Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS
AGREEMENT is made and entered into the 31st day of December,
2008, by
and between DST
Systems, Inc.,
a Delaware
corporation
("DST") and Thomas
A.
McDonnell, 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
President and Chief
Executive Officer to
serve from the date of this Agreement
through December 31, 2010, 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
$750,000, 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
100%
200%
300%
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.
4.
TERMINATION.
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(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 Executive
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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 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
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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 terms 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
(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
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<PAGE>
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
