<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
DST SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[LOGO]
DST SYSTEMS, INC.
NOTICE AND PROXY STATEMENT
FOR
THE ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, MAY 9, 2000
YOUR VOTE IS IMPORTANT!
Please mark, date and sign the enclosed Voting Card
and promptly return it in the enclosed envelope, or vote by telephone or the
Internet
as described on the card.
MAILING OF THIS NOTICE AND PROXY STATEMENT, THE ACCOMPANYING VOTING CARD AND THE
1999 ANNUAL REPORT COMMENCED ON OR ABOUT MARCH 30, 2000.
<PAGE>
DST SYSTEMS, INC.
333 WEST 11TH STREET
KANSAS CITY, MISSOURI 64105
------------------------
PROXY STATEMENT
AND
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 9, 2000
------------------------
You are hereby notified of and cordially invited to attend the Annual
Meeting of Stockholders of DST Systems, Inc., a Delaware corporation ("DST"), to
be held at the Muehlebach Tower, Colonial Ballroom, Kansas City Marriott
Downtown, 1213 Wyandotte, Kansas City, Missouri, at 10:30 a.m., Central Time, on
Tuesday, May 9, 2000, to consider and vote upon the following matters:
1. Election of three directors;
2. Approval of the DST Systems, Inc. 2000 Employee Stock Purchase Plan;
3. Amendment of DST's Certificate of Incorporation to increase the authorized
capital stock;
4. Approval of Amendment of the DST Systems, Inc. 1995 Stock Option and
Performance Award Plan; and
5. 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 17, 2000 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 offices of DST, 333 West 11th Street, Kansas City,
Missouri, in the 10-day period prior to the Annual Meeting.
It is important that your shares be represented at the meeting. Please use
the enclosed Voting Card to direct the vote of your shares, regardless of
whether you plan to attend the Annual Meeting. Please date the Voting Card, sign
it and promptly return it in the enclosed envelope, which requires no postage if
mailed in the United States. Alternatively, you may cast your votes by telephone
or through the Internet as described on the Voting Card.
If you own shares registered in the name of a broker, you should receive a
card from that broker permitting you to direct the broker to vote those shares.
Please promptly complete the card and return it to the broker.
Any stockholder or stockholder's representative who may need special
assistance or accommodation to participate in the Annual Meeting because of a
disability should contact DST's Corporate Secretary at the above address,
(816) 435-4636. To provide DST sufficient time to arrange for reasonable
assistance, please submit all such requests by May 1, 2000.
By Order of the Board of Directors,
/s/ Robert C. Canfield
Robert C. Canfield
SENIOR VICE PRESIDENT, GENERAL COUNSEL
AND SECRETARY
The date of this Notice is March 30, 2000.
<PAGE>
DST SYSTEMS, INC.
333 WEST 11TH STREET
KANSAS CITY, MISSOURI 64105
------------------------
PROXY STATEMENT
---------------------
CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Voting...................................................... 1
Principal Stockholders and Stockholdings of Management...... 4
Proposal 1--Election of Three Directors..................... 7
Proposal 2--Approval of DST Systems, Inc. 2000 Employee
Stock Purchase Plan....................................... 8
Proposal 3--Amendment of Certificate of Incorporation to
Increase Authorized Capital Stock......................... 10
Proposal 4--Approval of Amendment of DST Systems, Inc. 1995
Stock Option and Performance Award Plan................... 11
The Board of Directors...................................... 16
Executive Compensation...................................... 18
Other Matters............................................... 28
</TABLE>
<PAGE>
PROXY STATEMENT
This proxy statement is being mailed on or about March 30, 2000, to all
holders of the common stock of DST Systems, Inc. ("DST"), par value $.01 per
share ("DST Common Stock"), the only outstanding class of voting securities of
DST, at the close of business on March 17, 2000 (the "Record Date"). Such
stockholders are entitled to vote on the proposals to be presented by the DST
Board of Directors (the "DST Board") at the Annual Meeting of Stockholders to be
held at 10:30 a.m. Central Time, on Tuesday, May 9, 2000, at the Muehlebach
Tower, Colonial Ballroom, Kansas City Marriott Downtown, 1213 Wyandotte, Kansas
City, Missouri ("Annual Meeting"). The DST Board is soliciting your proxy or
instructions to vote on the proposals, and is also furnishing you with the
Annual Report to stockholders of DST for the year ended December 31, 1999.
VOTING
PROPOSALS. At the Annual Meeting, the DST Board intends to present (a) the
election of three directors, (b) the approval of the DST Systems, Inc. 2000
Employee Stock Purchase Plan (the "DST ESPP"), (c) an amendment of the
Certificate of Incorporation of DST Systems, Inc. (the "Certificate") to
increase the authorized capital stock, and (d) approval of an amendment to the
DST Systems, Inc. 1995 Stock Option and Performance Award Plan (the "Stock
Option Plan") to increase the number of shares of DST Common Stock authorized
for issuance thereunder. The DST Board knows of no other matters that will be
presented or voted on at the Annual Meeting. Stockholders do not have any
dissenters' rights of appraisal in connection with the four proposals.
TABULATION OF VOTES. Each stockholder may cast one vote for each share of
DST Common Stock held by such stockholder on the Record Date on all matters to
be voted on at the Annual Meeting. Stockholders may vote cumulatively for
directors. In other words, each stockholder may cast a number of votes equal to
the number of shares of DST Common Stock held by such stockholder on the Record
Date multiplied by the number of directors to be elected, and the stockholder
may cast all such votes for a single nominee or distribute them among the
nominees as the stockholder chooses. The directors are elected by a plurality of
the shares voted by the stockholders. The plurality is determined by reference
to the number of votes for each director nominee, and where, as here, there are
three vacancies for director, the three nominees with the highest number of
affirmative votes are elected. Votes respecting the election of directors may be
cast in favor or withheld; votes that are withheld will be excluded entirely
from the vote and will have no effect. Broker non-votes (which occur when a
broker has not received directions from customers, and the broker cannot or does
not vote the customers' shares) will have no effect on a proposal to elect
directors.
A majority of the shares represented at the meeting in person or by proxy is
required to adopt the DST ESPP and to approve the amendment of the Stock Option
Plan. The percentage of shares that have been affirmatively voted for each of
these proposals is determined by dividing the number of shares voted for the
proposal by the total of the number of shares voted for the proposal, the number
of shares voted against the proposal, the number of shares abstained from voting
on the proposal, and broker non-votes. In other words, abstentions and broker
non-votes will have the effect of votes against each of these proposals.
A majority of the outstanding shares on the Record Date is required to amend
the Certificate to increase the authorized capital stock. The percentage of
shares that have been voted for the proposal is determined by dividing the
affirmative votes by the total number of outstanding shares on the Record Date.
QUORUM. In order for any proposal to be approved at the Annual Meeting, a
quorum of DST stockholders must be present at the meeting, either in person or
through a proxy, regardless of whether such stockholders vote their shares. The
presence in person or by proxy of the holders of a majority of the shares of DST
Common Stock outstanding on the Record Date constitutes a quorum. Broker
non-votes generally would not affect the determination of whether the holders of
the majority of shares of
1
<PAGE>
outstanding DST Common Stock are present at the Annual Meeting because typically
some of the shares held in the broker's name have been voted on at least some
proposals, and therefore, all of such shares held in the broker's name are
considered present at the Annual Meeting.
HOW STOCKHOLDERS VOTE. Stockholders holding DST Common Stock in their own
names on the Record Date ("Record Holders"), persons ("Plan Participants")
holding DST Common Stock on the Record Date through any of three DST benefit
plans through which DST Common Stock may be held (collectively, the "Plans")(1)
and investors ("Broker Customers") holding DST Common Stock on the Record Date
through a broker or other nominee, may vote such stock as follows:
DST COMMON STOCK HELD OF RECORD. Record Holders may only vote their shares
of DST Common Stock if they or their proxies are present at the Annual Meeting.
Record Holders may appoint as their proxy the Proxy Committee, which consists of
officers of DST whose names are listed on the Voting Card. The Proxy Committee
will vote all shares of DST Common Stock for which it is the proxy as specified
by the stockholders on the Voting Cards.(2) A Record Holder desiring to name as
proxy someone other than the Proxy Committee may do so by crossing out the names
of the Proxy Committee members on the Voting Card and inserting the full name of
such other person. In that case, the Record Holder must sign the Voting Card and
deliver it to the person named, and the person named must be present and vote at
the Annual Meeting.
If a properly executed and unrevoked Voting Card does not specify how the
shares of DST Common Stock represented thereby are to be voted, the Proxy
Committee intends to vote such shares for the election as directors of the
persons nominated by the DST Board ("Board Nominees"), for approval of the DST
ESPP, for amendment of the Certificate to increase the authorized capital stock,
for approval of the amendment to the Stock Option Plan, and in accordance with
the discretion of the Proxy Committee upon such other matters as may properly
come before the Annual Meeting. This Proxy Statement solicits, and the Voting
Card or telephone or Internet vote grants, discretionary authority to the Proxy
Committee to vote cumulatively for directors by, for instance, casting all its
votes for a single Board Nominee. The Proxy Committee does not intend to vote
cumulatively unless persons other than Board Nominees are properly nominated and
such a vote appears necessary to assure that a Board Nominee is elected.
DST COMMON STOCK HELD UNDER THE PLANS. Plan Participants may on the Voting
Card instruct the respective trustees of the Plans how to vote the shares
allocated to the respective participant accounts.(2) With respect to any shares
of DST Common Stock not allocated to the accounts of Plan Participants and the
shares for which the trustee received no instructions, the DST 401(k) and DST
ESOP trustees must vote such shares in the same proportion as those shares for
which it received instructions, and the USCS 401(k) trustee must vote such
shares as the committee that administers the plan directs. The trustees of the
plan may vote shares allocated to the accounts of the participants either in
person or through a proxy.
DST COMMON STOCK HELD THROUGH A BROKER OR OTHER NOMINEE. Each broker or
nominee must solicit from the Broker Customers directions on how to vote the
shares, and the broker or nominee must then vote such shares in accordance with
such directions. Brokers or nominees are to forward soliciting materials to the
Broker Customers, at the reasonable expense of DST if the broker or nominee
requests reimbursement. Whether brokers may vote the shares of Broker Customers
when they have not received directions depends on the proposal and on the rules
and procedures of the New York Stock Exchange
- ------------------------
(1) The Employee Stock Ownership Plan of DST Systems, Inc. ("DST ESOP"), the
DST Systems, Inc. 401(k) Profit Sharing Plan ("DST 401(k)") and the USCS
International, Inc. 401(k) Retirement Plan ("USCS 401(k)").
(2) Internet and telephone voting are also available, and the Voting Card
contains the Internet address and toll-free telephone number.
2
<PAGE>
("NYSE") and the Chicago Stock Exchange ("CHX"), which are the exchanges that
list DST Common Stock for trading.
REVOKING PROXY AUTHORIZATIONS OR INSTRUCTIONS. Until the polls close, (or,
in the case of Plan Participants, until the trustees of the respective Plans
vote), votes of Record Holders and Plan Participants may be recast by (a) an
Internet or telephone vote subsequent to the date shown on a previously executed
and delivered Voting Card or to the date of a prior electronic vote or (b) with
a later-dated, properly executed and delivered Voting Card. Otherwise, a
stockholder may not revoke a vote, even by attending the Annual Meeting, unless,
(a) in the case of a Record Holder, a written revocation is delivered to the
Corporate Secretary of DST at any time before the Chairman of the Annual Meeting
closes the polls; (b) in the case of a Plan Participant, the revocation
procedures of the trustee of the respective Plan are followed; or (c) in the
case of a Broker Customer, the revocation procedures of the broker or nominee
are followed.
ATTENDANCE AND VOTING IN PERSON AT THE ANNUAL MEETING. Attendance at the
Annual Meeting is limited to Record Holders or their properly appointed proxies,
beneficial owners of DST Common Stock having evidence of such ownership, and
guests of DST. Plan Participants and Broker Customers, absent special direction
to DST from the respective Plan trustee, broker or nominee, may only vote by
instructing the trustee, broker or nominee and may not cast a ballot at the
Annual Meeting. Record Holders who have not appointed a proxy, or who have
revoked the appointment of a proxy, may vote by casting a ballot at the Annual
Meeting.
3
<PAGE>
PRINCIPAL STOCKHOLDERS AND STOCKHOLDINGS OF MANAGEMENT
As of the Record Date, DST had outstanding 62,740,913 shares of DST Common
Stock. The following table sets forth information as of the Record Date
concerning the beneficial ownership of DST Common Stock by: (i) beneficial
owners of DST Common Stock who have publicly filed a report acknowledging
ownership of more than 5% of the number of shares of outstanding DST Common
Stock; (ii) the directors and certain executive officers of DST; and (iii) all
of DST's executive officers and directors as a group. Beneficial ownership
generally means either the sole or shared power to vote or dispose of the
shares. Except as otherwise noted, the holders have sole voting and dispositive
power. Other than a single share of stock held by each of several DST officers
in an indirect foreign DST subsidiary to comply with foreign law, which holdings
constitute less than 1% of such subsidiary's stock, no officer or director of
DST owns any equity securities of any subsidiary of DST.
<TABLE>
<CAPTION>
SHARES OF
COMMON PERCENT
NAME AND ADDRESS STOCK(1) OF CLASS(2)
- ---------------- ---------- -----------
<S> <C> <C>
Stilwell Management, Inc. ("Stilwell")(3)................... 20,281,526(4) 32.3%
FMR Corp., Edward C. Johnson 3d,............................ 9,298,043(6) 14.8%
Abigail P. Johnson, Fidelity Management & Research Company
("Fidelity"), Fidelity Management Trust Company ("Fidelity
Trust"), Fidelity International Limited ("Fidelity
International")(5)
George L. Argyros(7)........................................ 4,757,070(8) 7.6%
Director
A. Edward Allinson.......................................... 27,000(9) *
Director
Robert C. Canfield.......................................... 136,247(10) *
Senior Vice President, General Counsel and Secretary
James C. Castle, Ph.D....................................... 301,214(11) *
Chairman and Chief Executive Officer, USCS International,
Inc. ("USCS")(12)
Director
Michael G. Fitt............................................. 24,000(9) *
Director
Thomas A. McCullough........................................ 356,715(13) *
Executive Vice President, Director
Thomas A. McDonnell......................................... 693,685(14) 1.1%
President and Chief Executive Officer, Director
William C. Nelson........................................... 21,127(9) *
Director
Charles W. Schellhorn....................................... 223,226(15) *
Vice Chairman, USCS; President, Argus Health Systems, Inc.
("Argus")(16)
M. Jeannine Strandjord...................................... 22,000(9) *
Director
J. Michael Winn............................................. 40,000(17) *
Managing Director, DST International Limited ("DSTi")(18)
All Executive Officers and Directors as a Group (18 7,189,948(19) 11.5%
Persons)..................................................
</TABLE>
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* Less than 1% of the outstanding DST Common Stock.
4
<PAGE>
(1) Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), share amounts shown for DST's 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 allocated to them as Plan Participants under the Plans. The holders
may disclaim beneficial ownership of any such shares which are owned by or
with family members, trusts or other entities.
(2) The percentage is based on the number of shares outstanding as of the
Record Date.
(3) The address of Stilwell is 210 University Boulevard, Suite 900, Denver,
Colorado 80206. Stilwell is an indirect wholly-owned subsidiary of Kansas
City Southern Industries, Inc. ("KCSI").
(4) The number of shares is based upon information reported in a Form 4 filed
by KCSI dated March 8, 1999.
(5) The address of FMR Corp., Fidelity and Fidelity Trust is 82 Devonshire
Street, Boston, Massachusetts 02109. Edward C. Johnson 3d is Chairman of
and Abigail P. Johnson is a director of FMR Corp. Fidelity and Fidelity
Trust are wholly-owned subsidiaries of FMR Corp. Shares of Fidelity
International were distributed to shareholders of FMR Corp.
(6) The number of shares is based upon information in Amendment No. 4 to
Schedule 13G dated February 14, 2000 (the "FMR Schedule"). The FMR Schedule
states that Fidelity beneficially owns 7,882,080 shares, Fidelity Trust
beneficially owns 934,973 shares, and Fidelity International beneficially
owns 480,990 shares of DST Common Stock.
(7) Mr. Argyros' address is c/o Arnel Development Company, 949 South Coast
Drive, Suite 600, Costa Mesa, California 92626.
(8) Mr. Argyros acquired shares of DST Common Stock pursuant to an Agreement
and Plan of Merger dated September 2, 1998 by and among DST, USCS and DST
Acquisitions, Inc. (the "USCS Merger Agreement"). The number of shares of
DST Common Stock is based on information in a Form 5 dated February 4, 2000.
The shares consist of 14,200 shares that may be acquired through option
exercises, 4,591,876 shares held by Mr. Argyros, 37,200 shares held by
Argyros Children's Trust II, 97,451 shares held by The Argyros Foundation,
15,500 shares held by HBI Financial, Inc., and 843 shares held by GLA
Financial Corporation. Mr. Argyros is the sole shareholder of HBI
Financial, Inc. and GLA Financial Corporation. Mr. Argyros disclaims
beneficial ownership of 134,651 shares held by The Argyros Foundation and
Argyros Children's Trust II.
(9) Includes 21,000 shares that may be acquired through option exercises.
(10) Includes 122,000 shares that may be acquired through option exercises and
25 shares allocated to his account in the DST ESOP.
(11) Dr. Castle acquired shares of DST Common Stock pursuant to the USCS Merger
Agreement. Includes 247,569 shares that may be acquired through option
exercises and 406 shares allocated to his account in the USCS 401(k).
(12) USCS is a wholly-owned subsidiary of DST.
(13) Includes 325,000 shares that may be acquired through option exercises and
17,871 shares allocated to his account in the DST ESOP.
(14) Includes 650,000 shares that may be acquired through option exercises and
19,308 shares allocated to his account in the DST ESOP.
(15) Includes 200,000 shares that may be acquired through option exercises and
12,798 shares allocated to his account in the DST ESOP.
5
<PAGE>
(16) DST is a 50% shareowner of Argus.
(17) Includes 40,000 shares that may be acquired through option exercises.
(18) DSTi is a wholly-owned subsidiary of DST.
(19) Includes 2,183,874 shares that may be acquired through option exercises by
the executive officers and directors and by the spouse of an executive
officer, 112,178 shares allocated to the DST ESOP accounts of executive
officers and the spouses of two executive officers, and 812 shares allocated
to the USCS 401(k) accounts of executive officers.
6
<PAGE>
PROPOSAL 1--ELECTION OF THREE DIRECTORS
The DST By-laws classify the DST Board into three classes and stagger the
three year terms of each class to expire in consecutive years. The term of
office of one class of directors expires each year in rotation so that at each
annual meeting of stockholders one class is up for election for a full
three-year term. The terms of the three Board Nominees identified below are
expiring at this Annual Meeting. Directors elected at the Annual Meeting will
hold office for a three-year term expiring in 2003 or until their successors are
elected and qualified. DST expects that the other directors will continue in
office for the remainder of their terms.
The Board Nominees are James C. Castle, Ph.D., Thomas A. McCullough, and
William C. Nelson. They are currently directors of DST, have indicated that they
are willing and able to continue serving as directors if elected and have
consented to being named as nominees in this Proxy Statement. If any of the
Board Nominees should for any reason become unavailable for election, the Proxy
Committee will vote for such other nominee as may be proposed by the annually
appointed Nominating Committee of the DST Board or, alternatively, the DST Board
may reduce the number of directors to be elected at the meeting.
JAMES C. CASTLE, PH.D., age 63, has been Chairman and Chief Executive
Officer of USCS since August 1992. Dr. Castle has been a member of the DST Board
since December 21, 1998, when USCS became a wholly-owned subsidiary of DST (the
"USCS Merger"). The USCS Merger Agreement contemplated Dr. Castle's appointment
as a DST director.
THOMAS A. MCCULLOUGH, age 57, has served as a director of DST since 1990. He
has served as Executive Vice President of DST since April 1987. His
responsibilities include full-service mutual fund processing, remote service
mutual fund client servicing, Automated Work Disbributor-TM- products,
information systems, portfolio accounting, securities transfer, product sales
and marketing, and DST Canada, Inc. (a wholly-owned subsidiary of DST).
WILLIAM C. NELSON, age 62, has served as a director of DST since
January 1996. In March 2000, Mr. Nelson retired from his position as President,
Kansas City, of Bank of America, N.A. and Chairman of Bank of America, N.A.
(Mid-West). Mr. Nelson had served since June 1988 as an executive officer of
banks acquired by Bank of America.
THE DST BOARD RECOMMENDS THAT YOU VOTE "FOR"
THE BOARD NOMINEES
7
<PAGE>
PROPOSAL 2--APPROVAL OF THE DST SYSTEMS, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
GENERAL. On September 23, 1999, the DST Board adopted the DST
Systems, Inc. 2000 Employee Stock Purchase Plan (the "DST ESPP"), subject to
approval by stockholders. The DST Board adopted the DST ESPP in order to offer
an additional benefit to attract and retain qualified employees and in order to
encourage employee ownership of and interest in the performance of DST Common
Stock. The following summary of the material features of the DST ESPP does not
purport to be complete and is qualified in its entirety by reference to the
complete text of the DST ESPP, which is attached as Appendix A.
ADMINISTRATION. The DST ESPP will be administered by the DST Compensation
Committee or another committee appointed by the DST Board. DST shall pay all
costs and expenses of administering the DST ESPP, including any brokerage
commissions incurred on a participant's purchase of DST Common Stock. However,
the participant shall pay any costs relating to any disposition of the purchased
stock.
ELIGIBILITY. All employees of DST and participating subsidiaries are
eligible to participate, except those whose customary employment is less than
20 hours per week or is five months or less per calendar year, or those who are
5% or greater stockholders of DST. As of January 1, 2000, DST and the
participating subsidiaries had approximately 8,500 employees eligible to
participate in the DST ESPP.
PARTICIPATION. Participation in the DST ESPP is voluntary. Eligible
employees of DST may elect annually to have DST deduct 1% to 15% from their
compensation to be used to purchase DST Common Stock. On the last NYSE trading
day of each year (the "Purchase Date"), the funds accumulated will automatically
be used to purchase shares of DST Common Stock at a purchase price equal to the
lesser of (i) 85% of the fair market value of a share of DST Common Stock that
day, or (ii) 85% of the fair market value of a share of DST Common Stock as of
the Enrollment Date. For 2000, the Enrollment Date is the date stockholders
approve the DST ESPP, and for subsequent years the Enrollment Date is the first
day the NYSE is open for trading in that calendar year. A participant may not
purchase more than $25,000 of DST Common Stock under the DST ESPP per plan year,
determined by the fair market value of DST Common Stock as of the Enrollment
Date.
During a year, a participant may cease, but not reduce or increase, payroll
deductions for the remainder of the year, in which case any funds accumulated up
to that point will be used to purchase shares at the end of the year for the
participant's benefit. If notice is given any time prior to December 1, a
participant may withdraw from the DST ESPP in full for that year and have
contributions returned, without interest.
Upon termination of employment during a year, no further contributions will
be made to a participant's account. In such an event, the accumulated payroll
deductions in the participant's account will be refunded without interest as
soon as administratively practical to the participant or, in the event of a
participant's death, to the participant's designated beneficiary but, if none,
then to the participant's spouse or estate.
AMENDMENT. The DST Board may at any time amend the DST ESPP in any respect,
including termination of the DST ESPP, without notice to participants. If the
DST ESPP is terminated, the DST Board may either allow the DST Common Stock to
be purchased on the last trading day of the year with amounts accumulated
through the termination date or may refund the balance in the contribution
accounts to the participants. The DST ESPP may not be amended to increase the
number of shares reserved under the DST ESPP (except pursuant to certain changes
in the capital structure of DST) without the approval of DST stockholders.
OFFERING OF COMMON STOCK. One million shares of DST Common Stock have been
registered for issuance under the DST ESPP, subject to shareholder approval. As
of the Record Date, such shares had a market value of $56,562,500. The number,
kind and purchase price of shares will be adjusted by the DST
8
<PAGE>
Compensation Committee in an equitable manner to reflect changes in the
capitalization of DST, including, but not limited to such changes as result from
merger, consolidation, reorganization, recapitalization, stock dividend, stock
split, reverse stock split, acquisition of property or shares, asset spin-off,
stock rights offering, combination of shares, and change in corporate or capital
structure. If a dissolution or liquidation of DST occurs during a year, any
rights to acquire DST Common Stock under the DST ESPP will be terminated, but
participating employees will have the right to acquire DST Common Stock before
the dissolution or liquidation.
RIGHTS AS A SHAREHOLDER. When shares of DST Common Stock are purchased
under the DST ESPP, a participant shall have all rights and privileges of a
shareholder of DST with respect to such shares, regardless of whether
certificates representing such shares have been issued. DST Common Stock
purchased under the DST ESPP is freely transferable, although the holder will
not be eligible for the special tax treatment discussed below if shares are
disposed of within two years from the Enrollment Date or one year from the
Purchase Date.
FEDERAL INCOME TAX CONSEQUENCES. The DST ESPP is intended to qualify for
special tax treatment under Section 423 of the Internal Revenue Code (the
"Code"). Pursuant to the Code, participants generally would not immediately
recognize income for federal tax purposes when shares of DST Common Stock are
purchased. If the recipient of DST Common Stock under the DST ESPP disposes of
the shares before the end of the holding period (two years after the Enrollment
Date and one year after the Purchase Date), he or she generally will recognize
ordinary income in the year of disposition in an amount equal to the difference
between his or her purchase price and the market value of the DST Common Stock
on the Purchase Date. The excess (if any) of the amount received upon
disposition over the sum of the purchase price plus the amount treated as
ordinary income will be taxed as capital gain. If a disposition does not occur
until after the expiration of the holding period, the recipient generally will
recognize ordinary income in the year of disposition equal to the lesser of
(i) the excess of the fair market value of the shares of DST Common Stock on the
Enrollment Date over the price paid by the recipient on the Purchase Date or
(ii) the excess of the fair market value of such shares on the date of
disposition over the price paid by the recipient on the Purchase Date. The
excess (if any) of the amount received upon disposition over the tax basis (i.e.
purchase price plus amount taxed as ordinary income) will be taxed as capital
gain. DST generally will not be entitled to a tax deduction for compensation
expense on the original sales to participants, but may be entitled to a
deduction if a participant disposes of DST Common Stock received under the DST
ESPP prior to the expiration of the holding period.
NEW PLAN BENEFITS. Because participants who have enrolled in the plan for
2000 may terminate deductions or withdraw entirely from the plan, and may choose
not to participate in future plan years, it is not possible to determine with
certainty the dollar value or number of shares of DST Common Stock that will be
distributed under the DST ESPP.
THE DST BOARD RECOMMENDS THAT YOU VOTE "FOR"
APPROVAL OF THE DST ESPP
9
<PAGE>
PROPOSAL 3--AMENDMENT OF THE DST CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED CAPITAL STOCK
On February 29, 2000, the DST Board unanimously approved a resolution to
amend Section 4 of the DST Certificate to increase the number of authorized
shares of DST Common Stock from 125,000,000 shares to 300,000,000 shares,
subject to stockholder approval. As of the Record Date, DST had 62,740,913
shares of DST Common Stock issued and outstanding.
The purpose of the amendment is to provide DST with additional shares of DST
Common Stock which may be made available for future financing and acquisition
transactions, stock dividends or splits, employee benefit plans and other
general corporate purposes. If the amendment is approved, DST also will have
greater flexibility in the future to issue shares in excess of those currently
authorized, without the expense and delay of a special stockholders meeting.
DST currently has no arrangements or understandings for the issuance of
additional shares of DST Common Stock other than as provided in certain DST
employee benefit plans. If the DST Board deems it in the best interests of DST
and the stockholders to issue additional shares of DST Common Stock, the DST
Board will have the authority to determine the terms of the issuance and
generally would not seek approval by the stockholders unless such approval is
required by applicable law or by the NYSE or CHX rules.
An issuance of additional shares of DST Common Stock could dilute the voting
power of a person seeking control of DST, thereby deterring or rendering more
difficult a merger, tender offer, proxy contest or an extraordinary corporate
transaction opposed by the DST Board. DST has no knowledge that any person
intends to effect such a transaction.
THE DST BOARD RECOMMENDS THAT YOU VOTE "FOR"
THE CERTIFICATE AMENDMENT TO INCREASE AUTHORIZED CAPITAL STOCK
10
<PAGE>
PROPOSAL 4--APPROVAL OF THE AMENDMENT TO THE STOCK OPTION
PLAN TO INCREASE AUTHORIZED SHARES
GENERAL. The DST Board is proposing for stockholder approval an amendment
to the Stock Option Plan that would set the number of shares of DST Common Stock
to be authorized under the Stock Option Plan at 12,000,000 shares (instead of
the currently authorized number of 9,000,000 shares). As of February 29, 2000,
DST has issued awards under the Stock Option Plan in the form of stock options
and restricted stock. As of February 29, 2000 a total of 7,681,449 shares have
been subject to such awards (which total excludes shares subject to awards that
have been forfeited). The DST Board is proposing such amendment to have the
shares available, through the grant of awards under the Stock Option Plan, to
enhance the ability of DST and its affiliates to attract and retain
exceptionally qualified employees, to encourage the long-term ownership in DST
by participants and to provide additional incentive compensation to participants
tied to the attainment by DST of performance goals.
The DST Board has approved an amendment, subject to stockholder approval, to
increase the number of authorized shares by 3,000,000. Based on the closing
price of DST Common Stock on the Record Date, the aggregate market value of the
additional 3,000,000 shares to be authorized for issuance is $169,687,500. If
approved, the Stock Option Plan, as amended, would provide for the availability
of a total of 12,000,000 shares of DST Common Stock for the granting of awards
to certain eligible employees and Outside Directors (as defined in the Stock
Option Plan). As of the Record Date, 926,394 shares of DST Common Stock have
been issued under the Stock Option Plan in the form of restricted stock or as a
result of option exercises. Therefore, the maximum number of authorized shares
of DST Common Stock that could be issued in the future in connection with awards
under the Stock Option Plan, if the amendment is approved by the DST
stockholders, would be 11,073,606 shares, representing approximately 17.7% of
DST Common Stock outstanding on the Record Date.
SUMMARY OF THE STOCK OPTION PLAN PRIOR TO THE PROPOSED AMENDMENT. The
following summary of the Stock Option Plan (DESCRIBING THE STOCK OPTION PLAN
PRIOR TO THE PROPOSED AMENDMENT) is qualified in its entirety by reference to
the Stock Option Plan. Capitalized terms in this summary not defined in this
Proxy Statement have the meanings set forth in the Stock Option Plan.
The Stock Option Plan provides for the availability of 9,000,000 shares of
DST Common Stock (representing approximately 14.3% of the outstanding DST Common
Stock as of the Record Date) for the granting of options (incentive and
non-qualified), reload options, stock appreciation rights, limited rights,
Performance Shares, Performance Units (including performance-based cash awards),
dividend equivalents, Restricted Stock, DST Common Stock, or any other right,
interest or option relating to shares of DST Common Stock granted pursuant to
the provisions of the Stock Option Plan to officers and other employees and to
Outside Directors. As of February 29, 2000, the total number of shares of
restricted DST Common Stock issued under the DST Systems, Inc. Officers
Incentive Plan (the "Officers Incentive Plan"), an implementation of the Stock
Option Plan, not including forfeited shares, is 126,249 shares, and the total
number of shares of DST Common Stock that have been subject to options awarded
to participants under the Stock Option Plan, not including shares subject to
forfeited options, is 7,555,200 shares. No other Awards respecting DST Common
Stock have been made under the Plan.
The purposes of the Stock Option Plan are to generate an increased incentive
for employees of DST to contribute to its future success, to secure for DST and
its stockholders the benefits inherent in equity ownership by employees of DST,
and to enhance the ability of DST and its Affiliates to attract and retain
exceptionally qualified employees upon whom, in large measure, the sustained
progress, growth and profitability of DST depend. Management employees and
employees with long-standing service who are regularly employed for more than
twenty hours per week and more than five months per year and Outside Directors
are eligible to participate in the Stock Option Plan. As of the date of this
Proxy Statement, approximately 1,100 persons are eligible to participate in the
Stock Option Plan.
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<PAGE>
When an Outside Director first takes a position on the DST Board, the
Outside Director receives an option to purchase shares of DST Common Stock. On
the date of each annual meeting of DST's stockholders, each Outside Director
will be granted an option to purchase shares of DST Common Stock if such Outside
Director will continue to serve in such capacity immediately following such
annual stockholders' meeting. The DST Compensation Committee determines the
number of options to be granted Outside Directors upon appointment or election
to the DST Board and to be granted on the date of each annual stockholders'
meeting. Except as otherwise set forth in the Stock Option Plan, all options
granted to an Outside Director to purchase shares of DST Common Stock become
exercisable as follows: 50% on the day preceding the date of the first annual
stockholders' meeting after the date of grant of the option; an additional 25%
on the day preceding the date of the second annual stockholders' meeting after
the date of grant of the option; and the remaining 25% on the day preceding the
third annual stockholders' meeting after the date of grant of the option.
However, all such options will immediately become exercisable in the event the
Outside Director's service on the DST Board is terminated by reason of such
Outside Director's death, disability, or retirement (after reaching age 60 and
having at least five years of service on the DST Board), subject to certain
restrictions under the federal securities laws. All such options will also
immediately become exercisable in the event of a change in control of DST
subject to certain restrictions under the federal securities laws. Options
granted to an Outside Director may be exercised, to the extent otherwise
exercisable, for up to one year (but no later than ten years after the date of
grant) after the Outside Director ceases to be a member of the DST Board by
reason of death, for the remaining term of the option if the Outside Director
retires from the DST Board (if such retirement occurs after the director has
reached age 60 and has at least five years of service on the DST Board) or
becomes disabled, or for a period of ninety days (but no later than ten years
after the date of grant) after the Outside Director otherwise ceases to be a
member of the DST Board.
The DST Compensation Committee, or another committee designated by the DST
Board consisting of disinterested persons within the meaning of Rule 16b-3 under
the Exchange Act and outside directors within the meaning of Code
Section 162(m), or its delegate (the "Stock Option Plan Committee") will
administer the Stock Option Plan and determine the recipients of Awards, the
type or types of Awards to be granted to each such recipient, the term of such
Awards, the consideration to be received by DST for such Awards, if any, the
method of payment, and the number of shares subject to such Awards. All
determinations of the Stock Option Plan Committee shall be made by a majority of
its members. The Stock Option Plan Committee may not grant Awards under the
Stock Option Plan after August 31, 2005. The term of Awards granted under the
Stock Option Plan may be set at any length the Stock Option Plan Committee
determines and may extend beyond August 31, 2005. However, the term of any
options granted to Outside Directors may not extend beyond ten years from the
date of grant, and the term of any incentive stock option may not extend beyond
ten years from the date of grant (or beyond five years, in the case of an
incentive stock option granted to a 10% or more stockholder of DST).
With respect to options, the option exercise price must be at least equal to
(and in the case of options granted to Outside Directors must be equal to) the
fair market value of the underlying shares on the date of the grant, or, in the
case of an option granted in tandem with or in substitution of another grant
under the Stock Option Plan or another plan of DST, the fair market value on the
effective date of grant of such other award. A stock appreciation right may be
granted to Participants either alone or in addition to other Awards granted
under the Stock Option Plan and need not relate to a specific option granted.
Subject to the terms of the Stock Option Plan, a participant receiving a stock
appreciation right will have the right to receive upon exercise thereof an
amount equal to the excess of the fair market value of one share of DST Common
Stock on the date of exercise, or (except with respect to an incentive stock
option) at any time during a specified period before or after the date of
exercise as determined by the Stock Option Plan Committee, over the grant price
of the right, multiplied by the number of shares of DST Common Stock as to which
the participant is exercising the right. The grant price will be as specified by
the Stock Option Plan Committee, but will not be less than the fair market value
of one share of DST Common Stock on the date of grant of the right, or, in the
case of any stock appreciation right retroactively granted in tandem with or
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<PAGE>
in substitution for another Award or any outstanding award under any other plan
of DST, on the date of grant of such other award. Limited rights, however, may
be granted to participants only with respect to an option granted under the
Stock Option Plan or another plan of DST. Subject to the terms of the Stock
Option Plan, a participant receiving a limited right granted under the Stock
Option Plan will have the right to receive upon exercise thereof an amount equal
to the excess of the fair market value of one share of DST Common Stock on the
date of exercise or, if greater, and only with respect to any limited right
related to an option other than an incentive stock option, the highest price per
share of DST Common Stock paid in connection with any change in control of DST,
over the option price of the related option, multiplied by the number of shares
of DST Common Stock as to which the recipient is exercising the right. Limited
rights are exercisable only to the extent the related option is exercisable and
only during the three-month period immediately following a change in control of
DST. A "change in control" of DST is deemed to have occurred for purposes of the
Stock Option Plan if (i) there is a 25% or greater change in the constitution of
the DST Board unless such change is approved by at least 75% of certain
directors as described in the Stock Option Plan, (ii) any person(s) make a
public announcement or filing that they have become, without the consent of the
DST Board, an owner of 40% or more of the voting securities of DST, or
(iii) the stockholders of DST approve a merger, consolidation or dissolution of
DST or a sale, lease, exchange or disposition of all or substantially all the
assets of DST unless such transaction was approved by at least 75% of certain
directors as described in the Stock Option Plan.
The Stock Option Plan provides that the grant, vesting or exercise of
Restricted Stock or Performance Awards may be based on one or more of the
following performance-based criteria or such other criteria as the Stock Option
Plan Committee may determine: (i) attainment of a specified price per share of
DST Common Stock; (ii) attainment of a specific rate of growth or increase in
the amount of growth in the price per share of DST Common Stock;
(iii) attainment of a specified level of earnings or earnings per share of DST
Common Stock; (iv) attainment of a specified rate of growth or increase in the
amount of growth of earnings or earnings per share of DST Common Stock;
(v) attainment of a specified level of cash flow or cash flow per share of DST
Common Stock; (vi) attainment of a specific rate of growth or increase in the
amount of growth of cash flow or cash flow per share of DST Common Stock;
(vii) attainment of a specified level of return on equity; (viii) attainment of
a specific rate of growth or increase in the amount of growth of return on
equity; (ix) attainment of a specified level of return on assets; or
(x) attainment of a specified rate of growth or increase in the amount of growth
of return on assets.
Performance Awards may be paid in cash, DST Common Stock, Restricted Stock,
Options or other property or combination thereof as determined by the Stock
Option Plan Committee at the time of payment. Such payment may be made in a
single sum, in installments or deferred, as determined by the Stock Option Plan
Committee.
Subject to the terms of the Stock Option Plan, the Stock Option Plan
Committee may provide that the recipient of any Award, including a deferred
Award, may receive, currently or on a deferred basis, interest or dividends, or
interest or dividend equivalents (which the Stock Option Plan Committee may deem
to have been reinvested in additional shares of DST Common Stock or otherwise
invested), with respect to the number of shares of DST Common Stock covered by
an Award. The Stock Option Plan Committee may permit payment of a Performance
Dividend Equivalent to be deferred by a participant until such time as the Stock
Option Plan Committee may establish, subject to applicable requirements of the
Code.
No participant in the Stock Option Plan may be granted in any one year
options, limited rights, stock appreciation rights, Performance Shares or DST
Common Stock, whether or not restricted, that together with all other such
Awards granted under the Stock Option Plan in the same calendar year to such
participant are in excess of 400,000 shares. Reload options are not counted
toward the 9,000,000 share overall Stock Option Plan limit. Performance Units,
including performance-based cash bonuses, for any year may not exceed 300% of a
participant's annual base salary as of the first day of the year; provided,
however, that no more than $1,000,000 of annual base salary may be taken into
account for purposes of
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<PAGE>
determining the maximum amount of Performance Units which may be granted in any
calendar year to any participant.
In the event of a change in control of DST, vesting of Awards (including
options) will be automatically accelerated and all conditions on Awards will be
deemed satisfactorily completed without any action required by the Stock Option
Plan Committee. Such Award may then be exercised or realized in full on or
before a date fixed by the Stock Option Plan Committee subject to certain
restrictions under the federal securities laws. The Stock Option Plan Committee
may, in its discretion, include such further provisions and limitations in any
agreement documenting such Awards as it may deem equitable and in the best
interests of DST.
The DST Board may amend, alter, suspend, discontinue or terminate the Stock
Option Plan. However, any such action that would materially impair the rights of
a holder of an Award cannot be made without such holder's consent. The DST Board
may consider for each amendment whether the approval of stockholders is
desirable or is necessary for the amendment to be effective. The Stock Option
Plan Committee is authorized, without a participant's consent, to make
adjustments in Performance Award criteria or in the terms and conditions of
other Awards in recognition of events it deems to be unusual or non-recurring
that affect DST or any Affiliates or the financial statements of DST or any
Affiliate, or in recognition of changes in applicable law, regulations or
accounting principles, whenever the Stock Option Plan Committee deems
appropriate to prevent dilution or enlargement of benefits or potential benefits
under the Stock Option Plan. In addition, the Stock Option Plan Committee has
authority (but is not required), in the case of changes affecting the securities
of DST or other unusual events (as the Stock Option Plan Committee determines),
to make certain adjustments in the Stock Option Plan or in Awards in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Stock Option Plan.
The federal income tax consequences of the issuance and exercise of options
under the Stock Option Plan are summarized below. The summary is based on
federal income tax laws in effect as of the date hereof. The summary does not
constitute tax advice and, among other things, does not address possible state,
local or foreign tax consequences.
The grant of an option will have no tax consequences for the grantee or DST.
In general, the grantee will have no taxable income upon the exercise of an
incentive stock option if the applicable incentive stock option holding period
is satisfied (except that the alternative minimum tax may apply) and DST will
have no deduction upon exercise of the incentive stock option. Upon exercising a
non-qualified option, the grantee will recognize ordinary income in an amount
equal to the difference between the fair market value on the date of exercise of
the stock acquired on exercise and the option exercise price; DST will be
entitled to a deduction in the same amount, subject to the possible
applicability of the $1,000,000 limitation on deductibility under
Section 162(m) of the Code. Generally, there will be no tax consequence to DST
in connection with a disposition of shares acquired on exercise of an option,
except that DST may be entitled to a deduction upon disposition of shares
acquired on exercise of an incentive stock option before the applicable holding
period has been satisfied.
Under current rulings of the IRS, a grantee who pays the exercise price for
an option with DST Common Stock does not recognize gain or loss with respect to
the disposition of the stock transferred in payment of the option price.
However, the grantee normally will recognize ordinary income upon the exercise
of a non-qualified option in the manner discussed above. The grantee's basis in
a number of acquired shares equal to the number surrendered will be the same as
the grantee's basis in the surrendered shares; the grantee's basis in any
additional shares received will be equal to the amount of income the grantee
recognizes upon exercise of the option.
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NEW PLAN BENEFITS. DST cannot determine the amounts of Awards that will be
granted under the Stock Option Plan or the benefits thereof to the executive
officers named in the Summary Compensation table herein, the executive officers
as a group, the directors who are not executive officers as a group, and
employees who are not executive officers as a group. Under the terms of the
Stock Option Plan, the number of Awards to be granted is within the discretion
of the DST Compensation Committee.
The following options to purchase DST Common Stock have been granted prior
to the Record Date under the Stock Option Plan to the following individuals and
groups:
<TABLE>
<CAPTION>
<S> <C>
NUMBER OF
NAME AND POSITION OPTIONS*
<CAPTION>
<S> <C>
Thomas A. McDonnell......................................... 850,000
President and Chief Executive Officer
Thomas A. McCullough (director nominee)..................... 445,000
Executive Vice President
J. Michael Winn............................................. 162,000
Managing Director of DSTi
Charles W. Schellhorn....................................... 240,000
Vice Chairman of USCS; President of Argus
Robert C. Canfield.......................................... 162,000
Senior Vice President, General Counsel and Secretary
James C. Castle, Ph.D. (director nominee)................... 50,000
Chairman and Chief Executive Officer, USCS
William C. Nelson (director nominee)........................ 24,000
Current Executive Officers as a Group (13 persons).......... 2,521,500**
Current Non-Employee Director Group (5 persons)............. 108,000***
Current Non-Executive Officer Employee Group 5,540,850
(1,080 persons)...........................................
</TABLE>
* Some of these options have been exercised or forfeited.
** Includes number of options granted to the executive officers listed
individually in the table.
*** Includes number of options granted to William C. Nelson, who is the only
non-employee director listed individually in the table.
THE DST BOARD RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE AMENDMENT TO THE
STOCK OPTION PLAN TO INCREASE AUTHORIZED SHARES
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THE BOARD OF DIRECTORS
INFORMATION ABOUT PRESENT DIRECTORS. In addition to the Board Nominees, who
are described under Proposal 1, the following individuals are also on the DST
Board, for a term ending on the date of the annual meeting of stockholders in
the year indicated.
DIRECTORS SERVING UNTIL THE ANNUAL MEETING OF STOCKHOLDERS IN 2001.
A. EDWARD ALLINSON, age 65, has served as a director of DST from 1977 to
November 1990 and from September 1995 to present. He was an Executive Vice
President of State Street Bank and Trust Company ("State Street Bank") and an
Executive Vice President of State Street Corporation ("State Street"), the
parent company of State Street Bank, from March 1990 through December 1999.
Since December 1999, he has served as the Chief Executive Officer and Chairman
of the Board of EquiServe L.P. ("EquiServe"), which is owned 25% by Boston
Financial Data Services, Inc. ("BFDS"), a joint venture of State Street and DST.
He is also a director of KCSI.
GEORGE L. ARGYROS, age 63, joined the DST Board on December 21, 1998, the
effective date of the USCS Merger. Mr. Argyros had been a USCS director since
November 1990, and the USCS Merger Agreement contemplated his appointment as a
DST director. From 1968 to the present, Mr. Argyros has been Chairman and Chief
Executive Officer of Arnel & Affiliates, a diversified investment company. From
1987 to the present, he has been a general partner and the principal financial
partner in Westar Capital, a private investment company. Mr. Argyros serves as a
member of the boards of directors of First American Financial Corporation,
Rockwell International Corporation, and Newhall Land and Farming Co.
MICHAEL G. FITT, age 68, has served as a director of DST since
September 1995. He was Chairman of Employers Reinsurance Corporation from 1980
through 1992, its President from 1979 through October 1991, and its Chief
Executive Officer from 1980 through 1992, and he is now retired. He is also a
director of KCSI.
DIRECTORS SERVING UNTIL THE ANNUAL MEETING OF STOCKHOLDERS IN 2002.
THOMAS A. MCDONNELL, age 54, has served DST as a director since 1971; as
Chief Executive Officer since October 1984; and as President since January 1973
(except for a 30-month period from October 1984 to April 1987). He served as
Treasurer of DST from February 1973 to September 1995 and as Vice Chairman of
the Board from June 1984 to September 1995. He served KCSI as Executive Vice
President from February 1987 until October 1995 and as a director from 1983
until October 1995. He is a director of BHA Group, Inc., Computer Sciences
Corporation, Euronet Services Inc., and Informix Software, Inc.
M. JEANNINE STRANDJORD, age 54, has served as a director of DST since
January 1996. She has served as Senior Vice President of Finance for the Long
Distance Division of Sprint Corporation ("Sprint") since November 1998. She had
previously served since 1985 as Vice President of Finance and Distribution at
AmeriSource, Inc., a Sprint subsidiary, and since 1990 as Senior Vice President
and Treasurer for Sprint. She is also a director of six registered investment
companies which are advised by American Century Investments.
BOARD OF DIRECTORS' MEETINGS AND STANDING COMMITTEES.
MEETINGS. The DST Board met six times in 1999. Dr. Castle was not present
at two of the meetings. The DST Board has established two standing committees:
the DST Audit Committee and the DST Compensation Committee. It has not
established a standing nominating committee. During 1999, the DST Audit
Committee held three meetings and the DST Compensation Committee held five
meetings, and all committee members attended all of the meetings of the
committees during the period in which they served.
DST AUDIT COMMITTEE. The DST Audit Committee's primary responsibilities are
to oversee the internal and external audit functions of DST and to meet with and
consider suggestions from members of
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management and the internal audit staff, as well as from DST's independent
accountants, concerning the financial operations of DST. The DST Audit Committee
also reviews audited financial statements of DST and considers and recommends
the appointment of, and approves the fee arrangement with, independent
accountants for audit, advisory, and consulting services. Members of the DST
Audit Committee are Ms. Strandjord and Messrs. Argyros, Fitt and Nelson. The DST
Board appoints the members of the DST Audit Committee to serve staggered
three-year terms.
DST COMPENSATION COMMITTEE. The DST Compensation Committee's primary
responsibilities are to make determinations with respect to salaries and bonuses
of and other compensation arrangements with DST's officers and to administer the
officers' compensation plans. Members of the DST Compensation Committee are
Ms. Strandjord and Messrs. Argyros, Fitt and Nelson. The DST Board appoints the
members of the DST Compensation Committee to serve one-year terms. The DST
Compensation Committee Report on Executive Compensation is set forth herein.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. Thomas A.
McCullough, Director and Executive Vice President of DST, serves on the Board of
Directors and as a member of the Executive Committee of the Board of Directors
of BFDS. During 1999, A. Edward Allinson, a director of DST, served as Chairman
of the Board of Directors of BFDS. Although the BFDS Board of Directors
Executive Committee performs certain functions equivalent to those of a
compensation committee, it did not determine Mr. Allinson's compensation for
serving as an officer of BFDS. BFDS uses DST's mutual fund system and services
as a remote service client of DST. Certain subsidiaries of DST provide printing,
mailing and other services to BFDS. For 1999, DST and its subsidiaries had
revenues of $74,164,948 from BFDS and its subsidiaries and joint ventures.
Mr. Allinson is also an executive officer of EquiServe. EquiServe uses DST's
stock transfer system and services. Certain subsidiaries of DST provide print,
mail and other services to EquiServe. For 1999, DST and its subsidiaries had
revenues of $15,497,159 from EquiServe.
COMPENSATION OF DIRECTORS. Directors who do not receive compensation as
officers or employees of DST or any of its more than 50% owned affiliates (the
"Outside Directors") are each paid a fee of $4,000 for each meeting of the DST
Board that they attend, a fee of $2,000 for each committee meeting that they
attend, and a fee of $500 for any telephonic DST Board or committee meeting in
which they participate, plus reimbursement of reasonable travel expenses.
The Outside Directors may defer their compensation under the Directors'
Deferred Fee Plan, a non-qualified deferred compensation plan adopted
September 19, 1995. Under the plan, directors who receive fees from DST may make
an annual election to defer all or a part of any fees earned during the next
calendar year. Each participant's account will be credited with the amount of
fees deferred and adjusted annually by an interest factor equal to a rate of
return selected by the DST Board, or if the participant elects, by a rate of
return earned for the year from a hypothetical investment allocated by the
participant among certain mutual funds. The benefits become distributable after
termination of service as a director or in certain other circumstances as
approved by the DST Compensation Committee. Fees to some directors previously
deferred under an earlier plan, which terminated effective August 31, 1995,
continue to be deferred and earn interest and shall be distributed in accordance
with such earlier plan.
The Outside Directors automatically receive options to purchase DST Common
Stock under the Stock Option Plan. The participation of the Outside Directors in
the Stock Option Plan is described under Proposal 4 herein. In addition to the
options, beginning February 29, 2000, when an Outside Director first takes a
position on the DST Board, the Outside Director receives 1,000 shares of DST
Common Stock, and on the date of each annual stockholders' meeting, each Outside
Director who will continue to serve in such capacity immediately following such
meeting receives 500 shares of DST Common Stock.
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EXECUTIVE COMPENSATION
DST COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION.*
SCOPE OF DST COMPENSATION COMMITTEE'S DETERMINATIONS. The DST Compensation
Committee determined the 1999 compensation packages for DST executive officers
other than Dr. Castle, C. Randles Lintecum, president of DST's wholly-owned
subsidiary, Output Technology Solutions, Inc., and Michael F. McGrail, president
of DST's indirect wholly-owned subsidiary DST Innovis, Inc. Dr. Castle and
Messrs. Lintecum and McGrail (collectively, "USCS Officers") were executive
officers of USCS or its subsidiaries prior to the USCS Merger and joined DST
upon the effective date of the USCS Merger. The 1999 compensation packages of
the USCS Officers were based on determinations made by the USCS Board of
Directors Compensation Committee prior to the USCS Merger, and, as respects
stock options granted in 1999, by the DST Compensation Committee. The DST
Compensation Committee intends to determine the entire compensation packages of
the USCS Officers for 2000.
COMPENSATION PRINCIPLES. The DST Compensation Committee determined the base
salaries for DST executive officers other than the USCS Officers (collectively
the "DST Officers") on the basis that such salaries be fair, reasonable and
competitive. The DST Compensation Committee also based the compensation packages
for the DST Officers and 1999 option grants on the principles that executive
officers should be encouraged to have long-term ownership in DST and should have
the opportunity to earn additional compensation if DST stockholders experience
increases in the value of DST Common Stock.
OVERVIEW OF 1999 COMPENSATION. The compensation of DST Officers for 1999
consisted of base salary and of awards issued pursuant to the Stock Option Plan.
The Stock Option Plan allows the granting of stock options and other forms of
incentive compensation to DST Officers and was approved by stockholders in 1996.
In 1997, stockholders approved additional types of awards the DST Compensation
Committee could grant under the Stock Option Plan, including restricted stock.
For 1999, the awards granted to DST Officers under the Stock Option Plan were
cash bonuses, restricted stock, and stock options, and awards granted to USCS
Officers were stock options. Because of the last two types of awards, a
substantial amount of the executive officers' 1999 compensation was at-risk and
tied to DST's performance, furthering the DST Compensation Committee's
compensation principles. The DST Officers also participated in certain other
benefits available generally to DST officers and employees so that their base
compensation packages were competitive with compensation packages of other
companies.
DETERMINATION OF 1999 COMPENSATION. In determining target levels of base
salary and of total cash compensation and the types of awards to grant, the DST
Compensation Committee considered the recommendations of an independent
compensation consultant and analyzed data from a survey provided by the
consultant. The survey provided compensation information from the proxy
statements of fourteen companies, including five of the companies in the peer
group shown in the Stock Performance Graph contained in this Proxy Statement and
other companies the compensation consultant and the DST Compensation Committee
believed to be comparable in size, scope or complexity to DST or to be
industries or businesses in which DST competes for customers or from which it
would typically recruit executives. The DST Compensation Committee focused on
the information in the survey about officers with positions and responsibilities
similar to each DST Officer.
- ------------------------
* The DST Compensation Committee Report on Executive Compensation and the
Stock Performance Graph included herein shall not be incorporated by
reference into any filings under the Securities Act of 1933 or the Exchange
Act, either as amended, notwithstanding the incorporation by reference of
the Proxy Statement into any such filings.
18
<PAGE>
The DST Compensation Committee took the following actions with respect to
each component of the compensation packages:
BASE SALARIES. With the advice of the independent compensation consultant,
the DST Compensation Committee set the target for each DST Officer's base salary
for 1999 to be in the 50th percentile of compensation levels for comparable
positions shown in the survey. The DST Compensation Committee also examined the
responsibilities of individual executive officers in relation to the market and
to each other and made adjustments where appropriate.
CASH BONUSES AND RESTRICTED STOCK. Under the Officers Incentive Plan, which
was adopted pursuant to and as an implementation of the Stock Option Plan as
incentive for DST Officers to meet DST's financial goals, the DST Compensation
Committee may award incentive compensation to an officer based on a percentage
of the officer's base salary. As described in the section Other Compensation
Plans and Arrangements herein, the bonus for J. Michael Winn, Managing Director
of DSTi, is tied to DSTi's pretax earnings. The percentage of salary awarded to
the other DST Officers, if any, depends on DST achieving certain annual and/or
cumulative threshold, target or maximum earnings per share goals ("EPS Goals")
established by the DST Compensation Committee prior to the beginning of the
years in which the goals apply.
For 1999, the DST Compensation Committee established threshold, target and
maximum EPS Goals for DST and determined the percentage of each DST Officer's
salary (other than Mr. Winn) to be awarded at each level of EPS Goals met by
DST. The DST Compensation Committee, with the help of the independent
compensation consultant, determined that EPS reported results for 1999 should be
decreased to eliminate the effect of new accounting rules requiring the
capitalization of software developed for internal use. The range of minimum
percentages of base salary which could be awarded to officers other than
Mr. McDonnell for 1999 if EPS goals were met was from 25% to 50% and the range
of maximum percentages was 75% to 150%. In establishing the ranges, the DST
Compensation Committee set the target for each DST Officer's total cash
compensation to be in the 75th percentile of the applicable survey information,
if DST met certain performance criteria.
Under the Officers Incentive Plan through 1999 for all DST Officers other
than Mr. Winn, incentive compensation awarded if DST exceeded the threshold EPS
Goal consisted of a combination of cash and restricted DST Common Stock. If the
threshold EPS Goal was met but not exceeded, all of the incentive bonus was paid
only in cash; for that portion of the bonus attributable to performance above
the threshold EPS Goal and up to the target EPS Goal, 60% of the bonus was cash
and 40% restricted stock; and for that portion of the bonus attributable to
performance above the target EPS Goal and up to the maximum EPS Goal, 50% of the
bonus was cash and 50% restricted stock.
If the participant's employment by DST or its subsidiaries terminates (other
than upon retirement after age 60, disability, death or termination without
cause) prior to the last day of the third calendar year after the plan year for
which the incentive award was granted, the restricted DST Common Stock is
forfeited. The Officers Incentive Plan provides that no participant may receive
an incentive award greater than 250% of such participant's base salary as of the
beginning of the plan year. Additionally, the aggregate value of all incentive
awards for a calendar year may not exceed 10% of DST's pre-tax income for that
year.
STOCK OPTIONS. In granting stock options in 1999 to executive officers, the
DST Compensation Committee, with advice from an independent compensation
consultant, analyzed the application of option pricing models and other
valuation techniques to stock option data in the surveys of the independent
compensation consultant and considered the responsibility level of each officer
receiving an option award and the total number of options previously granted to
each such officer.
19
<PAGE>
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. The DST Compensation Committee
determined Mr. McDonnell's base salary of $500,000 in the same manner it
determined the salaries of other DST Officers.
Under the Officers Incentive Plan, Mr. McDonnell's threshold, target and
maximum incentive awards for 1999 were set at 70%, 140% and 210% of his base
salary, respectively, if DST attained its threshold, target or maximum EPS
Goals. The DST Compensation Committee set such levels in recognition of
Mr. McDonnell's responsibilities and to provide incentives tied to DST's
financial performance.
The stock options awarded Mr. McDonnell in 1999 have the same terms as the
options awarded the other executive officers. The DST Compensation Committee
awarded Mr. McDonnell the number of options he received because of his level of
responsibility.
DEDUCTIBILITY OF COMPENSATION. Section 162(m) of the Code limits a public
company's deduction for federal income tax purposes of compensation expense in
excess of $1 million paid to the executive officers named in the company's
summary compensation table. Performance-based compensation which meets the
requirements of Section 162(m) is excluded from the compensation subject to the
$1 million deduction limitation. The DST Compensation Committee believes DST has
taken the steps required to exclude from calculation of the $1 million
compensation expense limitation any performance-based awards granted under the
Stock Option Plan to the executive officers listed in the Summary Compensation
Table in this proxy statement (the "Named Officers").
THE DST COMPENSATION COMMITTEE
George L. Argyros
Michael G. Fitt
William C. Nelson
M. Jeannine Strandjord
20
<PAGE>
STOCK PERFORMANCE GRAPH.
The following graph shows the changes in value since the initial public
offering of DST Common Stock (the "IPO") of an assumed investment of $100 in:
(i) DST Common Stock; (ii) the stocks that comprise the S&P 400 MidCap index(1);
and (iii) the stocks that comprise a peer group of companies(2). The table
following the graph shows the dollar value of those investments as of
December 31, 1999. The value for the assumed investments depicted on the graph
and in the table has been calculated assuming that cash dividends, if any, are
reinvested at the end of each quarter in which they are paid.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DST COMMON S&P 400 MIDCAP
<S> <C> <C> <C>
Stock Value Index Peer Group
Nov 1 1995 $100.00 $100.00 $100.00
Dec 31 1995 $135.71 $104.11 $103.62
Dec 31 1996 $149.40 $124.10 $117.74
Dec 31 1997 $203.27 $164.13 $132.26
Dec 31 1998 $271.72 $195.49 $167.45
Dec 31 1999 $363.38 $224.26 $216.15
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER 1, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995 1996 1997 1998 1999
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
DST Common Stock
Value $100 $135.71 $149.40 $203.27 $271.72 $363.38
S&P 400 MidCap Index
Value $100 $104.11 $124.10 $164.13 $195.49 $224.26
Peer Group Value $100 $103.62 $117.74 $132.26 $167.45 $216.15
</TABLE>
(1) Standard and Poor's Corporation, an independent company, prepares the
S&P 400 MidCap Index.
(2) This index is based upon a group of comparable companies in DST's industry
comprised of: Automatic Data Processing, Inc.; Bisys Group, Inc.; The
Continuum Company, Inc. (through August 1, 1996, the date it was acquired by
Computer Sciences Corporation); First Data Corporation; Fiserv, Inc.; Policy
Management Systems, Inc.; and SunGard Data Systems, Inc.
21
<PAGE>
SUMMARY COMPENSATION TABLE.
The following table sets forth for the calendar years indicated the total
compensation paid to or for the account of the Chief Executive Officer ("CEO")
of DST and the four executive officers other than the CEO receiving the highest
totals of salary and bonus for 1999.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL
COMPENSATION AWARDS
RESTRICTED NUMBER OF
STOCK SECURITIES
SALARY BONUS AWARDS UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(1) OPTIONS/SARS COMPENSATION($)(2)
<S> <C> <C> <C> <C> <C> <C>
Thomas A. McDonnell 1999 500,000 735,000 315,000 100,000 82,414
President and Chief Executive 1998 400,000 546,000 234,000 75,000 4,175
Officer 1997 400,000 546,000 234,000 75,000 4,746
Thomas A. McCullough 1999 400,000 420,000 180,000 60,000 50,376
Executive Vice President 1998 335,000 351,750 150,750 45,000 4,175
1997 335,000 351,752 150,748 45,000 4,746
J. Michael Winn 1999 242,730 364,095 0 20,000 55,323
Managing Director of DSTi 1998 231,708 373,500 0 20,000 52,449
1997 226,243 294,681 0 20,000 52,855
Charles W. Schellhorn 1999 300,000 252,000 108,000 30,000 31,615
Vice Chairman of USCS; 1998 260,000 218,400 93,600 30,000 4,175
President of Argus 1997 260,000 218,400 93,600 30,000 4,746
Robert C. Canfield 1999 275,000 231,000 99,000 20,000 28,580
Senior Vice President, General 1998 252,000 211,680 90,720 20,000 4,175
Counsel and Secretary 1997 252,000 211,712 90,688 20,000 4,746
</TABLE>
(1) Mr. Winn did not receive restricted stock as part of compensation for 1997
through 1999. The following table shows the number of shares of restricted
stock received by the remaining Named Officers as of February 29, 2000 under
the Officers Incentive Plan as part of 1999 compensation. Such number of
shares was determined by dividing the dollar amount of the portion of the
bonus to be paid in equity by the closing price of DST Common Stock on the
date of grant. The table also shows the aggregate number of restricted
shares held by such officers on December 31, 1999 and their aggregate market
value on December 31, 1999, and the dates on which restrictions lapse. The
restrictions on and the transferability of the stock are described herein in
the DST Compensation Committee Report on Executive Compensation and in the
section Other Compensation Plans and Arrangements. Holders of the restricted
DST Common Stock have the right to vote such stock and to receive any
dividends or other distributions with respect to such stock.
22
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RESTRICTED
SHARES
GRANTED PRIOR TO
12/31/99 AND
12/31/99
NUMBER OF MARKET VALUE
RESTRICTED SHARES --------------------- DATE RESTRICTIONS WILL LAPSE IF SHARES
GRANTED IN 2000 ARE NOT FORFEITED AND NUMBER OF SHARES
FOR 1999 TOTAL MARKET ------------------------------------------
NAMED OFFICER COMPENSATION SHARES VALUE ($) 12/31/2000 12/31/2001 12/31/2002
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Thomas A. McDonnell 5,612 8,735 666,590 4,500 4,235 5,612
Thomas A. McCullough 3,207 5,627 429,410 2,899 2,728 3,207
Charles W. Schellhorn 1,924 3,494 266,636 1,800 1,694 1,924
Robert C. Canfield 1,763 3,385 258,318 1,744 1,641 1,763
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(2) All other compensation for Messrs. McDonnell, McCullough, Schellhorn and
Canfield for 1999 is comprised of: (i) contributions to their respective
accounts under the DST ESOP of $701; and (ii) contributions to their
respective accounts under the DST 401(k) of $3,876. All other compensation
for 1999 for Mr. McDonnell also includes a grant of 30 shares of DST Common
Stock under the DST Stock Bonus Plan and a contribution of $76,148 to his
account under the DST Systems, Inc. Nonqualified Supplemental Executive
Retirement Plan ("Executive Retirement Plan"). The closing price of DST
Common Stock on the NYSE on the date of the grant to Mr. McDonnell under the
DST Stock Bonus Plan was $56.3125. All other compensation for 1999 for
Messrs. McCullough, Schellhorn and Canfield also includes respective
contributions of $45,799, $27,038 and $24,003 to their Executive Retirement
Plan accounts. All other compensation for Mr. Winn for 1999 is comprised of
a contribution of $42,526 to his qualified retirement plan account, a
payment of $11,303 for amounts Mr. Winn could not contribute to such account
as a result of statutory limits, and $1,494 in term life insurance premiums.
23
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth information about the options to acquire DST
Common Stock granted the Named Officers in 1999.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED(1) FISCAL YEAR(2) ($/SH)(1) DATE(1) VALUE($)(3)
<S> <C> <C> <C> <C> <C>
Thomas A. McDonnell 100,000 6.7 55.25 2/25/2009 1,990,000
Thomas A. McCullough 60,000 4.0 55.25 2/25/2009 1,194,000
J. Michael Winn 20,000 1.3 55.25 2/25/2009 398,000
Charles W. Schellhorn 30,000 2.0 55.25 2/25/2009 597,000
Robert C. Canfield 20,000 1.3 55.25 2/25/2009 398,000
</TABLE>
(1) The options granted to the Named Officers in 1999 are exercisable one year
from the date of grant. All options have a ten-year term but are subject to
earlier termination upon the occurrence of certain events, including
termination of employment, disability, or death. The exercise price of each
option is equal to the average of the high and low price of DST Common Stock
on the NYSE on the date of the grant. The Named Officers 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 or, subject to certain restrictions, by delivering DST Common Stock
to DST. In the event of a change in control (as defined in the Stock Option
Plan), the options granted in 1999 to the Named Officers become immediately
exercisable and, subject to certain securities laws restrictions, the
officers may exercise certain limited rights related to their options.
(2) Options for a total of 1,488,150 shares of DST Common Stock were granted
to employees in 1999.
(3) In accordance with Securities and Exchange Commission ("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. DST's 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 following assumptions were made for
purposes of calculating Grant Date Present Value: options are exercised
5 years after the date of grant, volatility of 29.353% (calculated weekly
over the three preceding calendar years), dividend yield of 0% and risk free
rate of return rate of 5.253% (United States Government Zero Coupon Bond on
date of grant with a five-year maturity). Given the limited trading history
of DST Common Stock, the volatility factor was determined by using the
average of the volatility of the stock of three of the peer companies
constituting the peer group referenced in the Stock Performance Graph
contained herein. 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.
24
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
The following table shows the Named Officers' exercise during 1999 of
options to purchase DST Common Stock and shows the number and value of their
exercisable and unexercisable options at December 31, 1999.
<TABLE>
NUMBER OF SECURITIES
SHARES UNDERLYING VALUE OF UNEXERCISED
ACQUIRED UNEXERCISED IN-THE-MONEY
ON VALUE OPTIONS/SARS AT OPTIONS/SARS
EXERCISE REALIZED FY-END (#) AT FY-END ($)
NAME (#) ($)* EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
Thomas A. McDonnell.... 0 0 550,000 100,000 26,831,278 2,040,630
Thomas A. McCullough... 0 0 265,000 60,000 12,546,107 1,224,378
J. Michael Winn........ 82,000 3,558,941 20,000 20,000 473,126 408,126
Charles W.
Schellhorn........... 0 0 170,000 30,000 7,999,696 612,189
Robert C. Canfield..... 0 0 102,000 20,000 4,713,693 408,126
</TABLE>
* Although Mr. McCullough did not realize any value through the exercise of
options to purchase DST Common Stock, he realized $4,230,534 from the
exercise of options to purchase KCSI stock he had been awarded prior to the
IPO by the Compensation and Organization Committee of the KCSI Board of
Directors (the "KCSI Committee") as a result of his employment as a DST
officer.
EMPLOYMENT AGREEMENTS. An agreement between DST and Thomas A. McDonnell
commencing January 1, 1999 (the "McDonnell Agreement") provides for
Mr. McDonnell's continued employment at a base salary set by the DST
Compensation Committee. Agreements between DST and Messrs. McCullough,
Schellhorn and Canfield, each dated April 1, 1992 and amended October 9, 1995
(the "DST Executive Agreements"), provide for the continued employment of each
such officer in his respective executive officer position at his base salary in
effect at the date of execution of his respective agreement subject to
adjustment by the DST Compensation Committee. Each of the DST Executive
Agreements and the McDonnell Agreement (collectively, the "DST Employment
Agreements") may be terminated by the officer on at least 30 days' notice to DST
and by DST without notice and with or without cause. If DST terminates any of
the DST Employment Agreements without cause, the DST Executive Agreements
entitle the officer to severance pay equal to 12 months' base salary and
12 months' reimbursement of costs of obtaining comparable life and health
insurance benefits unless another employer provides such benefits, and the
McDonnell Agreement provides for such severance pay based on a 24 month period.
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 officer's employment, executive capacity, salary 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 officer's
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 employ-
- ------------------------
* The DST Employment Agreements define this term.
25
<PAGE>
ment had been terminated other than for cause; (e) if amounts received on or
after the change in control date involve "Parachute Payments" subject to tax
under Section 4999 of the Code, to receive payments necessary to relieve the
officer of certain adverse federal income tax consequences; and (f) 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.
Mr. Winn, the Managing Director of DSTi, is subject to an employment
agreement dated June 23, 1993. DSTi may terminate the agreement without notice
"for cause" as described in the agreement, and either DSTi or Mr. Winn can
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. The agreement provides that Mr. Winn
shall receive pension contributions and medical insurance. The agreement
provides that Mr. Winn's base salary is reviewed annually and is subject to
increase by the board of directors of DSTi. Mr. Winn's bonus arrangements are
discussed in the section Winn Personal Retirement and Bonus Arrangements herein.
OTHER COMPENSATION PLANS AND ARRANGEMENTS. The following compensatory plans
and arrangements, in which certain of the Named Officers participate, are not
generally available to all DST employees:
THE STOCK OPTION PLAN. All of the Named Officers have received awards under
the Stock Option Plan. Stockholders approved the Stock Option Plan at the 1996
Annual Meeting of Stockholders and approved amendments to the plan at the 1997
Annual Meeting of Stockholders and at the Special Meeting of Stockholders held
on December 21, 1998. The Stock Option 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 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, DST Common Stock, or any
other right, interest or option relating to shares of DST Common Stock granted
pursuant to the Stock Option Plan.
In the event of a change in control of DST (as defined in the Stock Option
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 certain restrictions under the federal securities laws.
The DST Compensation Committee may, in its discretion, include such further
provisions and limitations in any agreement documenting such awards as it may
deem equitable and in the best interests of DST.
THE DST SYSTEMS, INC. EXECUTIVE PLAN. The Executive Plan, a non-qualified
deferred compensation plan, terminated effective December 31, 1995. However,
account balances for each participant on such date remain subject to the terms
of the Executive Plan. Officers of DST selected by the KCSI Committee prior to
the IPO participated in the Executive Plan. Each of the Named Officers other
than Mr. Winn participates. Prior to termination of the Executive Plan, DST
credited each participant's 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 participant's behalf. The
accounts, which became fully vested upon termination of the Executive Plan,
become distributable after termination of employment or in certain instances as
approved by the DST Compensation Committee.
THE EXECUTIVE RETIREMENT PLAN. For 1999, credits were made to the accounts
of all of the Named Officers other than Mr. Winn under an Executive Retirement
Plan adopted by the DST Compensation Committee. The credits for each of the
participating Named Officers were equal to 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 credited with earnings
based on hypothetical investments selected by
26
<PAGE>
the DST Compensation Committee or its delegate and vest based on years of
service or upon a change in control, as defined in the plan.
THE OFFICERS INCENTIVE PLAN. All of the Named Officers other than Mr. Winn
have received awards under the Officers Incentive Plan. Incentive awards issued
under the Officers Incentive Plan are subject to restrictions and limitations
imposed under the terms of the Stock Option Plan. All officers of DST
participate in the Officers Incentive Plan, and officers of more than 50% owned
subsidiaries are eligible if designated by the DST Compensation Committee. If
for a given plan year DST achieves 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 Officers
Incentive Plan, the equity portion of awards which may be granted as part of
compensation for 2000, if goals set by the DST Compensation Committee are met,
will consist of either options to purchase DST Common Stock or restricted DST
Common Stock.
Restrictions on DST Common Stock issued pursuant to the Officers Incentive
Plan are described in the DST Compensation Committee Report on Executive
Compensation herein. The restricted DST Common Stock is not transferable during
such period of restriction except to family members or trusts for family
members, and the stock remains subject to the restrictions after such permitted
transfers. In the event of retirement after age 60, termination because of
disability or without cause, or a change in control, as defined in the Officers
Incentive Plan, the restrictions shall be deemed released.
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 Officers Incentive Plan, and the Executive
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 DST's 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, 2001, unless the trusts are extended prior to such date.
WINN PERSONAL RETIREMENT AND BONUS ARRANGEMENTS. Under a qualified
retirement plan available to all DSTi employees, DSTi makes a contribution up to
a statutory limit to Mr. Winn's personal retirement account. DSTi makes a
supplemental payment to Mr. Winn of twenty percent of his annual salary less the
amount contributed to the qualified plan account. If DSTi achieves annual
threshold, target or maximum levels of pretax earnings, then Mr. Winn receives a
cash bonus based on a percentage of his salary. The percentage amount depends on
the level of pre-tax earnings achieved over a one-year period and cumulatively
over a three-year period. If DSTi achieves the threshold level, Mr. Winn earns a
bonus equal to 50% of his salary. If DSTi achieves the target level, the bonus
equals his salary. If DSTi achieves the maximum level, the bonus equals 150% of
his salary. Payment of 30% of the bonus is deferred for one year. The deferred
portion may be reduced by 20% if DSTi's pre-tax earnings do not exceed the
threshold level for the following year. It may grow by 20% if DSTi's pre-tax
earnings meet or exceed the maximum level for the following year.
27
<PAGE>
OTHER MATTERS
GENERAL INFORMATION. DST will bear the cost of the Annual Meeting,
including the cost of mailing the proxy materials. Proxies may also be solicited
by telephone, telegraph or in person by directors, officers and employees not
specifically engaged or compensated for that purpose. DST has retained D.F.
King & Co., Inc. to assist in the solicitation of proxies at a cost not expected
to exceed $5,000 plus expenses.
DST'S INDEPENDENT ACCOUNTANTS. The DST Audit Committee recommended, and the
DST Board selected, the firm of PricewaterhouseCoopers LLP to serve as
independent accountants to examine the consolidated financial statements of DST
for the year 2000. Although the DST Board has selected PricewaterhouseCoopers
LLP for 2000, the DST Board nonetheless may, in its discretion, retain another
independent accounting firm at any time during the year if it concludes that
such change would be in the best interest of DST and its stockholders.
PricewaterhouseCoopers LLP served as DST's independent accountants for 1999.
As such, PricewaterhouseCoopers LLP performed professional services in
connection with the examination of the consolidated financial statements of DST.
Such services included examination of the consolidated financial statements of
DST and of the financial statements of various subsidiaries, review of reports
filed with the SEC, and review of control procedures of the mutual fund
processing system of DST. In addition, PricewaterhouseCoopers LLP provided
certain other accounting, auditing and tax services to DST and certain of its
subsidiaries during 1999. Representatives of PricewaterhouseCoopers LLP will be
present at the Annual Meeting and will have the opportunity to make a statement
if they desire and to respond to appropriate questions.
STOCKHOLDER PROPOSALS. Stockholders may as described below submit proposals
for consideration at a stockholders' meeting. No stockholder proposals are being
considered at this Annual Meeting.
INCLUSION OF STOCKHOLDER PROPOSALS IN THE 2001 ANNUAL MEETING PROXY
STATEMENT. If a stockholder desires to have a proposal included in DST's Proxy
Statement for the annual meeting of stockholders to be held in 2001, the
Corporate Secretary of DST must receive such proposal on or before November 30,
2000, and the proposal must comply with the applicable SEC laws and rules and
the procedures set forth in the DST By-laws. DST may require any proposed
nominee for election as a director or stockholder proposing a nominee to furnish
such other information as DST may reasonably require to properly complete any
proxy or information statement used for the solicitation of proxies in
connection with the meeting at which stockholders are to elect directors.
TIMELY NOTICE TO DST OF NOMINATIONS FOR DIRECTOR AND OTHER STOCKHOLDER
PROPOSALS. To bring a proposal before an annual meeting (other than a proposal
requested to be set forth in the Proxy Statement, as noted above), the DST
By-laws require that the Corporate Secretary of DST must receive such proposal
in writing not less than 60 days nor more than 90 days prior to the meeting at
which the stockholders will consider the proposal; provided, however, that in
the event that the DST Board designates the meeting to be held at a date other
than the second Tuesday in May and gives notice of or publicly discloses the
date of the meeting less than 60 days prior to its occurrence, the Corporate
Secretary of DST must receive the written proposal not later than the close of
business on the 15th day following the date of the notice or public disclosure
of the meeting date, whichever first occurs.
Under these requirements, proposals (other than proposals submitted for
inclusion in the proxy statement) to be timely for the 2001 annual meeting must
be received by the Corporate Secretary of DST no earlier than February 7, 2001
and no later than March 9, 2001.
CONTENTS OF NOTICE OF PROPOSAL. The required contents of the notice of
proposal depend on whether the proposal pertains to nominating a director or to
other business. A stockholder's notice pertaining to the nomination of a
director shall set forth: (a) as to each nominee whom the stockholder proposes
to nominate for election or re-election as a director, (i) the name, age,
business address and residence
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address of the nominee, (ii) the principal occupation or employment of the
nominee, (iii) the class and number of shares of capital stock of DST that are
beneficially owned by the nominee, and (iv) any other information concerning the
nominee that would be required, under the rules of the SEC, in a proxy statement
soliciting proxies for the election of such nominee; (b) as to the stockholder
giving the notice, (i) the name and address of the stockholder, and (ii) the
class and number of shares of capital stock of DST that are beneficially owned
by the stockholder and the name and address of record under which such stock is
held; and (c) the signed consent of the nominee to serve as a director if
elected.
A stockholder's notice concerning business other than nominating a director
shall set forth as to each matter the stockholder proposes to bring before the
meeting (a) a brief description of the business desired to be brought before the
meeting and the reasons for conducting such business at the meeting, (b) the
name and address of the stockholder proposing such business, (c) the class and
number of shares of capital stock of DST that are beneficially owned by the
stockholder and the name and address of record under which such stock is held,
and (d) any material interest of the stockholder in such business. The Chairman
of the Annual Meeting has the power to determine whether the proposed business
is an appropriate subject for and was properly brought before the meeting.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Section 16(a) of
the Exchange Act requires DST's directors and certain of its officers, and each
person, legal or natural, who owns more than 10% of DST Common Stock (each, a
"Reporting Person"), to file reports of such ownership with the SEC, the NYSE,
the CHX, and DST. Based solely on review of the copies of such reports furnished
to DST, and written representations relative to the filing of certain forms, no
Reporting Person other than William C. Nelson, Director, was late in filing such
reports for fiscal year 1999. Mr. Nelson purchased 27.03 shares of DST Common
Stock through an investment partnership in 1997 and reported the sale on a
Form 4 filed in June 1999.
By Order of the Board of Directors
/s/ Robert C. Canfield
Robert C. Canfield
SENIOR VICE PRESIDENT, GENERAL COUNSEL
AND SECRETARY
Kansas City, Missouri
March 30, 2000
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APPENDIX A
DST SYSTEMS, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
I. Purpose and Effective Date.................................. 1
II. Definitions................................................. 1
III. Administration.............................................. 3
IV. Number of Shares............................................ 3
V. Eligibility Requirements.................................... 4
VI. Enrollment.................................................. 4
VII. Grant of Options on Enrollment.............................. 5
VIII. Payroll Deductions.......................................... 5
IX. Purchase of Shares.......................................... 6
Withdrawal From the Plan; Termination of Employment; Leave
X. of Absence; Death........................................... 7
XI. Miscellaneous............................................... 8
</TABLE>
<PAGE>
DST SYSTEMS, INC.
EMPLOYEE STOCK PURCHASE PLAN
I. PURPOSE AND EFFECTIVE DATE
1.1 The purpose of the DST Systems, Inc. 2000 Employee Stock Purchase Plan
is to provide an opportunity for eligible employees to acquire a proprietary
interest in DST Systems, Inc. through the purchase of shares of common stock of
the Company through accumulated payroll deductions. It is the intent of the
Company to have the Plan qualify as an "employee stock purchase plan" under
Section 423 of the Code. The provisions of the Plan shall be construed to extend
and limit participation in a manner consistent with the requirements of
Section 423 of the Code.
1.2 The Plan shall be effective on the Effective Date stated below, subject
to the approval of the Company's stockholders within one year before or one year
after the date the Plan is approved by the board of directors of the Company. No
option shall be granted under the Plan after the date as of which the Plan is
terminated by the Board in accordance with Section 11.7 of the Plan.
II. DEFINITIONS
The following words and phrases, when used in this Plan, unless their
context clearly indicates otherwise, shall have the following respective
meanings:
2.1 "ACCOUNT" means a recordkeeping account maintained for a Participant to
which payroll deductions are credited in accordance with Article VIII of the
Plan.
2.2 "ARTICLE" means an Article of this Plan.
2.3 "ACCUMULATION PERIOD" means, as to the Company or a Participating
Subsidiary, a period of 12 calendar months commencing on each successive
January 1, beginning with the Effective Date. The Committee may modify or
suspend Accumulation Periods at any time and from time to time.
2.4 "BASE EARNINGS" means base salary and wages payable by the Company or a
Participating Subsidiary to an Eligible Employee, prior to pre-tax deductions
for contributions to qualified or non-qualified (under the Code) benefit plans
or arrangements, and excluding bonuses, incentives and overtime pay but
including commissions.
2.5 "BOARD" means the Board of Directors of the Company.
2.6 "CODE" means the Internal Revenue Code of 1986, as amended.
2.7 "COMMITTEE" means the committee of the Board described in Section 3.1
of the Plan.
2.8 "COMMON STOCK" means the Company's common stock, $.01 par value.
2.9 "COMPANY" means DST Systems, Inc., a Delaware corporation.
2.10 "CUT-OFF DATE" means the date established by the Committee from time
to time by which enrollment forms must be received prior to the commencement of
the Accumulation Period.
2.11 "EFFECTIVE DATE" means January 1, 2000.
2.12 "ELIGIBLE EMPLOYEE" means an Employee eligible to participate in the
Plan in accordance with Article V.
2.13 "EMPLOYEE" means an individual who performs services for the Company
or a Participating Subsidiary pursuant to an employment relationship described
in Treasury Regulations Section 31.3401(c)-1 or any successor provision.
2.14 "ENROLLMENT DATE" means the first Trading Day of an Accumulation
Period, provided that, for the first Accumulation Period beginning with the
Effective Date, for purposes of determining grant date
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and number of shares under Sections 7.1 and 7.3, and purchase price under
Section 9.4, the Enrollment Date shall be the date upon which the Company's
stockholders approve the Plan.
2.15 "EXCHANGE ACT" means the Securities Exchange Act of 1934.
2.16 "FAIR MARKET VALUE" means, as of any applicable date:
(a) if the security is listed for trading on the New York Stock
Exchange, the closing price of the security as reported on the New York
Stock Exchange Composite Tape, or if no such reported sale of the security
shall have occurred on such date, on the latest preceding date on which
there was such a reported sale, or
(b) if the security is not so listed, but is listed on another national
securities exchange or authorized for quotation on the National Association
of Securities Dealers Inc.'s NASDAQ National Market ("NASDAQ/NMS"), the
closing price, regular way, of the security on such exchange or NASDAQ/NMS,
as the case may be, or if no such reported sale of the security shall have
occurred on such date, on the latest preceding date on which there was such
a reported sale, or
(c) if the security is not listed for trading on a national securities
exchange or authorized for quotation on NASDAQ/NMS, the average of the
closing bid and asked prices as reported by the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") or, if no such
prices shall have been so reported for such date, on the latest preceding
date for which such prices were so reported, or
(d) if the security is not listed for trading on a national securities
exchange or is not authorized for quotation on NASDAQ/NMS or NASDAQ, the
fair market value of the security as determined in good faith by the Board.
2.17 "PARTICIPANT" means an Eligible Employee who has enrolled in the Plan
pursuant to Article VI. A Participant shall remain a Participant until the
applicable date set forth in Section 10.2.
2.18 "PARTICIPATING SUBSIDIARY" means a Subsidiary incorporated under the
laws of any state in the United States, a territory of the United States, Puerto
Rico, or the District of Columbia, or such foreign Subsidiary approved under
Section 3.3, which has been designated by the Committee in accordance with
Section 3.3 of the Plan as covered by the Plan. As of the Effective Date, DST
Systems, Inc., DST Realty, Inc., DST Technologies, Inc., DST International North
America, Ltd., DST Portfolio Systems, Inc., DST Stock Transfer, Inc., Argus
Health Systems, Inc., DST Catalyst, Inc., Output Technology Solutions, Inc., MGI
Output Technology Solutions, Inc., Output Technology Solutions Eastern
Region, Inc., Output Technology Solutions of California, Inc., Output Technology
Solutions Western Region, Inc., Output Technology Solutions of Illinois, Inc.,
Output Technology Solutions Graphic Resources Group, Inc., Output Technology
Solutions SRI Group, Inc., National Financial Data Services, Inc., MC Real
Estate Services, Inc., DBS Systems Corporation, USCS International, Inc., and
DST Innovis, Inc., are Participating Subsidiaries of this Plan, subject to the
requirements of Section 423 of the Code.
2.19 "PLAN" means the DST Systems, Inc. 2000 Employee Stock Purchase Plan
as set forth herein and as from time to time amended.
2.20 "PURCHASE DATE" means the specific Trading Day during an Accumulation
Period on which shares of Common Stock are purchased under the Plan in
accordance with Article IX. For each Accumulation Period, the Purchase Date
shall be the last Trading Day occurring in such Accumulation Period. The
Committee may, in its discretion, designate a different Purchase Date with
respect to any Accumulation Period.
2.21 "SECTION" means a section of this Plan, unless indicated otherwise.
2.22 "SECURITIES ACT" means the Securities Act of 1933, as amended.
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2.23 "SUBSIDIARY" means any corporation in an unbroken chain of
corporations beginning with the Company if, as of the applicable Enrollment
Date, each of the corporations other than the last corporation in the chain owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in the chain.
2.24 "TRADING DAY" means a day on which the New York Stock Exchange is open
for trading.
III. ADMINISTRATION
3.1 The Plan shall be administered by a Committee appointed by the Board,
which shall consist of one or more Board members. If the Board does not so
appoint a Committee, the Compensation Committee of the Board shall administer
the Plan.
3.2 The Committee may select one of its members as chairman and may appoint
a secretary. The Committee shall make such rules and regulations for the conduct
of its business as it shall deem advisable; provided, however, that all
determinations of the Committee shall be made by a majority of its members.
3.3 The Committee shall have the power, in addition to the powers set forth
elsewhere in the Plan, and subject to and within the limits of the express
provisions of the Plan, to construe and interpret the Plan and options granted
under it; to establish, amend and revoke rules and regulations for
administration of the Plan; to determine all questions of policy and expediency
that may arise in the administration of the Plan; and, generally, to exercise
such powers and perform such acts as the Committee deems necessary or expedient
to promote the best interests of the Company, including, but not limited to,
designating from time to time which Subsidiaries of the Company shall be
Participating Subsidiaries. The Committee's determinations as to the
interpretation and operation of this Plan shall be final and conclusive.
In exercising the powers described in the foregoing paragraph, the Committee
may adopt special or different rules for the operation of the Plan including,
but not limited to, rules which allow employees of any foreign Subsidiary to
participate in, and enjoy the tax benefits offered by, the Plan; provided that
such rules shall not result in any grantees of options (other than employees of
any foreign subsidiary) having different rights and/or privileges under the Plan
nor otherwise cause the Plan to fail to satisfy the requirements of Section 423
of the Code and the regulations thereunder.
3.4 This Article III relating to the administration of the Plan may be
amended by the Board from time to time as may be desirable to satisfy any
requirements of or under the federal securities and/or other applicable laws of
the United States, or to obtain any exemption under such laws.
IV. NUMBER OF SHARES
4.1 One million (1,000,000) shares of the Company's Common Stock are
reserved for sales and authorized for issuance pursuant to the Plan. Shares sold
under the Plan may be newly-issued shares, outstanding shares reacquired in
private transactions or open market purchases, or any combination of the
foregoing. If any option granted under the Plan shall for any reason terminate
without having been exercised, the shares not purchased under such option shall
again become available for the Plan.
4.2 In the event of any reorganization, recapitalization, stock split,
reverse stock split, stock dividend, combination of shares, merger,
consolidation, acquisition of property or shares, separation, asset spin-off,
stock rights offering, liquidation or other similar change in the capital
structure of the Company, the Committee shall make such adjustment, if any, as
it deems appropriate in the number, kind and purchase price of the shares
available for purchase under the Plan. In the event that, at a time when options
are outstanding hereunder, there occurs a dissolution or liquidation of the
Company, except pursuant to a transaction to which Section 424(a) of the Code
applies, each option to purchase Common Stock of the Company shall terminate,
but the Participant holding such option shall have the right to exercise his
option prior to such termination of the option upon the dissolution or
liquidation. The Company reserves the
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right to reduce the number of shares of the Company's Common Stock which
Employees may purchase pursuant to their enrollment in the Plan.
V. ELIGIBILITY REQUIREMENTS
5.1 Except as provided in Section 5.2, each individual who is an Eligible
Employee of the Company or a Participating Subsidiary on the applicable Cut-Off
Date shall become eligible to participate in the Plan in accordance with
Article VI as of the first Enrollment Date following the date the individual
becomes an Employee of the Company or a Participating Subsidiary, provided that
the individual remains an Eligible Employee on the first day of the Accumulation
Period associated with such Enrollment Date. Participation in the Plan is
entirely voluntary.
5.2 Employees meeting any of the following restrictions are not eligible to
participate in the Plan:
(a) Employees who, immediately upon enrollment in the Plan or upon
grant of an Option would own directly or indirectly, or hold options or
rights to acquire, an aggregate of 5% or more of the total combined voting
power or value of all outstanding shares of all classes of stock of the
Company or any Subsidiary (and for purposes of this paragraph, the rules of
Code Section 424(d) shall apply, and stock which the Employee may purchase
under outstanding options shall be treated as stock owned by the Employee);
(b) Employees who are customarily employed by the Company or a
Participating Subsidiary for less than 20 hours per week; or
(c) Employees who are customarily employed by the Company or a
Participating Subsidiary for not more than five months in any calendar year.
5.3 The Plan is intended to conform to the extent necessary with all
provisions of the Securities Act and the Exchange Act and any and all
regulations and rules promulgated by the Securities and Exchange Commission
thereunder. Notwithstanding anything herein to the contrary, the Plan shall be
administered, and the options shall be granted and may be exercised, only in
such a manner as to conform to such laws, rules and regulations. To the extent
permitted by applicable law, the Plan and the options granted hereunder shall be
deemed amended to the extent necessary to conform to such laws, rules and
regulations.
VI. ENROLLMENT
6.1 Any Eligible Employee may enroll in the Plan for an Accumulation Period
by completing and signing an enrollment form (which authorizes payroll
deductions during such Accumulation Period in accordance with Section 8.1) and
submitting such enrollment form to the Company on or before the Cut-Off Date
immediately preceding the commencement of the Accumulation Period. Such
enrollment form (and the authorization therein) shall be effective as of the
Enrollment Date occurring within the Accumulation Period to which the enrollment
form relates, and shall continue in effect until the earliest of:
(a) the end of the last payroll period with a payday in the
Accumulation Period;
(b) the date during the Accumulation Period as of which the Employee
elects to cease his or her enrollment in accordance with Section 8.3; and
(c) the date during the Accumulation Period as of which the Employee
withdraws from the Plan or has a termination of employment in accordance
with Article X.
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VII. GRANT OF OPTIONS ON ENROLLMENT
7.1 Enrollment by an Eligible Employee in the Plan as of an Enrollment Date
will constitute the grant as of such Enrollment Date by the Company to such
Participant of an option to purchase shares of Common Stock from the Company
pursuant to the Plan.
7.2 An option granted to a Participant pursuant to this Plan shall expire,
if not terminated earlier for any reason, on the earliest to occur of (a) the
end of the Purchase Date with respect to the Accumulation Period in which such
option was granted; (b) the completion of the purchase of Common Stock under the
option under Article IX; or (c) the date on which participation of such
Participant in the Plan terminates for any reason.
7.3 As of each Enrollment Date, each Participant shall be granted an option
to purchase, subject to the terms of the Plan, the number of whole shares of
Common Stock equal to the quotient of $25,000 divided by the Fair Market Value
of a share of Common Stock on the Enrollment Date.
Notwithstanding any other provision of this Plan, no Employee may be granted
an option which permits his or her rights to purchase shares of Common Stock
under the Plan and any other Code Section 423 employee stock purchase plan of
the Company or any of its Subsidiaries or parent companies to accrue (when the
option first becomes exercisable) at a rate which exceeds $25,000 of Fair Market
Value of such Common Stock (determined at the time such option is granted) for
each calendar year in which such option is outstanding at any time.
VIII. PAYROLL DEDUCTIONS
8.1 An Employee who files an enrollment form pursuant to Article VI shall
elect and authorize in such form to have deductions made from his or her pay on
each payday he or she receives a paycheck during the Accumulation Period to
which the enrollment form relates, and he or she shall designate in such form
the percentage (in whole percentages) of Base Earnings to be deducted each
payday during such Accumulation Period. The minimum an Employee may elect and
authorize to have deducted is 1% of his or her Base Earnings paid per pay period
in such Accumulation Period, and the maximum is 15% of his or her Base Earnings
paid per pay period in such Accumulation Period (or such larger or smaller
percentage as the Committee may designate from time to time).
8.2 Deductions from a Participant's Base Earnings shall commence upon the
first payday on or after the commencement of the Accumulation Period, and shall
continue until the date on which such authorization ceases to be effective in
accordance with Article VI. The amount of each deduction made for a Participant
shall be credited to the Participant's Account. All payroll deductions received
or held by the Company or a Participating Subsidiary may be used by the Company
or Participating Subsidiary for any corporate purpose, and the Company or
Participating Subsidiary shall not be obligated to segregate such payroll
deductions.
8.3 As of the last day of any month, during an Accumulation Period, a
Participant may elect to cease (but not to increase or reduce) payroll
deductions made on his or her behalf for the remainder of such Accumulation
Period by filing the applicable election with the Company in such form and
manner and at such time as may be permitted by the Committee. A Participant who
has ceased payroll deductions may have the amount which was credited to his or
her Account prior to such cessation applied to the purchase of shares of Company
Common Stock as of the Purchase Date, in accordance with Section 9.1, and
receive the balance of the Account with respect to which the enrollment is
ceased, if any, in cash. A Participant who has ceased payroll deductions may
also voluntarily withdraw from the Plan pursuant to Section 10.1. Any
Participant who ceases payroll deductions for an Accumulation Period may
re-enroll in the Plan on the next subsequent Enrollment Date following the
cessation in accordance with the provisions of Article VI. A Participant who
ceases to be employed by the Company or any Participating Subsidiary will cease
to be a Participant in accordance with Section 10.2.
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8.4 A Participant may not make any separate or additional contributions to
his Account under the Plan. Neither the Company nor any Participating Subsidiary
shall make separate or additional contributions to any Participant's Account
under the Plan.
IX. PURCHASE OF SHARES
9.1 Subject to Section 9.2, any option held by the Participant which was
granted under this Plan and which remains outstanding as of a Purchase Date
shall be deemed to have been exercised on such Purchase Date for the purchase of
the number of whole shares of Common Stock which the funds accumulated in his or
her Account as of the Purchase Date will purchase at the applicable purchase
price (but not in excess of the number of shares for which options have been
granted to the Participant pursuant to Section 7.3).
9.2 A Participant who holds an outstanding option as of a Purchase Date
shall not be deemed to have exercised such option if the Participant elected not
to exercise the option by withdrawing from the Plan in accordance with
Section 10.1.
9.3 If, after a Participant's exercise of an option under Section 9.1, an
amount remains credited to the Participant's Account as of a Purchase Date, then
the remaining amount shall be distributed to the Participant in cash as soon as
administratively practical after such Purchase Date.
9.4 The purchase price for each share of Common Stock purchased under any
option shall be 85% of the lower of:
(a) the Fair Market Value of a share of Common Stock on the Enrollment
Date on which such option is granted; or
(b) the Fair Market Value of a share of Common Stock on the Purchase
Date.
9.5 If Common Stock is purchased by a Participant pursuant to Section 9.1,
then such shares shall be held in non-certificated form at a bank or other
appropriate institution selected by the Company until the earlier of the
Participant's termination of employment or the time a Participant requests
delivery of certificates representing such shares. If any law governing
corporate or securities matters, or any applicable regulation of the Securities
and Exchange Commission or other body having jurisdiction with respect to such
matters, shall require that the Company or the Participant take any action in
connection with the shares being purchased under the option, delivery of the
certificate or certificates for such shares shall be postponed until the
necessary action shall have been completed, which action shall be taken by the
Company at its own expense, without unreasonable delay.
Certificates delivered pursuant to this Section 9.5 shall be registered in
the name of the Participant or, if the Participant so elects, in the names of
the Participant and one or more such other persons as may be designated by the
Participant in joint tenancy with rights of survivorship or in tenancy by the
entireties or as spousal community property, or in such forms of trust as may be
approved by the Committee, to the extent permitted by law.
9.6 In the case of Participants employed by a Participating Subsidiary, the
Committee may provide for Common Stock to be sold through the Subsidiary to such
Participants, to the extent consistent with Section 423 of the Code.
9.7 If the total number of shares of Common Stock for which an option is
exercised on any Purchase Date in accordance with this Article IX, when
aggregated with all shares of Common Stock previously granted under this Plan,
exceeds the maximum number of shares reserved in Section 4.1, the Committee
shall make a pro rata allocation of the shares available for delivery and
distribution in as nearly a uniform manner as shall be practicable and as it
shall determine to be equitable, and the balance of the cash amount credited to
the Account of each Participant under the Plan shall be returned to him or her
as promptly as administratively practical.
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9.8 If a Participant or former Participant sells, transfers, or otherwise
makes a disposition of Common Stock purchased pursuant to an option granted
under the Plan within two years after the date such option is granted or within
one year after the Purchase Date to which such option relates, and if such
Participant or former Participant is subject to U.S. federal income tax, then
such Participant or former Participant shall notify the Company or Participating
Subsidiary in writing of such sale, transfer or other disposition within
10 days of the consummation of such sale, transfer or other disposition, and
shall remit to the Company or Participating Subsidiary or authorize the Company
or Participating Subsidiary to withhold from other sources such amount as the
Company may determine to be necessary to satisfy any federal, state or local tax
withholding obligations of the Company or Participating Subsidiary. A
Participant must reply to a written request, within 10 days of the receipt of
such written request, from the Company, Participating Subsidiary, or
Administrator regarding whether such a sale, transfer or other disposition has
occurred.
The Committee may from time to time establish rules and procedures
(including but not limited to postponing delivery of shares until the earlier of
the expiration of the two-year or one-year period or the disposition of such
shares by the Participant) to cause the withholding requirements to be
satisfied.
X. WITHDRAWAL FROM THE PLAN; TERMINATION OF EMPLOYMENT;
LEAVE OF ABSENCE; DEATH
10.1 WITHDRAWAL FROM THE PLAN. A Participant may withdraw from the Plan in
full (but not in part) during any Accumulation Period by delivering a notice of
withdrawal to the Company (in a manner prescribed by the Committee) at any time
up to the December 1 occurring in such Accumulation Period, or at such shorter
time in advance of the Purchase Date as the Committee may permit. If notice of
withdrawal is timely received, all funds then accumulated in the Participant's
Account shall not be used to purchase Common Stock, but shall instead be
distributed to the Participant as soon as administratively practical, and the
Participant's payroll deductions shall cease as soon as administratively
practical. An Employee who has withdrawn during an Accumulation Period may not
return funds to the Company or a Participating Subsidiary during the same
Accumulation Period and require the Company or Participating Subsidiary to apply
those funds to the purchase of Common Stock, nor may such Participant's payroll
deductions continue, in accordance with Article VI. Any Eligible Employee who
has withdrawn from the Plan may, however, re-enroll in the Plan on the next
subsequent Enrollment Date following withdrawal in accordance with the
provisions of Article VI.
10.2 TERMINATION OF EMPLOYMENT. Participation in the Plan terminates
immediately when a Participant ceases to be employed by the Company or any
Participating Subsidiary for any reason whatsoever, including but not limited to
termination of employment, whether voluntary or involuntary, disability, or
retirement, but not including death. Participation in the Plan also terminates
immediately when a Participant ceases to be an Eligible Employee under
Article V or withdraws from the Plan. Upon termination of participation such
terminated Participant's outstanding options shall thereupon terminate. As soon
as administratively practical after termination of participation, the Company
shall pay to the Participant or legal representative all amounts accumulated in
the Participant's Account and held by the Company at the time of termination of
participation, and any Participating Subsidiary shall pay to the Participant or
legal representative all amounts accumulated in the Participant's Account and
held by the Participating Subsidiary at the time of termination of
participation.
10.3 LEAVE OF ABSENCE. If a Participant takes a leave of absence without
terminating employment, such Participant will be deemed to have discontinued
contributions to the Plan in accordance with Section 8.3, but will remain a
Participant in the Plan through the balance of the Accumulation Period in which
his or her leave of absence begins, so long as such leave of absence does not
exceed 90 days. If a Participant takes a leave of absence without terminating
employment, such Participant will be deemed to have withdrawn from the Plan in
accordance with Section 10.1 if such leave of absence exceeds 90 days.
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10.4 DEATH. As soon as administratively feasible after the death of a
Participant, amounts accumulated in his or her Account shall be paid in cash to
the beneficiary or beneficiaries designated by the Participant on a beneficiary
designation form provided by the Company, but if the Participant does not make
an effective beneficiary designation then such amounts shall be paid in cash to
the Participant's spouse if the Participant has a spouse, or, if the Participant
does not have a spouse, to the executor, administrator or other legal
representative of the Participant's estate. Such payment shall relieve the
Company and the Participating Subsidiary of further liability with respect to
the Plan on account of the deceased Participant. If more than one beneficiary is
designated, each beneficiary shall receive an equal portion of the Account
unless the Participant has given express contrary instructions. None of the
Participant's beneficiary, spouse, executor, administrator or other legal
representative of the Participant's estate shall, prior to the death of the
Participant by whom he has been designated, acquire any interest in the amounts
credited to the Participant's Account under the Plan.
XI. MISCELLANEOUS
11.1 INTEREST. Interest will not be paid on any Employee Accounts, except
that the Board, in its sole discretion or in the discretion of the Committee
should the Board so authorize the Committee, may elect to credit Employee
Accounts with interest at such per annum rate as it may from time to time
determine.
11.2 RESTRICTIONS ON TRANSFER. The rights of a Participant under the Plan
shall not be assignable or transferable by such Participant, and an option
granted under the Plan may not be exercised during a Participant's lifetime
other than by the Participant. Any such attempt at assignment, transfer, pledge
or other disposition shall be without effect, except that the Company may treat
such act as an election to withdraw from the Plan in accordance with
Section 10.1.
11.3 ADMINISTRATIVE ASSISTANCE. If the Committee in its discretion so
elects, it may retain a brokerage firm, bank, other financial institution or
other appropriate agent to assist in the purchase of shares, delivery of reports
or other administrative aspects of the Plan. If the Committee so elects, each
Participant shall (unless prohibited by applicable law) be deemed upon
enrollment in the Plan to have authorized the establishment of an account on his
behalf at such institution. Shares purchased by a Participant under the Plan
shall be held in the account in the Participant's name, or if the Participant so
indicates in the enrollment form, in the Participant's name together with the
name of one or more other persons in joint tenancy with right of survivorship or
in tenancy by the entireties or as spousal community property, or in such forms
of trust as may be approved by the Committee, to the extent permitted by law.
11.4 COSTS. All costs and expenses incurred in administering the Plan shall
be paid by the Company, including any brokerage fees on the purchased shares;
excepting that any stamp duties, transfer taxes and any brokerage fees on the
sale price applicable to participation in the Plan after the initial purchase of
the shares on the Purchase Date shall be charged to the Account or brokerage
account of such Participant by the Company.
11.5 EQUAL RIGHTS AND PRIVILEGES. All Eligible Employees shall have equal
rights and privileges with respect to the Plan so that the Plan qualifies as an
"employee stock purchase plan" within the meaning of Section 423 or any
successor provision of the Code and the related regulations. Notwithstanding the
express terms of the Plan, any provision of the Plan which is inconsistent with
Section 423 or any successor provision of the Code shall without further act or
amendment by the Company or the Board be reformed to comply with the
requirements of Code Section 423. This Section 11.5 shall take precedence over
all other provisions in the Plan.
11.6 APPLICABLE LAW. The Plan shall be governed by the substantive laws
(excluding the conflict of laws rules) of the State of Missouri.
11.7 AMENDMENT AND TERMINATION. The Board may amend, alter or terminate the
Plan at any time; provided, however, that no amendment which would amend or
modify the Plan in a manner requiring
8
<PAGE>
stockholder approval under Code Section 423 or the requirements of any
securities exchange on which the Common Stock is traded shall be effective
unless, within one year after it is adopted by the Board, it is approved by the
holders of a majority of the voting power of the Company's outstanding shares.
In addition, the Committee may amend the Plan as provided in Section 3.3,
subject to the conditions set forth therein and in this Section 11.7.
If the Plan is terminated, the Board may elect to terminate all outstanding
options either prior to their expiration or upon completion of the purchase of
shares on the next Purchase Date, or may elect to permit options to expire in
accordance with the terms of this Plan (and participation to continue through
such expiration dates). If the options are terminated prior to expiration, all
funds accumulated in Participants' Accounts as of the date the options are
terminated shall be returned to the Participants as soon as administratively
feasible.
11.8 NO RIGHT OF EMPLOYMENT. Neither the grant nor the exercise of any
rights to purchase shares under this Plan nor anything in this Plan shall impose
upon the Company any obligation to employ or continue to employ any employee.
The right of the Company or Participating Subsidiary to terminate any employee
shall not be diminished or affected because any rights to purchase shares have
been granted to such employee.
11.9 REQUIREMENTS OF LAW. The Company shall not be required to sell, issue,
or deliver any shares of Common Stock under this Plan if such sale, issuance, or
delivery might constitute a violation by the Company or the Participant of any
provision of law. Unless a registration statement under the Securities Act is in
effect with respect to the shares of Common Stock proposed to be delivered under
the Plan, the Company shall not be required to issue such shares if, in the
opinion of the Company or its counsel, such issuance would violate the
Securities Act. Regardless of whether such shares of Common Stock have been
registered under the Securities Act or registered or qualified under the
securities laws of any state, the Company may impose restrictions upon the
hypothecation or further sale or transfer of such shares (including the
placement of appropriate legends on stock certificates) if, in the judgment of
the Company or its counsel, such restrictions are necessary or desirable to
achieve compliance with the provisions of the Securities Act, the securities
laws of any state, or any other law or are otherwise in the best interests of
the Company. Any determination by the Company or its counsel in connection with
any of the foregoing shall be final and binding on all parties.
If, in the opinion of the Company and its counsel, any legend placed on a
stock certificate representing shares of Common Stock issued under the Plan is
no longer required in order to comply with applicable securities or other laws,
the holder of such certificate shall be entitled to exchange such certificate
for a certificate representing a like number of shares lacking such legend.
The Company may, but shall not be obligated to, register or qualify any
securities covered by the Plan. The Company shall not be obligated to take any
other affirmative action in order to cause the grant or exercise of any right or
the issuance, sale, or deliver of shares pursuant to the exercise of any right
to comply with any law.
11.10 GENDER. When used herein, masculine terms shall be deemed to include
the feminine, except when the context indicates to the contrary.
11.11 WITHHOLDING OF TAXES. The Company may withhold from any purchase of
Common Stock under this Plan or any sale, transfer or other disposition thereof
any local, state, federal or foreign taxes, employment taxes, or other taxes at
such times and from such other amounts as the Company deems appropriate. The
Company may require the Participant to remit any required withholding amounts to
the Company.
9
<PAGE>
DSTCM-PS-00
<PAGE>
/ X / IF MARKING BOXES,
FOLLOW THIS EXAMPLE
- -------------------------------------------
DST SYSTEMS, INC.
- -------------------------------------------
COMMON STOCK
The DST Board of Directors has appointed Messrs. Thomas A. McDonnell, Robert
C. Canfield and Kenneth V. Hager to Except act as the Proxy Committee, each
with the power to appoint his substitute. By signing this card, you are
authorizing such Proxy Committee to represent and to vote at the Annual
Meeting of Stockholders to be held on May 9, 2000, or any adjournment
thereof, in the manner you specify on this card, all the shares of common
stock of DST Systems, Inc. you held of record on March 17, 2000.
CONTROL NUMBER:
RECORD DATE SHARES:
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
each of the proposals.
1. Election of Three Directors For All With- For All
Nominees hold Except
/ / / / / /
(01) James C. Castle
(02) Thomas A. McCullough
(03) William C. Nelson
NOTE: IF YOU MARK "WITHHOLD", YOUR VOTES WILL NOT BE CAST FOR ANY OF THE
NOMINEES. TO VOTE FOR ONLY SOME OF THE NOMINEES, MARK "FOR ALL EXCEPT" AND
STRIKE A LINE THROUGH THE NAMES OF THE NOMINEES FOR WHOM YOU ARE NOT VOTING.
For Against Abstain
2. Approval of DST Employee
Stock Purchase Plan / / / / / /
3. Amendment of Certificate of
Incorporation to Increase / / / / / /
Authorized Capital Stock
4. Approval of Amendment of
DST Stock Option Plan to / / / / / /
Increase Authorized Shares
SEE IMPORTANT INFORMATION ON THE REVERSE.
Mark box at right if you plan to attend the Annual
Meeting of Stockholders. / /
Mark box at right if an address change has been
noted on the reverse side of this card. / /
Please be sure to sign exactly as your name appears above / Date /
and to date this Voting Card.
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Stockholder sign here Co-owner sign here
All joint owners must sign. Executors, administrators,
trustees, officers of corporate stockholders, guardians and
attorneys-in-fact must indicate the capacity in which they
are signing.
DETACH CARD DETACH CARD
<PAGE>
DST SYSTEMS, INC.
Dear Stockholder:
Important matters set forth in the enclosed proxy materials require your
immediate attention and approval.
DST strongly encourages you to exercise your right to vote your shares. Your
vote counts.
Please sign the Voting Card, detach it, and promptly return it in the enclosed
postage paid envelope. Alternatively, you may authorize your proxy by telephone
at (877) 779-8683 or electronically at http://www.eproxyvote.com/dst. If you
choose to do so, you will need the Control Number on the Voting Card.
Thank you in advance for your prompt attention.
Sincerely,
DST Systems, Inc.
<PAGE>
COMMON COMMON
DST SYSTEMS, INC.
ANNUAL MEETING OF STOCKHOLDERS - MAY 9, 2000
SOLICITED ON BEHALF OF THE DST BOARD OF DIRECTORS
The DST Board is making the four proposals, and they are not related to or
conditioned on the approval of any other proposals which may come before the
Annual Meeting.
You authorize the Proxy Committee to vote in its discretion upon such other
business as may properly come before the Annual Meeting. You may revoke this
proxy in the manner described in the Proxy Statement dated March 30, 2000,
receipt of which you hereby acknowledge.
If you do not specify how you authorize the Proxy Committee to vote on the
proposals, you authorize it to vote FOR each of the proposals.
- --------------------------------------------------------------------------------
PLEASE DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE
OR MAKE YOUR INSTRUCTIONS BY TELEPHONE AT (877) 779-8683 OR ELECTRONICALLY AT
HTTP://WWW.EPROXYVOTE.COM/DST.
- --------------------------------------------------------------------------------
IF YOUR ADDRESS HAS CHANGED, PLEASE NOTE THE NEW ADDRESS BELOW.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------ -----------------------
VOTE BY TELEPHONE VOTE BY INTERNET
- ------------------------ -----------------------
<S> <C>
FOLLOW THESE FOUR EASY STEPS: FOLLOW THESE FOUR EASY STEPS:
1. READ THE ACCOMPANYING PROXY STATEMENT AND 1. READ THE ACCOMPANYING PROXY STATEMENT
VOTING CARD. AND VOTING CARD.
2. CALL THE TOLL-FREE NUMBER 2. GO TO THE WEBSITE
1-877-PRX-VOTE (1-877-779-8683). FOR HTTP://WWW.EPROXYVOTE.COM/DST
STOCKHOLDERS RESIDING OUTSIDE THE UNITED
STATES CALL COLLECT ON A TOUCH TONE PHONE 3. ENTER YOUR CONTROL NUMBER LOCATED ON
1-201-536-8073. THERE IS NO CHARGE FOR YOUR VOTING CARD.
THIS CALL.
4. FOLLOW THE INSTRUCTIONS PROVIDED.
3. ENTER YOUR CONTROL NUMBER LOCATED ON YOUR
VOTING CARD.
4. FOLLOW THE RECORDED INSTRUCTIONS.
DO NOT RETURN YOUR VOTING CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET.
</TABLE>
<PAGE>
/ X / IF MARKING BOXES,
FOLLOW THIS EXAMPLE
- -------------------------------------------
DST SYSTEMS, INC.
- -------------------------------------------
DST ESOP, DST 401(k), USCS 401(k)
CONTROL NUMBER:
RECORD DATE SHARES:
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
each of the proposals.
1. Election of Three Directors For All With- For All
Nominees hold Except
/ / / / / /
(01) James C. Castle
(02) Thomas A. McCullough
(03) William C. Nelson
NOTE: IF YOU MARK "WITHHOLD", YOUR VOTES WILL NOT BE CAST FOR ANY OF THE
NOMINEES. TO VOTE FOR ONLY SOME OF THE NOMINEES, MARK "FOR ALL EXCEPT" AND
STRIKE A LINE THROUGH THE NAMES OF THE NOMINEES FOR WHOM YOU ARE NOT VOTING.
For Against Abstain
2. Approval of DST Employee
Stock Purchase Plan / / / / / /
3. Amendment of Certificate of
Incorporation to Increase / / / / / /
Authorized Capital Stock
4. Approval of Amendment of
DST Stock Option Plan to / / / / / /
Increase Authorized Shares
SEE IMPORTANT INFORMATION ON THE REVERSE.
Mark box at right if you plan to attend the Annual
Meeting of Stockholders. / /
Mark box at right if an address change has been
noted on the reverse side of this card. / /
Please be sure to sign exactly as your name appears above / Date /
and to date this Voting Card.
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Participant sign here
DETACH CARD DETACH CARD
DST SYSTEMS, INC.
Dear Plan Participant:
Important matters set forth in the enclosed proxy materials require your
immediate attention and approval.
DST strongly encourages you to instruct the Trustee(s) of the employee benefit
plan(s) in which you hold DST shares how to vote the shares allocated to your
plan account(s). Your vote counts.
<PAGE>
Please mark the boxes on this Voting Card to indicate how the Trustee(s) shall
vote your shares. Then sign the Voting Card, detach it, and promptly return it.
PLEASE USE THE ENCLOSED POSTAGE PAID ENVELOPE. DO NOT RETURN THIS CARD TO DST OR
USCS AS YOUR VOTE IS CONFIDENTIAL.
Alternatively, you may make your instructions by telephone at (877) 779-8683 or
electronically at http://www.eproxyvote.com/dst. If you choose to do so, you
will need the Control Number on the Voting Card.
Thank you in advance for your prompt attention.
Sincerely,
DST Systems, Inc.
<PAGE>
DST AND USCS BENEFIT PLANS DST AND USCS BENEFIT PLANS
DST SYSTEMS, INC.
ANNUAL MEETING OF STOCKHOLDERS - MAY 9, 2000
CONFIDENTIAL VOTING INSTRUCTIONS TO TRUSTEE(S) UNDER THE APPLICABLE DST OR USCS
PLAN(S)
The Trustee(s) of the DST or USCS benefit plan(s) under which you hold DST
shares seek(s) your instruction on how to vote your shares on the proposals
listed on the reverse side of this Voting Card. The DST Board is making the four
proposals, and they are not related to or conditioned on the approval of any
other proposals which may come before the meeting.
By signing this Voting Card, you direct that the voting rights pertaining to
shares of common stock of DST Systems, Inc. held by the Trustee(s) and allocated
to your plan account(s) shall be exercised as specified herein by you when the
Trustee(s) vote(s) on the proposals being presented at the Annual Meeting of
Stockholders to be held on May 9, 2000, or any adjournment thereof. You may
revoke your instruction as explained in the Proxy Statement dated March 30,
2000, receipt of which you hereby acknowledge.
If you hold shares through the DST Employee Stock Ownership Plan or the DST
401(k) Profit Sharing Plan and you either fail to return this Voting Card or do
not specify your vote, the Trustee will vote shares allocated to your plan
account(s) in the same proportion as the shares held by the applicable plan for
which the Trustee receives voting instructions. If you hold shares through the
USCS 401(k) Plan and you either fail to return this Voting Card or do not
specify your vote, the Trustee will vote shares allocated to your account as the
administrative committee of the USCS 401(k) directs.
- --------------------------------------------------------------------------------
PLEASE DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE
OR MAKE YOUR INSTRUCTIONS BY TELEPHONE AT (877) 779-8683 OR ELECTRONICALLY AT
HTTP://WWW.EPROXYVOTE.COM/DST.
- --------------------------------------------------------------------------------
IF YOUR ADDRESS HAS CHANGED, PLEASE NOTE THE NEW ADDRESS BELOW.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------ -----------------------
VOTE BY TELEPHONE VOTE BY INTERNET
- ------------------------ -----------------------
<S> <C>
FOLLOW THESE FOUR EASY STEPS: FOLLOW THESE FOUR EASY STEPS:
1. READ THE ACCOMPANYING PROXY STATEMENT AND 1. READ THE ACCOMPANYING PROXY STATEMENT
VOTING CARD. AND VOTING CARD.
2. CALL THE TOLL-FREE NUMBER 2. GO TO THE WEBSITE
1-877-PRX-VOTE (1-877-779-8683). FOR HTTP://WWW.EPROXYVOTE.COM/DST
STOCKHOLDERS RESIDING OUTSIDE THE UNITED
STATES CALL COLLECT ON A TOUCH TONE PHONE 3. ENTER YOUR CONTROL NUMBER LOCATED ON
1-201-536-8073. THERE IS NO CHARGE FOR YOUR VOTING CARD.
THIS CALL.
4. FOLLOW THE INSTRUCTIONS PROVIDED.
3. ENTER YOUR CONTROL NUMBER LOCATED ON YOUR
VOTING CARD.
4. FOLLOW THE RECORDED INSTRUCTIONS.
DO NOT RETURN YOUR VOTING CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET.
</TABLE>
