SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [XX]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[XX] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or
240.14a-12
DST SYSTEMS, INC.
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(Name of Registrant as Specified In Its Charter)
Not Applicable
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[XX] 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:
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:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
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[DST LOGO]
333 West 11th Street
Kansas City, Missouri 64105
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.
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DST SYSTEMS, INC.
333 WEST 11TH STREET
KANSAS CITY, MISSOURI 64105
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PROXY STATEMENT
AND
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 9, 2000
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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. 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,
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
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PROXY STATEMENT
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Contents
PAGE
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Voting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal Stockholders and Stockholdings of Management. . . . . . . . . .
Proposal 1 - Election of Three Directors. . . . . . . . . . . . . . . . .
Proposal 2 - Approval of DST Systems, Inc. 2000 Employee Stock
Purchase Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proposal 3 - Amendment of Certificate to Increase Authorized
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proposal 4 - Approval of Amendment of DST Systems, Inc. Stock
Option Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Board of Directors. . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation. . . . . . . . . . . . . . . . . . . . . . . . . .
Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<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 between 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 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.
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(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 number.
<PAGE>
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.(1) 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 ("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 stockholders holding DST
Common Stock through a broker or other nominee, 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.
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(1) Internet and telephone voting are also available, and the Voting Card
contains the Internet address and toll-free number.
<PAGE>
PRINCIPAL STOCKHOLDERS AND STOCKHOLDINGS OF MANAGEMENT
As of the Record Date, DST had outstanding ________ 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. No officer or director of DST owns any equity securities
of any subsidiary of DST.
SHARES OF
COMMON PERCENT
NAME AND ADDRESS STOCK(1) OF CLASS(2)
- ---------------- --------- ----------
Stilwell Management, Inc. ("Stilwell")(3) . . . . . 20,281,526(4)
FMR Corp., Edward C. Johnson 3d,. . . . . . . . . . 9,298,043(6)
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)
Director
A. Edward Allinson . . . . . . . . . . . . . . . . . 26,000(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 . . . . . . . . . . . . . . . . 357,715(13) *
Executive Vice President, Director
Thomas A. McDonnell. . . . . . . . . . . . . . . . . 693,685(14) *
President and Chief Executive Officer, Director
William C. Nelson. . . . . . . . . . . . . . . . . . 21,127(9) *
Director
Charles W. Schellhorn. . . . . . . . . . . . . . . . 223,408(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 Persons) . . . . . . . . . . . . . . . . . . . 7,190,130(19)
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* Less than 1% of the outstanding DST Common Stock.
(1) Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), share amounts shown for 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
International, Inc. 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
18,871 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
12,980 shares allocated to his account in the DST ESOP.
(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, 113,360 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.
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
<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 the
approval by the 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 $_______.
The number, kind and purchase price of shares will be adjusted by the DST
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.
<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 _________
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
<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 $___________. 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,
__________ 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 the awards under the Stock
Option Plan, if the amendment is approved by the DST stockholders, would be
__________ shares, representing approximately ___% 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 ___% 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.
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 (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 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% 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 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 optionee 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 optionee'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.
NEW PLAN BENEFITS.
DST cannot determine the amounts of Awards under the Stock Option Plan
that will be granted under such 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,
an 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.
Under the Stock Option Plan, the following options for the purchase of
DST Common Stock have been granted at various times under such plan to the
following individuals and groups, including the most recent grant of options
on February 29, 2000.
Name and Position Number of Options*
----------------- -----------------
Thomas A. McDonnell
President and Chief Executive Officer 670,000
Thomas A. McCullough (director nominee)
Executive Vice President 445,000
J. Michael Winn
Managing Director of DSTi 162,000
Charles W. Schellhorn
Vice Chairman of USCS; President of Argus 240,000
Robert C. Canfield
Senior Vice President, General Counsel and Secretary 162,000
James C. Castle, Ph.D. (director nominee) 50,000
William C. Nelson (director nominee) 24,000
Current Executive Officers as a Group (13 persons) 2,341,500**
Current Non-Employee Director Group (5 persons) 108,000***
Current Non-Executive Officer Employee Group
(1,080 persons) 5,540,850
* 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
<PAGE>
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 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's report on executive compensation is
set forth herein under "Executive Compensation."
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 under the Stock Option
Plan. Their options are 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.
<PAGE>
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 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
- -----------------------
* 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.
<PAGE>
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
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 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. The incentive award
for 1999 consisted of a combination of cash and restricted DST Common 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.
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. The DST Compensation Committee believes DST has taken
the steps required to exclude from calculation of the $1 million compensation
expense 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
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
DST S&P 400 MIDCAP PEER GROUP
Value Index Total Return Total Return
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>
<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 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 $216.15
<FN>
<F1>
(1) Standard and Poor's Corporation, an independent company, prepares the S&P 400 MidCap
Index.
<F2>
(2) This index is based upon a group of comparable companies in DST's industry comprised
of: Automatic Data Processing, Inc.; Bisys Group, Inc.; The Continuum Company, Inc.
(through August 1, 1996, the date it was acquired by Computer Sciences Corporation);
First Data Corporation; Fiserv, Inc.; Policy Management Systems, Inc.; and SunGard
Data Systems, Inc.
</FN>
</TABLE>
<PAGE>
SUMMARY COMPENSATION TABLE. The following table sets forth for the calendar
years indicated the total compensation paid to or for the account of the Chief
Executive Officer ("CEO") of DST and the Named Officers, who are the four
executive officers other than the CEO receiving the highest totals of salary
and bonus for 1999.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
Awards
Restricted Number of
Salary Bonus Stock Awards Securities All Other
Name and Principal Position Year ($) ($) ($)(1) Underlying Compensation($)(2)
Options/SARs
<S> <C> <C> <C> <C> <C> <C>
Thomas A. McDonnell 1999 500,000 735,000 315,000 100,000 82,414
President and Chief 1998 400,000 546,000 234,000 75,000 4,175
Executive 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 1998 335,000 351,750 150,750 45,000 4,175
President 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 1998 231,708 373,500 0 20,000 52,449
DSTi 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 1998 260,000 218,400 93,600 30,000 4,175
USCS; President of 1997 260,000 218,400 93,600 30,000 4,746
Argus
Robert C. Canfield 1999 275,000 231,000 99,000 20,000 28,580
Senior Vice President, 1998 252,000 211,680 90,720 20,000 4,175
General Counsel and 1997 252,000 211,712 90,688 20,000 4,746
Secretary
<FN>
<F1>
(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 and their aggregate market value on
December 31, 1999, and the dates on which restrictions lapse. The DST Compensation Committee Report
on Executive Compensation contained herein describes the restrictions on the stock. 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.
Named Number of
Officer Restricted Shares Total Restricted Shares Date Restrictions
Granted in 2000 Granted Prior to Will Lapse if Shares
for 1999 12/31/99 and 12/31/99 are Not Forfeited and
Compensation Market Value Number of Shares
Total Market 12/31/2000 12/31/2001 12/31/2002
Shares Value($)
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
<FN>
<FN2>
2 All other compensation for Messrs. McDonnell, McCullough, Schellhorn and
Canfield is comprised of: (i) contributions to his account for 1999 under
the DST ESOP of $701; and (ii) contributions to his account for 1999 under
the DST Systems, Inc. 401(k) of $3,876. All other compensation 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 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 $1,494 in term life insurance premiums.
</FN>
</TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR.
The following table sets forth information about the options to acquire
DST Common Stock granted the Named Officers in 1999.
<TABLE>
<CAPTION>
Percent
Number of of Total
Securities Options/SARs
Underlying Granted to Exercise or Grant Date
Options/SARs Employees in Base Price Expiration Present
Name Granted(1) Fiscal Year(2) ($/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
<FN>
<F1>
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. Such 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.
<F2>
2 Options for a total of 1,488,150 shares of DST Common Stock were granted
to employees in 1999.
<F3>
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.
</FN>
</TABLE>
<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>
<CAPTION>
Shares Number of Securities
Acquired Underlying Value of Unexercised
on Value Unexercised Options/SARs In-the-Money Options/SARs
Exercise Realized SARs at 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
<FN>
<F+>
+ 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.
</FN>
</TABLE>
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 employment 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
- --------------------------
* The DST Employment Agreements define this term.
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 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. 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 pretax 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 pretax earnings
do not exceed the threshold level for the following year. It grows by 20% if
DSTi's pretax earnings meet or exceed the maximum level for the following year.
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 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 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
Robert C. Canfield
Senior Vice President, General Counsel and
Secretary
Kansas City, Missouri
March 30, 2000
<PAGE>
APPENDIX A
DST SYSTEMS, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
<PAGE>
TABLE OF CONTENTS
Page
----
I. Purpose and Effective Date . . . . . . . . . . . . . 1
II. Definitions. . . . . . . . . . . . . . . . . . . . . 1
III. Administration . . . . . . . . . . . . . . . . . . . 3
IV. Number of Shares . . . . . . . . . . . . . . . . . . 4
V. Eligibility Requirements . . . . . . . . . . . . . . 5
VI. Enrollment . . . . . . . . . . . . . . . . . . . . . 5
VII. Grant of Options on Enrollment . . . . . . . . . . . 6
VIII. Payroll Deductions . . . . . . . . . . . . . . . . . 6
IX. Purchase of Shares . . . . . . . . . . . . . . . . . 7
X. Withdrawal From the Plan; Termination of
Employment; Leave of Absence; Death. . . . . . . . . 9
XI. Miscellaneous. . . . . . . . . . . . . . . . . . . .10
<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 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.
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 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.
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.
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.
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.
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 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.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
IF MARKING BOXES,
[X] FOLLOW THIS EXAMPLE
- ---------------------------- TO VOTE IN ACCORDANCE WITH ALL OF THE DST BOARD
DST SYSTEMS, INC. OF DIRECTORS' RECOMMENDATIONS, PLEASE SIGN AND
- ---------------------------- AND DATE; YOU NEED NOT MARK ANY BOXES. THE
DST BOARD OF DIRECTORS RECOMMENDS THAT YOU
VOTE FOR EACH OF THE PROPOSALS.
COMMON STOCK
The DST Board of Directors 1. Election of Three Directors For All With- For All
has appointed Messrs. Thomas Nominees hold Except
A. McDonnell, Robert C. (01) James C. Castle
Canfield and Kenneth V. (02) Thomas A. McCullough [ ] [ ] [ ]
Hager to act as the Proxy (03) William C. Nelson
Committee, each with the
power to appoint his substi- NOTE: IF YOU MARK "WITHHOLD", YOUR VOTES WILL NOT BE
tute. By signing this card, CAST FOR ANY OF THE NOMINEES. TO VOTE FOR ONLY SOME OF
you are authorizing such THE NOMINEES, MARK "FOR ALL EXCEPT" AND STRIKE A LINE
Proxy Committee to represent THROUGH THE NAMES OF THE NOMINEES FOR WHOM YOU ARE NOT
and to vote at the Annual VOTING.
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: For Against Abstain
RECORD DATE SHARES: 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 Date
exactly as your name appears
above and to date this Voting
Card.
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.
- ------------------------------------
Stockholder sign here Co-owner sign
here
</TABLE>
DETACH CARD DETACH CARD
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 ____________ or electronically at _____________________. 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 ______________
OR ELECTRONICALLY AT _____________________________.
IF YOUR ADDRESS HAS CHANGED, PLEASE NOTE THE NEW ADDRESS BELOW.
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
VOTE BY TELEPHONE VOTE BY INTERNET
Follow these four easy steps: Follow these four easy steps:
1. Read the accompanying Proxy 1. Read the accompanying Proxy
Statement and Voting Card. Statement and Voting Card.
2. Call the toll-free number 2. Go to the Website
______________. For shareholders ____________________.
residing outside the United
States call collect on a touch- 3. Enter your Control Number
tone phone ____________. There located on your Voting Card.
is NO CHARGE for this call.
4. Follow the instructions
3. Enter your Control Number located provided.
on your Voting Card.
4. Follow the recorded instructions.
DO NOT RETURN YOUR VOTING CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
IF MARKING BOXES,
[X] FOLLOW THIS EXAMPLE
- -------------------------- TO VOTE IN ACCORDANCE WITH ALL OF THE DST BOARD OF
DST SYSTEMS, INC. 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.
DST ESOP, DST 401(k),
USCS 401(k)
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
CONTROL NUMBER: CAST FOR ANY OF THE NOMINEES. TO VOTE FOR ONLY SOME
RECORD DATE SHARES: 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 Date
exactly as your name
appears above and to date
this Voting Card.
- ---------------------------------
Participant sign here
</TABLE>
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.
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 ____________ or
electronically at _____________________. 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) 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.
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.
PLEASE DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE OR MAKE YOUR INSTRUCTIONS BY TELEPHONE AT ______________ OR
ELECTRONICALLY AT _____________________________.
IF YOUR ADDRESS HAS CHANGED, PLEASE NOTE THE NEW ADDRESS BELOW.
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
VOTE BY TELEPHONE VOTE BY INTERNET
Follow these four easy steps: Follow these four easy steps:
1. Read the accompanying Proxy 1. Read the accompanying Proxy
Statement and Voting Card. Statement and Voting Card.
2. Call the toll-free number 2. Go to the Website
______________. For shareholders ____________________.
residing outside the United
States call collect on a touch- 3. Enter your Control Number
tone phone ____________. There located on your Voting Card.
is NO CHARGE for this call.
4. Follow the instructions
3. Enter your Control Number located provided.
on your Voting Card.
4. Follow the recorded instructions.
DO NOT RETURN YOUR VOTING CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET.
