Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of this 30th day of November,
2005, by and between DST Systems, Inc., a Delaware corporation ("DST") and
Xxxxxx X. XxXxxxxxx, 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
until December 31, 2010, unless earlier terminated as provided herein (the
"Employment Period"), 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. 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.
(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:
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 the 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.
(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.
(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 12 months, Executive is receiving or is reasonably expected to
receive income replacement benefits for a period of not less than 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, for a period of twenty-four (24) months following
such termination
(the "Period"), (A) continue to pay to Executive a monthly amount equal to
one-twelfth (1/12th) 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) 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 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 (i) such award shall be prorated to reflect only the
portion of such performance year that precedes Executive's termination, and (ii)
the portion of the prorated award that would otherwise have been deferred under
the DST Annual Incentive Program shall be paid in cash and shall not be
deferred. 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 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(d)) at any time during Executive's employment hereunder, Executive
will remain in the employ of DST for a period of an additional three 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
Xxxxxxxxx 0, XXX shall, for the three 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.
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) PAYMENT. With respect to any plan or agreement under which
Executive would be entitled at the Control Change Date to receive Specified
Benefits as a general obligation of DST which has not been separately funded
(including specifically, but not limited to, those referred to under Paragraphs
7(b)(i) and 7(b)(ii)(D) above), Executive shall receive within five (5) days
after such date full payment in cash of all amounts to which he is then entitled
thereunder.
(d) 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 immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least sixty percent (60%) of the total voting power
represented by the Voting Securities of such surviving entity outstanding
immediately after the Reorganization Transaction, if the voting rights of
each Voting Security relative to the other Voting Securities were not
altered in the Reorganization Transaction; or
(4) the stockholders of DST approve a plan of complete liquidation of
DST, other than in connection with a Reorganization Transaction.
Notwithstanding the occurrence of any of the foregoing events, a Change in
Control shall not occur with respect to Executive if, in advance of such event,
Executive agrees in writing that such event shall not constitute a Change in
Control.
For purposes of this 7(d) and the definition of Change in Control, the
following terms have the meaning set forth below:
(1) "Incumbent Directors" means (i) an individual who was a member of
the DST Board on May 10, 2005 (effective date of the 2005 Plan); or (ii) an
individual whose election, or nomination for election by DST's
stockholders, was approved by a vote of at least seventy-five percent (75%)
of the members of the DST Board then still in office who were members of
the DST Board on such effective date; or (iii) individuals whose election,
or nomination for election by DST's stockholders, was approved by a vote of
at least seventy-five percent (75%) of the members of the DST Board then
still in office who were elected in the manner described in (i) or (ii)
above; provided that no director whose election was in connection with a
proposed transaction which, if consummated, would be a Change in Control
shall be an Incumbent Director.
(2) "Related Party" means (i) a majority-owned subsidiary of DST; or
(ii) an employee or group of employees of DST or of any majority-owned
subsidiary of DST; or (iii) an employee benefit plan of DST or of any
majority-owned subsidiary of DST; or (iv) a corporation owned directly or
indirectly by the stockholders of DST in substantially the same proportion
as their ownership of the voting power of Voting Securities of DST.
(3) "Reorganization Transaction" means a merger, reorganization,
consolidation, or similar transaction or a sale of all or substantially all
of DST's assets other than any such sale which would result in a Related
Party owning or acquiring more than fifty percent (50%) of the assets owned
by DST immediately prior to the sale.
(4) "Voting Securities" of a corporation means securities of such
corporation that are entitled to vote generally in the election of
directors, but not including any other class of securities of such
corporation that may have voting power by reason of the occurrence of a
contingency.
(e) TERMINATION AFTER CONTROL CHANGE DATE. Notwithstanding any other
provision of this Paragraph 7, at any time after the Control Change Date, DST
may, through its Board, terminate the employment of Executive (the
"Termination"), but within five (5) days of the Termination it shall pay to
Executive his full Base Salary through the Termination, to the extent not
theretofore paid, plus a lump sum amount (the "Special Severance Payment") equal
to the product of his annual Base Salary specified in Paragraph 7(a) hereof
multiplied by the number of years and any portion thereof remaining in the
Three-Year Period or, if the balance of the Three-Year Period after Termination
is less than one year, for a period of one year from the Control Change Date
(the "Extended Period"). Specified Benefits to which Executive was entitled
immediately prior to Termination shall continue until the end of the Three-Year
Period or, if applicable, the Extended Period; provided that: (a) if any plan
pursuant to which Specified Benefits are provided immediately prior to
Termination would not permit continued participation by Executive after
Termination, then DST shall pay to Executive within five (5) days after
Termination a lump sum payment equal to the amount of Specified Benefits
Executive would have received if Executive had been fully vested and had been a
continuing participant in such plan to the end of the Three-Year Period or, if
applicable, the Extended Period (with the amount for health and life insurance
coverage calculated as provided in Section 4(d)(ii) except basing the
calculation on the Three-Year Period or, if applicable, the
Extended Period); (b) if Executive obtains new employment following Termination,
then following any waiting period applicable to participation in any plan of the
new employer, Executive shall continue to be entitled to receive benefits
pursuant to this sentence only to the extent such benefits would exceed those
available to Executive under comparable plans of the Executive's new employer
(but Executive shall not be required to repay any amounts then already received
by him), and (c) Executive shall receive in a lump sum the aggregate amount of
the Annual Incentives that would have been payable if DST had met Target goals
for each year of the Three-Year Period or, if applicable, the Extended Period
(prorated for the final performance year if the Three-Year Period or the
Extended Period, as the case may be, ends partially through such performance
year and with the deferred portion to be paid in cash, all as set forth in
Paragraph 4(d)(ii)).
(f) RESIGNATION AFTER CONTROL CHANGE DATE. In the event of a Change in
Control of DST, thereafter, upon good reason (as defined below) Executive may,
at any time during the Three-Year Period or the Extended Period, in his sole
discretion, on not less than thirty (30) days' written notice to the Secretary
of DST given within ninety (90) days of the date the good reason arose and
effective at the end of such notice period, resign his employment with DST (the
"Resignation"). Within five (5) days of such a Resignation, DST shall pay to
Executive his full Base Salary through the effective date of such Resignation,
to the extent not theretofore paid, plus a lump sum amount equal to the Special
Severance Payment (computed as provided in the first sentence of Paragraph 7(e),
except that for purposes of such computation all references to "Termination"
shall be deemed to be references to "Resignation"). Upon Resignation of
Executive, Specified Benefits to which Executive was entitled immediately prior
to Resignation shall continue or be reimbursed on the same terms and conditions
as provided in Paragraph 7(e) in the case of Termination (including equivalent
payments provided for therein). For purposes of this Agreement, Executive shall
have "good reason" if there occurs without his consent (a) a reduction in the
character of the duties assigned to Executive or in Executive's level of work
responsibility or conditions; (b) a reduction in Executive's Base Salary as in
effect immediately prior to the Control Change Date or as the same may have been
increased thereafter; (c) a failure by DST or its successor to (i) either
continue any of the plans of the type referred to in Paragraph 7(b) which shall
have been in effect at the Control Change Date (including those providing for
Specified Benefits) and Executive's participation therein on at least the basis
in effect immediately prior to the Control Change Date or 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 (provided, however, that Executive shall not have good reason if
participation in any such plan is immaterial or benefits to Executive from
participation in such plans are not reduced by more than ten percent (10%) in
the aggregate); or (ii) make the payment required under Paragraph 7(c); (d) the
relocation of the principal executive offices of DST or its successor to a
location outside the metropolitan area of Kansas City, Missouri or requiring
Executive to be based anywhere other than DST's principal executive office,
except for required travel on DST's business to an extent substantially
consistent with Executive's obligations immediately prior to the Control Change
Date; or (e) any breach by DST of this Agreement to the extent not previously
specified.
(g) TERMINATION FOR CAUSE AFTER CONTROL CHANGE DATE. Notwithstanding
any other provision of this Paragraph 7, at any time after the Control Change
Date, Executive may be terminated by DST "for cause" without notice and without
any payment
hereunder only if such termination is for an act of dishonesty by Executive
constituting felony under the laws of the State of Missouri which resulted or
was intended to result in gain or personal enrichment of Executive at DST's
expense.
(h) MITIGATION AND EXPENSES.
(i) OTHER EMPLOYMENT. After the Control Change Date, Executive
shall not be required to mitigate the amount of any payment provided for in
this Agreement by seeking other employment or otherwise, and, except as
expressly set forth herein, no such other employment, if obtained, or
compensation or benefits payable in connection therewith shall reduce any
amounts or benefits to which Executive is entitled hereunder.
(ii) EXPENSES. If any dispute should arise under this Agreement
after the Control Change Date involving an effort by Executive to protect,
enforce or secure rights or benefits claimed by Executive hereunder, DST
shall pay (promptly upon demand by Executive accompanied by reasonable
evidence of incurrence) all reasonable expenses (including attorneys' fees)
incurred by Executive in connection with such dispute, without regard to
whether Executive prevails in such dispute except that Executive shall
repay DST any amounts so received if a court having jurisdiction shall make
a final, nonappealable determination that Executive acted frivolously or in
bad faith by such dispute. To assure Executive that adequate funds will be
made available to discharge DST's obligations set forth in the preceding
sentence, DST has established a trust and, upon the occurrence of a Change
in Control, shall promptly deliver to the trustee of such trust to hold in
accordance with the terms and conditions thereof that sum which the DST
Board shall have determined is reasonably sufficient for such purpose.
(i) SUCCESSORS IN INTEREST. The rights and obligations of Executive
and DST under this Paragraph 7 shall inure to the benefit of and be binding in
each and every respect upon the direct and indirect successors and assigns of
DST and Executive, regardless of the manner in which such successors or assigns
shall succeed to the interest of DST or Executive hereunder, and this Paragraph
7 shall not be terminated by the voluntary or involuntary dissolution of DST or
any merger or consolidation or acquisition involving DST, or upon any transfer
of all or substantially all of DST's assets, or terminated otherwise than in
accordance with its terms. In the event of any such merger or consolidation or
transfer of assets, the provisions of this Paragraph 7 shall be binding upon and
shall inure to the benefit of the surviving corporation or the corporation or
other person to which such assets shall be transferred.
(j) PREVAILING PROVISIONS. On and after the Control Change Date, the
provisions of this Paragraph 7 shall control and take precedence over any other
provisions of this Agreement which are in conflict with or address the same or a
similar subject matter as the provisions of this Paragraph 7.
8. NON-SOLICITATION AND NON-COMPETITION.
(a) Executive covenants and agrees that, during his employment
hereunder and during the three-year period immediately following any termination
of that employment, Executive will not:
(i) directly or indirectly employ or seek to employ any person
employed at that time by DST or any of its subsidiaries or joint ventures
or otherwise encourage or entice any such person to leave such employment.
(ii) become employed by, enter into a consulting arrangement with
or otherwise agree to perform personal services for a Competitor (as
defined below);
(iii) acquire an ownership interest in a Competitor, other than
not more than a 2% equity interest in a publicly-traded Competitor; or
(iv) solicit any customers or vendors of DST or any of its
subsidiaries on behalf of or for the benefit of a Competitor.
(b) For purposes of this Paragraph, "Competitor" means, unless the DST
Board determines otherwise, any person, entity or organization that sells goods
or services in the geographic area described below, which goods or services are
the same or similar to (or may be used as a substitute for) those sold by a
business that (i) is being conducted by DST or any subsidiary or joint venture
of DST in the geographic area at the time in question and (ii) was being
conducted by DST or any subsidiary or joint venture of DST in the geographic
area on the date of Executive's termination of employment.
(c) The "geographic area" referred to in this Paragraph 8 shall mean
the United States and any other country in which DST or any subsidiary or joint
venture of DST has, at the termination of Executive's employment, offices or
operations which accounted for 1% or more of the annual revenues of DST or any
of its subsidiaries or joint ventures during the time in question.
(d) Executive acknowledges that monetary damages will not be an
adequate remedy for DST in the event of a breach of this Paragraph 8, and that
it would be impossible for DST to measure damages in the event of such a breach.
Therefore, Executive agrees that, in addition to other rights that DST may have,
DST is entitled to an injunction preventing Executive from any such breach.
(e) If the DST Board (excluding Executive, if Executive is a member of
the DST Board) by majority vote, determines in good faith that Executive has
breached any of the covenants in this Paragraph 8, then DST shall have no
further obligations to pay any amounts or provide any benefits under this
Agreement.
9. GROSS-UP PAYMENT. If at any time or from time to time, it shall be
determined by tax counsel mutually agreeable to DST and Executive that any
payment or other benefit to Executive pursuant to this Agreement or otherwise
("Potential Parachute Payment") is or will become subject to the excise tax
imposed by Section 4999 of the Code or any similar tax
("Excise Taxes"), then DST shall, subject to the limitations below, pay or cause
to be paid a tax gross-up payment ("Gross-Up Payment") with respect to all such
Excise Taxes and other taxes on the Gross-Up Payment. The Gross-Up Payment shall
be an amount equal to the product of (a) the amount of the Excise Taxes
multiplied by (b) a fraction (the "Gross-Up Multiple"), the numerator or which
is one (1.0), and the denominator of which is one (1.0) minus the lesser of (i)
the sum, expressed as a decimal fraction, of the effective marginal rates of any
taxes and any Excise Taxes applicable to the Gross-Up Payment or (ii) .80, it
being intended that the Gross-Up Multiple shall in no event exceed five (5.0).
If different rates of tax are applicable to various portions of a Gross-Up
Payment, the weighted average of such rates shall be used. Excise Taxes and
other penalties under Section 409A of the Code shall not be "any similar tax"
for purposes of this Agreement.
(a) To the extent possible, any payments or other benefits to
Executive pursuant to this Agreement shall be allocated as consideration for
Executive's entry into the covenants made by him in Paragraph 8(a).
(b) Notwithstanding any other provisions of this Paragraph 9, if the
aggregate After-Tax Amount (as defined below) of the Potential Parachute
Payments and Gross-Up Payment that, but for this limitation, would be payable to
Executive, does not exceed 120% of After-Tax Floor Amount (as defined below),
then no Gross-Up Payment shall be made to Executive and the aggregate amount of
Potential Parachute Payments payable to Executive shall be reduced (but not
below the Floor Amount) to the largest amount which would both (i) not cause any
Excise Tax to be payable by Executive and (ii) not cause any Potential Parachute
Payments to become nondeductible by DST by reason of Section 280G of the Code
(or any successor provision). For purposes of the preceding sentence, Executive
shall be deemed to be subject to the highest effective after-tax marginal rate
of taxes.
For purposes of this Agreement:
(i) "After-Tax Amount" means the portion of a specified amount
that would remain after payment of all taxes paid or payable by Executive
in respect of such specified amount; and
(ii) "Floor Amount" means the greatest pre-tax amount of
Potential Parachute Payments that could be paid to Executive without
causing Executive to become liable for any Excise Taxes in connection
therewith; and
(iii) "After-Tax Floor Amount" means the After-Tax Amount of the
Floor Amount.
(c) If for any reason tax counsel mutually agreeable to DST and
Executive later determine that the amount of Excise Taxes payable by Executive
is greater than the amount initially determined pursuant to the above provisions
of this Paragraph 9, then DST shall, subject to Paragraphs 9(d) and 9(e) pay
Executive, within thirty (30) days of such determination, or pay to the IRS as
required by applicable law, an amount (which shall also be deemed a Gross-Up
Payment) equal to the product of (a) the sum of (i) such additional Excise Taxes
and (ii) any interest, penalties, expenses or other costs incurred by Executive
as a result of having taken a
position in accordance with a determination made pursuant to Paragraph 9(d)
multiplied by (b) the Gross-Up Multiple.
(d) Executive shall immediately notify DST in writing (an "Executive's
Notice") of any claim by the IRS or other taxing authority (an "IRS Claim")
that, if successful, would require the payment by Executive of Excise Taxes in
respect of Potential Parachute Payments in an amount in excess of the amount of
such Excise Taxes determined in accordance with Paragraph 9. Executive's Notice
shall fully inform DST of all particulars of the IRS Claim and the date on which
such IRS Claim is due to be paid (the "IRS Claim Deadline").
DST shall direct the Executive as to whether to pay all or part of the
IRS Claim or to contest the IRS Claim or to pursue a claim for a refund (a
"Refund Claim") of all or any portion of such Excise Taxes, other taxes,
interest or penalties as may be specified by DST in a written notice to
Executive. If DST directs Executive to pay all or part of the IRS Claim, the
amount of such payment shall also be deemed a Gross-Up Payment, which DST shall
pay to the Executive or the IRS, as appropriate. The Executive shall cooperate
fully with DST in good faith to contest such IRS Claim or pursue such Refund
Claim (including appeals) and shall permit DST to participate in any proceedings
relating to such IRS Claim or Refund Claim.
DST shall control all proceedings in connection with such IRS Claim or
Refund Claim (as applicable) and in its discretion may cause Executive to pursue
or forego any and all administrative appeals, proceedings, hearings and
conferences with the Internal Revenue Service or other taxing authority.
DST shall pay directly all legal, accounting and other costs and
expenses (including additional interest and penalties) incurred by DST or
Executive in connection with any IRS Claim or Refund Claim, as applicable, and
shall indemnify Executive, on an after-tax basis, for any Excise Tax or income
tax, including related interest and penalties, imposed as a result of such
payment of costs or expenses.
(e) If Executive receives any refund with respect to Excise Taxes,
Executive shall (subject to DST's complying with any applicable requirements of
Paragraph 9(d)) promptly pay DST the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). Any contest
of a denial of refund shall be controlled by Paragraph 9(d).
10. NOTICE. Notices and all other communications to either party pursuant
to this Agreement shall be in writing and shall be deemed to have been given
when personally delivered, delivered by telecopy or deposited in the United
States mail by certified or registered mail, postage prepaid, addressed, in the
case of DST, to DST, 000 Xxxx 00xx Xxxxxx, Xxxxxx Xxxx, Xxxxxxxx 00000,
Attention: Corporate Secretary, or, in the case of the Executive, to him at 0000
Xxxxxx Xxxxx, Xxxxxx Xxxx, Xxxxxxxx 00000, or to such other address as a party
shall designate by notice to the other party.
11. AMENDMENT. No provision of this Agreement may be amended, modified,
waived or discharged unless such amendment, waiver, modification or discharge is
agreed to in a writing signed by Executive and the Executive Vice President of
DST. No waiver by either party hereto at any time of any breach by the other
party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the time or at any prior or subsequent time.
12. SUCCESSORS AND ASSIGNS; ASSIGNMENT BY EXECUTIVE PROHIBITED. The rights
and obligations of DST under this Agreement shall inure to the benefit of and
shall be binding upon the successors and assigns of DST. Except as provided in
Paragraph 7(j), neither this Agreement nor any of the payments or benefits
hereunder may be pledged, assigned or transferred by Executive either in whole
or in part in any manner, without the prior written consent of DST.
13. SEVERABILITY. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforeceable provisions were omitted.
14. CONTROLLING LAW AND JURISDICTION. The validity, interpretation and
performance of this Agreement shall be subject to and construed under the laws
of the State of Missouri, without regard to principles of conflicts of law.
15. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
other prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter hereof, except this Agreement does
not supersede any Officer Indemnification Agreement between DST and Executive.
16. CODE SECTION 409A. In the event any payment or provision of a benefit
hereunder would trigger excise tax, interest or other penalties under Code
Section 409A ("409A Penalties") if postponement of such payment or provision
would avoid 409A Penalties, (a) such payment or provision will be postponed and
made the earliest date it can be made without triggering 409A Penalties, and (b)
if postponement of such payment or provision would not avoid 409A Penalties, the
parties agree to amend the Agreement to provide an alternative benefit of
substantially equivalent value that would not be subject to 409A Penalties.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the day
and year first above written.
By: /s/ Xxxxxx X. XxXxxxxxx
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Xxxxxx X. XxXxxxxxx
DST SYSTEMS, INC.
By: /s/ Xxxxxx X. XxXxxxxxxx
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Xxxxxx X. XxXxxxxxxx,
Executive Vice President
