Exhibit 10.2
EMPLOYMENT AGREEMENT
THIS
AGREEMENT is made and entered into as of the 31st day of
December
2008, by and between
DST Systems,
Inc., a Delaware corporation ("DST") and
Thomas A. McCullough, an individual ("Executive").
WHEREAS, Executive is now employed by DST, and DST and Executive
desire for
DST to continue to employ Executive on the terms and conditions set forth in
this Agreement and to
provide an incentive to Executive to remain in the employ
of DST hereafter,
particularly in the event of any Change in Control of DST (as
herein defined), thereby establishing and preserving continuity of
management of
DST;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements
herein contained, it is agreed by and between DST and Executive as
follows:
1.
EMPLOYMENT.
DST hereby
continues the employment of Executive as its
Executive Vice President and Chief Operating Officer to serve from the date
of
this Agreement through
December 31, 2009 unless earlier terminated as provided
in Paragraph 4, and to have such duties, powers and responsibilities as may be
prescribed by the Certificate of Incorporation and By-Laws of DST, subject to
the powers
vested in the DST Board of Directors ("DST Board") and in the
stockholders of DST.
Such term shall
automatically extend
for additional one
year terms on each December 31st thereafter unless DST or Executive
provides
written notice to the
other that the term of the Agreement is not to be further
extended or the
Agreement is
terminated earlier
than the next renewal date as
provided in Paragraph 4. Executive shall faithfully perform his duties under
this Agreement to the best of his ability and shall devote
substantially all
of
his working
time and efforts to the business and affairs of DST and its
affiliates.
2.
COMPENSATION.
(a) BASE COMPENSATION. DST shall pay Executive as compensation for
his
services hereunder an annual base salary ("Base Salary") at the
rate of $575,000
which may be increased
but not decreased during the term of this Agreement
except by written agreement of the parties.
(b)
INCENTIVE COMPENSATION.
(i) Executive
shall be eligible for
an annual incentive
award
("Annual Incentive")
for each year of his employment under this
Agreement. Except as
noted below, the
Annual Incentive shall be paid
and otherwise be
subject to the terms of the DST Systems, Inc. 2005
Equity Incentive Plan and any successor thereto, each as amended from
time to time (the "2005 Plan") and of any annual incentive program
adopted by the Compensation Committee of the DST Board under
the 2005
Plan ("DST Annual Incentive Program"). Subject to the terms of the
DST
Annual Incentive Program, Executive's Threshold,
Target, and
Maximum
bonus
opportunities
under the DST Annual
Incentive Program
shall be
the percentages
shown below of Executive's Base Salary as of the
beginning of each year:
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Threshold
Target
Maximum
---------
------
-------
90%
180%
270%
The actual amount of any Annual Incentive will be based upon DST's
performance
in meeting specific goals set by the Compensation Committee of the DST Board in
accordance with the
2005 Plan. DST
reserves the right to change, revoke or
terminate the DST Annual Incentive Program at any time; provided
that, while the
DST Annual Incentive
Program is in effect,
Executive's Threshold,
Target and
Maximum annual incentives will not be reduced below the percentages
shown above.
3.
BENEFITS.
(a) EQUITY
PLAN PARTICIPATION. Executive shall be entitled to
participate in the 2005 Plan in accordance with the terms thereof, at a level
consistent with DST's practice regarding awards to senior
executive officers.
Awards under the 2005
Plan are granted in
the discretion
of the DST Board
or
Compensation Committee
or other appropriate
committee of the DST
Board. It is
understood that
Executive will not be granted an equity
award for any
period
prior to 2010, except for any Annual Incentive.
(b) INCENTIVE,
SAVINGS AND RETIREMENT PLANS. In addition to Base
Salary and an Annual
Incentive, Executive
shall be entitled to participate
during his employment hereunder in all incentive, savings and retirement plans,
practices, policies
and programs, whether or not qualified under Section 401(a)
of the Internal
Revenue Code of 1986,
as amended (the
"Code"), that are
from
time to time
applicable to other senior executives of DST in accordance with
their terms as in effect from time to time.
(c) WELFARE BENEFITS.
During the employment period, Executive and/or
his family, as the case may be, shall be eligible for participation
in and shall
receive all benefits
under welfare benefit plans, practices, policies and
programs provided by DST (including medical, prescription, dental, disability,
salary continuance,
employee life, group life, dependent life, accidental death
and travel accident insurance plans and programs) generally
applicable to
other
senior executives of
DST in accordance with their terms (including limitations
on eligibility)
as in effect
from time to time. DST reserves the right to
change, revoke or
terminate any welfare benefit plan, practice, policy or
program at any time.
(d) FRINGE BENEFITS.
During the employment period, Executive shall be
entitled to fringe benefits applicable to other senior executives
of DST.
(e) VACATION.
During the employment period, Executive shall be
entitled to paid
vacation time in accordance with DST's plans, practices,
policies, and
programs, but in no event shall such
vacation time be less than
four weeks per calendar year.
(f) EXPENSES.
During the employment period, Executive shall be
entitled to receive prompt reimbursement for all ordinary and
necessary business
expenses incurred by
Executive,
upon the receipt by
DST of an accounting
in
accordance with practices, policies and procedures of DST.
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4.
TERMINATION.
(a) TERMINATION BY
EXECUTIVE. Executive
may terminate this Agreement
and his employment hereunder by at least thirty (30) days advance
written notice
to DST, except that in
the event of any
material breach of
this Agreement by
DST, Executive
may terminate this Agreement and his employment hereunder
immediately upon notice to DST; provided, however, that DST's obligation to
pay
severance benefits shall be subject to Paragraph 7(e).
(b) DEATH OR
DISABILITY. This
Agreement and
Executive's
employment
hereunder shall terminate automatically on the death or disability
of Executive.
For purposes of this Agreement, Executive shall be deemed to be
disabled if, by
reason of any medically determinable physical or mental
impairment which can be
expected to result in death or can be expected to last for a
continuous
period
of not less than twelve (12) months, Executive is receiving or is reasonably
expected to receive
income replacement
benefits for a period
of not less than
three (3) months under an accident and health plan that covers him
(or, if he is
not covered, that covers DST's employees).
(c) TERMINATION BY DST FOR CAUSE. DST may terminate this Agreement
and
Executive's employment
"for cause"
immediately upon
notice to Executive.
For
purposes of this Agreement, termination "for cause" shall mean
termination based
upon any one or more of the following:
(i) Any material
breach of this Agreement by Executive which is
not, or cannot be, cured (in each case in the sole judgment of the
DST
Board) within thirty (30) days after written notice of such breach to
Executive;
(ii) Executive's
dishonesty
involving DST or any
subsidiary of
DST;
(iii) Gross negligence
or willful misconduct
in the performance
of Executive's duties as determined in good faith by the DST
Board;
(iv) Willful
failure
by Executive to follow reasonable
instructions of the DST Board or any officer to whom Executive
reports
concerning the operations or business of DST or any subsidiary of
DST;
(v) Executive's fraud or criminal activity; or
(vi) Embezzlement or misappropriation by Executive.
(d) TERMINATION BY DST OTHER THAN FOR CAUSE.
(i) DST may terminate this Agreement and Executive's employment
other than for cause immediately upon notice to Executive, and in
such
event, DST shall provide severance benefits to Executive in
accordance
with Paragraph 4(d)(ii) below.
(ii) In the event of termination of Executive's employment under
Paragraph 4(d)(i),
DST shall,
(A) within sixty (60)
days after such
termination, pay
to
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Executive a lump sum amount equal to twenty-four (24) months of the
annual Base Salary
referenced in Paragraph 2(a) above at the rate in
effect immediately
prior to termination, which amount shall be
separation pay;
and (B) for a
period of twenty-four (24) months
following such
termination
(the "Period"), if Executive elects
continued group
medical coverage for himself and his eligible
dependents pursuant to
COBRA, (1) provide such continued coverage for
the lesser of the COBRA continuation period or the duration of the
Period, with the same
deductible and out-of-pocket expenses as apply
to active employees (and their eligible dependents) from time to time
during the COBRA continuation coverage period, and (2) for the
period
beginning on the expiration of COBRA continuation coverage and ending
on the last day of the Period, monthly reimburse Executive for the
cost of premiums for health plan benefits comparable to such benefit
plans provided
to Executive at the time of termination of active
employment. In
addition, during the Period, DST will reimburse
Executive for the
cost of premiums for life insurance coverage
comparable to
the coverage provided to Executive during active
employment pursuant to this Agreement. Notwithstanding the foregoing,
any reimbursement
obligation set forth in this subparagraph (but, for
purposes of clarity,
not including the
reimbursement
obligation set
forth in Paragraph 7) shall lapse as of the date comparable coverage
in connection with
other employment
is made available to Executive
regardless of
whether Executive participates in such alternate
coverage program. DST shall reimburse Executive for any federal,
state
and local income taxes due with respect to amounts paid
hereunder for
COBRA continuation
coverage or for the cost of health or life
insurance. The
terms and conditions of this subparagraph shall
continue until
the end of the
Period notwithstanding the death or
disability of Executive during said period (except, in the event of
death, the
obligation
to reimburse
Executive for the cost of life
insurance shall not continue). Executive shall receive, on the
payment
due date as provided in the DST Annual Incentive Program, any Annual
Incentive earned
for the performance year in which Executive's
employment terminated;
provided, however, that such award shall be
prorated to reflect
only the portion of
such performance
year that
precedes Executive's
termination.
To the extent required by Code
Section 409A and
guidance issued thereunder, such award shall be
deferred in accordance with any applicable deferral requirements and
elections in place
with respect
to such award and, to the extent
deferred, such award
shall be paid pursuant
to the terms of deferral
procedures in effect with respect to the DST Annual Incentive
Program
from time to time.
Notwithstanding the
receipt during the
Period of
separation pay as provided herein and the benefits that are
generally
available to
executive employees of DST during the Period, (a)
Executive shall not be
entitled to accrue or
receive such
benefits
during the Period except as set forth herein and (b) any
contributions
and benefits
under applicable plans with respect to the year of
termination shall be
based solely upon compensation paid to Executive
for periods
prior to termination. In the year of termination,
Executive shall be
entitled to
participate in the DST
401(k) Profit
Sharing Plan and the DST Employee Stock Ownership Plan only if the
Executive meets all
requirements of such plans for participation in
such year.
5.
NON-DISCLOSURE. During the term of this Agreement and at all times
after
any termination of
this Agreement,
Executive shall not, either directly or
indirectly, use or disclose any DST trade secret, except to the
extent necessary
for Executive to
perform his duties for DST while an employee. For purposes of
this Agreement, the term "DST trade secret" shall
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mean any information regarding the business or activities of DST or any
subsidiary or affiliate, including any formula, pattern,
compilation,
program,
device, method,
technique,
process, customer list, technical
information or
other confidential
or proprietary
information,
that (a) derives
independent
economic value, actual or potential, from not being generally known to,
and not
being readily
ascertainable
by proper means by,
other persons who can
obtain
economic value from
its disclosure or use, and (b) is the subject of efforts of
DST or its subsidiary or affiliate that are reasonable under the
circumstance to
maintain its
secrecy. In the event of any breach of this Paragraph 5 by
Executive, DST shall
be entitled to terminate any and all remaining separation
benefits under
Paragraph 4(d)(ii) above and shall be entitled to
pursue such
other legal and equitable remedies as may be available.
6.
DUTIES UPON
TERMINATION. Upon
termination of this
Agreement by DST or
Executive for any
reason, Executive
shall immediately return to DST all DST
trade secrets
which exist in tangible form and shall sign such written
resignations from all
positions as an officer, director or member of any
committee or
board of DST and all direct and indirect subsidiaries and
affiliates of DST as may be requested by DST and shall sign such
other documents
and papers relating to Executive's employment, benefits and benefit
plans as DST
may reasonably request.
7.
CONTINUATION OF EMPLOYMENT UPON CHANGE IN CONTROL.
(a) CONTINUATION OF
EMPLOYMENT. Subject to the terms and conditions of
this Paragraph
7, in the event of a
Change in Control
of DST (as
defined in
Paragraph 7(c)) at any time during Executive's employment hereunder, Executive
will remain in the employ of DST for a period of an additional three (3) years
from the date of such Change in Control of DST (the "Control
Change Date").
In
the event of a Change in Control of DST, subject to the terms and
conditions of
this Paragraph 7, DST
shall, for the three
(3)-year period (the "Three-Year
Period") immediately
following the Control Change Date, continue to employ
Executive at not less than the executive capacity Executive held immediately
prior to the Change in Control of DST. During the Three-Year
Period, DST shall
continue to pay Executive salary on the same basis, at the
same intervals,
and
at a rate not less than that, paid to Executive at the Control
Change Date.
(b) BENEFITS.
During the Three-Year Period, Executive shall be
entitled to participate, on the basis of his executive
position, in each of the
following plans
(together,
the "Specified Benefits") in existence, and in
accordance with the terns thereof, at the Control Change Date:
(i) any incentive
compensation plan;
(ii) any benefit
plan, and trust fund associated therewith,
related to (A) life, health, dental, disability, or accidental death
and dismemberment
insurance, (B) profit
sharing, thrift or
deferred
savings (including
deferred compensation,
such as under Sec.
401(k)
plans), (C) retirement or pension benefits, (D) ERISA excess
benefits,
and (E) tax favored
employee stock ownership (such as under ESOP,
TRASOP, TCESO or PAYSOP programs); and
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(iii) any other benefit plans hereafter made generally available
to executives
at Executive's level or to the employees of DST
generally;
or, in the
alternative, DST shall
provide other plans under which at least
equivalent
compensation and
benefits are available and in which Executive
continues to participate on a basis at least equivalent to his
participation in
the DST plans in
effect immediately prior to the Control Change Date. In
addition, the change in control provisions of the agreements and
plans governing
options, restricted
shares, and other equity or incentive
awards granted to
Executive under the
2005 Plan or any other award plan of DST or its affiliates
shall govern whether any such outstanding awards become exercisable or payable
or vest in connection
with a change in
control, as defined in
the applicable
agreement or plan.
(c) CHANGE IN CONTROL
OF DST. For purposes of this Agreement, a
"Change in Control" shall be deemed to have occurred if:
(1) the Incumbent
Directors cease for any reason to
constitute
at
least seventy-five percent (75%) of the directors of DST then
serving;
(2) any "person" (as such term is used in Sections 13(d) and 14(d)(2)
of
the Exchange Act)
other than DST or any
majority-owned
subsidiary of
DST,
or an employee benefit plan of DST or of any majority-owned
subsidiary
of
DST shall have become the "beneficial owner" (as defined in Rule
13d-3
under the Exchange
Act) directly or indirectly, of securities of DST
representing twenty
percent (20%) or more
(calculated in accordance with
Rule
13d-3) of the combined voting power of DST's then outstanding Voting
Securities; provided,
however, that a
person's becoming such a beneficial
owner shall not
constitute a Change in
Control if such person is party to
an
agreement that limits
the ability of such person and its affiliates (as
defined in Rule
12b-2 under the Exchange Act) to obtain and exercise
control over the management and policies of DST;
(3) a Reorganization Transaction is consummated, other than a
Reorganization
Transaction which
results in the Voting
Securities of DST
outstanding immedi
