
"Parachute Payments" under Section 4999 of the Internal Revenue Code.
The parties agree to the postponement of benefits and to amend the
Employment Agreements if the benefits thereunder would trigger certain
consequences under Section 409A of the Internal Revenue Code.
In addition to approving the Employment Agreements, the Committee also
approved the business and personal use by Mr. McDonnell, and the business and
limited personal use by Mr. McCullough, of aircraft in which the Company has an
interest. Such use is subject to quarterly reporting to, and review by the
Committee, as well as applicable tax reporting, tax withholding, and securities
law reporting regulations.
ITEM 5.02 Election of Directors
On November 30, 2005, the DST Board voted to increase the size of the DST
Board to eight members, and elected Ambassador George Argyros as a member of the
DST Board, effective at the first regular meeting of the DST Board in February
2006.
Ambassador Argyros previously served on the DST Board from December 21,
1998 through November 16, 2001, when he resigned because of his nomination to
serve as United States Ambassador to Spain. Until his ambassadorship, Ambassador
Argyros was Chairman and Chief Executive Officer of Arnel & Affiliates, a
diversified investment company with corporate offices located in Costa Mesa,
California. He has also served as a general partner in Westar Capital, a private
investment company.
The Corporate Governance Committee of the DST Board is currently
considering Ambassador Argyros' service on DST Board committees.
ITEM 9.01 Financial Statements and Exhibits
(c). Exhibits.
Exhibit
Number Description
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10.1 Employment Agreement between DST Systems, Inc. and Thomas A.
McDonnell
10.2 Employment Agreement between DST Systems, Inc. and Thomas A.
McCullough
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized on this 6th day of December, 2005.
DST SYSTEMS, INC.
By: /s/ Randall D. Young
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Name: Randall D. Young
Title: Vice President, General Counsel
and Secretary
Exhibit Index
Exhibit
Number Description
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10.1 Employment Agreement between DST Systems, Inc. and Thomas A.
McDonnell
10.2 Employment Agreement between DST Systems, Inc. and Thomas A.
McCullough