Exhibit 10.1

 

WADDELL & REED FINANCIAL, INC.

1998 EXECUTIVE STOCK AWARD PLAN

As Amended and Restated

 

Waddell & Reed Financial, Inc. previously established the Waddell & Reed
Financial, Inc. 1998 Executive Deferred Compensation Stock Award Plan (formerly
named the Waddell & Reed Financial, Inc. 1998 Executive Deferred Compensation
Stock Option Plan), as amended effective December 12, 2002 and as further
amended effective on each of March 11, 2003 (which March 11, 2003 amendment was
submitted to and approved by the Company’s stockholders at the Company’s 2003
Annual Meeting of Stockholders), January 1, 2004, October 14, 2004 and
October 19, 2005 (as amended, the “Original Plan”).  Pursuant to the powers
reserved in Section 8.1 in the Original Plan, the Original Plan is amended and
restated effective October 18, 2012 as follows (the Original Plan, as amended
and restated the “Plan”).

 

ARTICLE 1
Purposes of the Plan

 

Section 1.1.  Purposes.  The purposes of the Plan are to promote the long-term
growth of the Company by providing a vehicle for Eligible Executives (as defined
below) to increase their proprietary interest in the Company and to attract and
retain highly qualified Eligible Executives.

 

ARTICLE 2
Definitions

 

Section 2.1.  Definitions.  Unless the context clearly indicates otherwise, the
following terms shall have the following meanings:

 

“Acquisition” has the meaning assigned such term in Section 9.3.

 

“Acquisition Consideration” means the kind and amount of shares of capital stock
of the surviving or new corporation, cash, securities, evidence of indebtedness,
other property or any combination thereof receivable in respect of one Share
upon consummation of an Acquisition.

 

“Affiliate” means (a) any corporation (other than a Subsidiary), partnership,
joint venture or any other entity in which the Company owns, directly or
indirectly, at least a ten percent beneficial ownership interest, and (b) the
Company’s parent company, if any.

 

“Annual Bonus” means the annual cash bonus payable by the Company to an Eligible
Executive for services to the Company or any of its Affiliates, as such amount
may be determined from year to year.

 

“Annual SORP Exercise Date” has the meaning assigned such term in Section 6.5.

 

“Award” means the grant of an Option or Restricted Stock to a Participant
pursuant to the terms, conditions and limitations that the Committee may
establish in order to fulfill the objectives of the Plan.

 

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“Award Grant Date” means the date on which an Award of Options or Restricted
Stock, as the context applies, is made under the Plan which, unless the
Committee determines otherwise, shall be not later than April 15th of the
calendar year following the year in which Salary or Annual Bonus converted
pursuant to a Conversion Election Form is earned.

 

“Award Agreement” means a written agreement by and between the Company and a
Participant evidencing an award of Options or Restricted Stock, as applicable,
under the Plan.

 

“Awardee” means a Participant to whom an outstanding Award has been granted or,
in the event of such Participant’s death prior to the expiration of an Option or
the lapse of restrictions encumbering Restricted Stock, such Participant’s
Beneficiary.

 

“Beneficiary” means any person or persons designated by a Participant, in
accordance with procedures established by the Committee or Plan Administrator,
to receive benefits hereunder in the event of the Participant’s death.  If any
Participant fails to designate a Beneficiary or designates a Beneficiary who
fails to survive the Participant, the Beneficiary shall be the Participant’s
surviving spouse, or, if none, the Participant’s surviving descendants (who
shall take per stirpes) and if there are no surviving descendants, the
Beneficiary shall be the Participant’s estate.

 

“Board” means the Board of Directors of the Company.

 

“Bonus Conversion Election Date” means the date established by the Plan as the
date by which an Eligible Executive must submit a valid Bonus Conversion
Election Form to the Plan Administrator in order to convert Annual Bonus to an
Award under the Plan for a calendar year.  Unless otherwise determined by the
Committee, for each calendar year, the Bonus Conversion Election Date is June 30
of the calendar year for which the Annual Bonus is to be earned; provided,
however, that if an executive officer becomes an Eligible Executive on or after
June 1 of any calendar year, such election may be made within 30 days after the
date on which such executive officer becomes an Eligible Executive.

 

“Bonus Conversion Election Form” means a form, substantially in the form
attached hereto as Exhibit A, pursuant to which a Participant elects to convert
Annual Bonus to an Award pursuant to Section 5.1.

 

“Business Day” means a day on which the New York Stock Exchange or other
principal national securities exchange or over-the-counter market on which the
Shares are then traded is open for business.

 

“Change in Control” means the occurrence of any of the following:

 

(a)                                  when any “person,” as such term is used in
Sections 13(d) and 14(d) of the Exchange Act (other than the Company or a
Subsidiary thereof or any Company employee benefit plan), is or becomes the
“beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or
indirectly, of securities of the Company representing 20% or more of the
combined voting power of the Company’s then outstanding securities;

 

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(b)                                 the effective date of any transaction or
event relating to the Company that is required to be described pursuant to the
requirements of Item 6(e) of Schedule 14A of the Exchange Act;

 

(c)                                  when, during any period of two consecutive
years during the existence of the Plan, the individuals who, at the beginning of
such period, constitute the Board, cease for any reason other than death to
constitute at least a majority thereof, unless each director who was not a
director at the beginning of such period was elected by, or on the
recommendation of, at least two-thirds of the directors at the beginning of such
period; or

 

(d)                                 the effective date of a transaction
requiring stockholder approval for the acquisition of the Company by an entity
other than the Company or a Subsidiary thereof through the purchase of assets,
by merger, or otherwise.

 

“Code” means the Internal Revenue Code of 1986, as amended, and any successor
statute thereto.

 

“Committee” means the Compensation Committee of the Board.

 

“Company” means Waddell & Reed Financial, Inc., a Delaware corporation, and its
successors.

 

“Conversion Election Form” means a Bonus Conversion Election Form and/or a
Salary Conversion Election Form, as the context requires.

 

“Covered Employee” means (a) the chief executive officer of the Company, and (b)
any person designated by the Committee, at the time of grant of Performance
Awards, who the Committee believes is likely to be a “covered employee” (within
the meaning of Section 162(m)(3) of the Code) with respect to the fiscal year
during which the Performance Award is granted or in the foreseeable future.

 

“Disability” means total and permanent disability as determined under the
Company’s long-term disability program, whether or not the Participant is
covered under such program.  If no such program is in effect, the Disability of
a Participant shall be determined in good faith by the Board (excluding the
Participant, if applicable).

 

“Eligible Executive” means an executive officer of the Company or any of its
Affiliates, as may be selected by the Chairman of the Board or the Committee or
its designee from year to year.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Fair Market Value” means, unless otherwise determined in good faith by the
Committee or required by applicable law, as of any given date, the closing sale
price of a Share on such date on the New York Stock Exchange or other principal
national securities exchange or over-the-counter market on which the Shares are
then traded or, if there is no sale on that day, then on the last previous
Business Day on which a sale was reported.

 

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“Option” means an option to purchase Shares granted pursuant to Article 6. 
Options granted under the Plan are not incentive stock options within the
meaning of Section 422 of the Code.

 

“Participant” means any Eligible Executive who is participating in the Plan.

 

“Performance Award” means any Option or award of Restricted Stock granted under
the Plan to a Covered Employee that the Committee intends to be
performance-based compensation under Section 162(m)(4)(C) of the Code.

 

“Plan” means the Waddell & Reed Financial, Inc. 1998 Executive Stock Award Plan,
as Amended and Restated, as set forth herein and as may be amended, modified or
supplemented from time to time.

 

“Plan Administrator” means the Committee or its delegee of administrative duties
under the Plan pursuant to Section 3.2.

 

“Repricing” has the meaning assigned to such term in Section 8.1.

 

“Restricted Stock” means Shares that are subject to certain restrictions and/or
a risk of forfeiture granted pursuant to Article 6.

 

“Salary” means the salary payable by the Company to an Eligible Executive for
services to the Company or any of its Affiliates, as such amount may be changed
from time to time.

 

“Salary Conversion Election Date” means the date established by the Plan as the
date by which an Eligible Executive must submit a valid Salary Conversion
Election Form to the Plan Administrator in order to convert Salary to an Award
under the Plan for a calendar year.  Unless otherwise determined by the
Committee, for each calendar year in which Salary will be earned, the Salary
Conversion Election Date is the last day of the preceding calendar year;
provided, however, that in the case of an executive officer who becomes an
Eligible Executive on or after January 1 of the calendar year in which Salary
that is to be converted into an Award is earned, such election may be made
within 30 days after the date on which such executive officer becomes an
Eligible Executive.

 

“Salary Conversion Election Form” means a form, substantially in the form
attached hereto as Exhibit B, pursuant to which a Participant elects to convert
Salary to an Award pursuant to Section 5.1.

 

“Shares” means shares of the Company’s Class A common stock, par value $.01.

 

“SORP” has the meaning assigned such term in Section 6.5.

 

“SORP Option” has the meaning assigned such term in Section 6.5.

 

“Subsidiary” means any corporation (other than the Company) in an unbroken chain
of corporations beginning with the Company if each of the corporations (other
than the last

 

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corporation in the unbroken 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.

 

ARTICLE 3
Administration of the Plan

 

Section 3.1.  Administrator of the Plan.  The Plan shall be administered by the
Committee, except as may be delegated pursuant to Section 3.2.  To the extent
required by Section 162(m)(4)(C) of the Code, only outside directors shall
administer the Plan with respect to Covered Employees.

 

Section 3.2.  Authority of Committee.  The Committee shall have full power and
authority to (a) interpret and construe the Plan and adopt such rules and
regulations as it shall deem necessary and advisable to implement and administer
the Plan, and (b) designate persons other than members of the Committee or the
Board to carry out its responsibilities, subject to such limitations,
restrictions and conditions as it may prescribe, such determinations to be made
in accordance with the Committee’s business judgment as to the best interests of
the Company and its stockholders and in accordance with the purposes of the
Plan.  Subject to Section 3.1, the Committee may delegate administrative duties
under the Plan to one or more agents as it shall deem necessary or advisable.

 

Section 3.3.  Effect of Committee Determinations.  No member of the Committee or
the Board or the Plan Administrator shall be personally liable for any action or
determination made in good faith with respect to the Plan or any Award or to any
settlement of any dispute between a Participant and the Company.  Any decision
or action taken by the Committee, the Board or the Plan Administrator with
respect to an Award or the administration or interpretation of the Plan shall be
conclusive and binding upon all persons.

 

ARTICLE 4
Participation

 

Section 4.1.  Election to Participate.  The Chairman of the Board or the
Committee or its designee shall designate each year those executive officers who
shall be Eligible Executives for the coming year.  An Eligible Executive may
participate in the Plan by delivering to the Plan Administrator a properly
completed and signed (a) Salary Conversion Election Form on or before the Salary
Conversion Election Date, and/or (b) Bonus Conversion Election Form on or before
the Bonus Conversion Election Date.  An Eligible Executive’s participation in
the Plan will be effective as of the date the Plan Administrator receives the
Eligible Executive’s Salary or Bonus Conversion Election Form.  An Eligible
Executive shall not be entitled to any benefit hereunder unless such Eligible
Executive has properly completed a Conversion Election Form.

 

Section 4.2.  Irrevocable Election.  A Participant may not revoke or change his
or her Conversion Election Form for a calendar year.

 

Section 4.3.  No Right to Continue as an Employee.  Nothing contained in the
Plan shall be deemed to give any Eligible Executive the right to be retained as
an employee of the Company or any of its Affiliates.

 

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ARTICLE 5
Plan Benefits

 

Section 5.1.  Conversion of Annual Bonus or Salary.  An Eligible Executive may
elect to convert up to 100% of his or her Annual Bonus and/or Salary (in
increments of 10% or $10,000) to Awards in accordance with the terms of the
Plan.

 

(a)                                  Time of Conversion Election.  An Eligible
Executive who wishes to convert Salary for a calendar year to an Award pursuant
to Article 6 must irrevocably elect to do so on or prior to the Salary
Conversion Election Date for such calendar year, by delivering a valid Salary
Conversion Election Form to the Plan Administrator.  The Salary Conversion
Election Form shall indicate the percentage or dollar amount of Salary to be
converted to Awards.  An Eligible Executive who wishes to convert Annual Bonus
for a calendar year to an Award pursuant to Article 6 must irrevocably elect to
do so on or prior to the Bonus Conversion Election Date for such calendar year,
by delivering a valid Bonus Conversion Election Form to the Plan Administrator. 
The Bonus Conversion Election Form shall indicate the percentage or dollar
amount of Annual Bonus to be converted to an Award.

 

(b)                                 Responsibility for Investment Choices.  Each
Participant is solely responsible for any decision to convert Annual Bonus
and/or Salary to Awards under the Plan and accepts all investment risks entailed
by such decision, including the risk of loss and a decrease in the value of the
amounts he or she elects to convert.

 

Section 5.2.  Award Converted from Annual Bonus at Committee Direction.  The
Committee, in its sole discretion, may direct that all or any portion of the
Annual Bonus that would otherwise be payable in cash to a Participant, be
converted into Awards pursuant to Article 6.

 

ARTICLE 6
Terms and Conditions of Awards

 

Subject to Article 6A, if a Participant remains employed through the Award Grant
Date for Salary or Annual Bonus converted pursuant to Section 5.1 or
Section 5.2, the Participant shall be granted Awards subject to the following
terms and conditions:

 

Section 6.1.  Exercise Price of Options.  The exercise price per Share, if any,
under each Option granted pursuant to this Article 6 shall be indicated in the
Award Agreement.  The exercise price per Share of any Option granted hereunder
shall be 100% of the Fair Market Value per Share on the Award Grant Date.

 

Section 6.2  Number of Shares Subject to Awards.

 

(a)                                  Number of Options.  The number of Shares
subject to an Option granted pursuant to this Article 6 shall be the number of
whole Shares equal to A divided by B, where:

 

A =                            the dollar amount which the Participant has
elected to convert to Options pursuant to Section 5.1; and

 

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B =                              the per Share value of an Option on the Award
Grant Date, as determined by the Committee using an option valuation model
selected by the Committee in its discretion (such value to be expressed as a
percentage of the Fair Market Value per Share on the Award Grant Date).

 

In determining the number of Shares subject to an Option, (i) the Committee may
designate the assumptions to be used in the selected option valuation model, and
(ii) any fraction of a Share will be rounded down to the next whole number of
Shares.  The maximum number of shares with respect to which Options may be
granted to a Covered Employee in any calendar year is 750,000.

 

(b)                                 Number of Shares of Restricted Stock.  The
number of Shares subject to an Award of Restricted Stock granted pursuant to
this Article 6 shall be the number of whole Shares equal to A divided by B,
where:

 

A =                            the dollar amount which the Participant has
elected to convert to Restricted Stock pursuant to Section 5.1; and

 

B =                              the Fair Market Value of a Share on the Award
Grant Date.

 

In determining the number of Shares subject to an Award of Restricted Stock, any
fraction of a Share will be rounded down to the next whole number of Shares.

 

Effective January 1, 2004, a Participant will only be entitled to convert Salary
and/or Annual Bonus into Restricted Stock.

 

Section 6.3                                   Term of Awards.

 

(a)                                  Exercise of Options.  Each Option shall be
first exercisable, cumulatively, as to 10% of the total Shares subject to the
Option commencing on each of the first through tenth annual anniversaries of the
Award Grant Date.  Notwithstanding the foregoing, the exercisability of any
Option held by a Covered Employee shall be deferred to the extent that the
Committee, in its discretion, determines that current exercise of the Option
would cause loss of the Company’s tax deduction pursuant to Section 162(m) of
the Code.  In no event shall such deferral continue beyond the first day of the
calendar year after the Awardee ceases to be a Covered Employee.  An Awardee’s
death, Disability, retirement or other termination of employment shall not
shorten the term of any outstanding Option.  In no event shall the period of
time over which the Option may be exercised exceed the longer of (i) 11 years
from the Award Grant Date, or (ii) the 30th day of the calendar year immediately
following the year in which the Awardee ceased to be a Covered Employee.  An
Option, or portion thereof, may be exercised in whole or in part only with
respect to whole Shares.  Options may be exercised in whole or in part at any
time during the exercise period by giving written notice of the exercise to the
Company specifying the number of Shares to be purchased, accompanied by payment
in full of the exercise price, in cash, by check or such other instrument as may
be acceptable to the Committee (including instruments providing for “cashless
exercise”).  Payment in full or in part may also be made in the form of
unrestricted Shares already owned by the Awardee (based on the Fair Market Value
of the Shares on the date

 

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the Option is exercised).  An Awardee shall have rights to dividends and other
stockholder rights with respect to Shares subject to an Option only after the
Awardee has given written notice of the exercise and has paid in full for such
Shares.

 

(b)                                 Terms of Restricted Stock Awards.

 

(i)                                     Grant and Restrictions.  Restricted
Stock shall be subject to such restrictions on transferability, risk of
forfeiture and other restrictions, if any, as the Committee may impose, which
restrictions may lapse separately or in combination at such times, under such
circumstances (including based on achievement of performance goals and/or future
service requirements), or in such installments or otherwise, as the Committee
may determine at the Award Grant Date or thereafter.  Except to the extent
restricted under the terms of the Plan or any related Award Agreement, an
Awardee granted Restricted Stock shall have all of the rights of a stockholder
with respect to such Restricted Stock, including the right to vote the
Restricted Stock and the right to receive dividends thereon.  During the
applicable restricted period, subject to Section 6.6, the Restricted Stock may
not be sold, transferred, pledged, hypothecated, margined or otherwise
encumbered by the Awardee.

 

(ii)                                  Forfeiture.  Subject to Section 6.4, upon
termination of employment, Restricted Stock that is at the time of such
termination subject to restrictions shall be forfeited and reacquired by the
Company.

 

(iii)                               Book-Entry Accounts; Certificates for
Restricted Stock.  An account for each Awardee who is awarded Restricted Stock
shall be maintained by the Company’s transfer agent or such other administrator
designated by the Committee for the deposit of such Restricted Stock, or, in the
sole discretion of the Committee, each Awardee may be issued a stock certificate
registered in the name of the Awardee with respect to such Restricted Stock. 
The Committee shall specify that such certificates bear an appropriate legend
referring to the terms, conditions and restrictions applicable to the Restricted
Stock, that the Company or transfer agent retain physical possession of such
certificates, and that the Awardee deliver a stock power to the Company or
transfer agent, as applicable, endorsed in blank, relating to the Restricted
Stock.  Any such legend shall be substantially in the following form:

 

“The transferability of this certificate and the shares of stock represented
hereby are subject to the terms and conditions (including forfeiture) of the
Waddell & Reed Financial, Inc. 1998 Executive Stock Award Plan, as Amended and
Restated (the “Plan”) and a Restricted Stock Award Agreement entered into
between the registered owner and Waddell & Reed Financial, Inc. (the
“Agreement”).  Copies of the Plan and Agreement are on file in the offices of
Waddell & Reed Financial, Inc., 6300 Lamar Avenue, Overland Park, Kansas 66202.”

 

(iv)                              Dividends and Splits.  Unless otherwise
determined by the Committee, Shares distributed in connection with a stock split
or stock dividend, and other property distributed as a dividend, shall be
subject to restrictions and a risk of forfeiture to the same extent as the
Restricted Stock with respect to which such Shares or other property has been
distributed.

 

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Section 6.4                                   Accelerated Exercisability and
Lapse of Restrictions.  Notwithstanding the normal exercisability schedule and
forfeiture provisions set forth in Sections 6.3(a) and 6.3(b)(ii), any and all
outstanding Options shall become immediately exercisable, and restrictions on
any Award of Restricted Stock shall lapse and the Shares subject to such Award
shall be deemed fully vested and nonforfeitable, upon the first to occur of (a)
the death of the Awardee, (b) the Disability of the Awardee, (c) the occurrence
of a Change in Control, (d) the determination by the Committee that a particular
Award, in whole or in part, shall become fully exercisable and/or
nonforfeitable, or (e) as otherwise provided by the Committee by rule or
regulation or in any Award Agreement, or as determined in any individual case,
that restrictions or forfeiture conditions relating to Restricted Stock shall be
waived in whole or in part in the event of terminations resulting from specified
causes.  Upon acceleration, an Option will remain exercisable for the remainder
of its original term.

 

Section 6.5                                   Award Agreement.  Each Award
granted under the Plan shall be evidenced by an Award Agreement which shall be
executed by an authorized officer of the Company.  The Award Agreement shall
contain provisions regarding (a) the number of Shares subject to the Award, (b)
the exercise price per Share, if any, of the Award and the means of payment
therefor, (c) the term of the Award, and (d) such other terms and conditions not
inconsistent with the Plan as may be determined from time to time by the
Committee.  The Committee, in its discretion, may include in the grant of any
Option under the Plan, a stock option restoration program (“SORP”) provision.  A
SORP provision shall provide, without limitation, that, if payment of the
exercise price of an Option is made in the form of Shares, and the exercise of
such Option occurs on the Annual SORP Exercise Date, an additional option to
purchase Shares (a “SORP Option”) will automatically be granted to the Awardee
effective as of the Annual SORP Exercise Date.  A SORP Option shall (i) have an
exercise price equal to 100% of the Fair Market Value of the Shares on the
Annual SORP Exercise Date, (ii) have a term of no more than the later of (1) the
term equal to that of the originally exercised Option giving rise to the SORP
Option, not to exceed a maximum term of ten years and two days from the issuance
date of the SORP Option (subject to any forfeiture provision or shorter
limitation on exercise required under the Plan) or (2) the 30th day of the
calendar year immediately following the year in which the Awardee ceases to be a
Covered Employee, (iii) have an initial vesting date no earlier than six months
after the date of its issuance, and (iv) cover a number of Shares equal to the
number of Shares used to pay the exercise price of the originally exercised
Option, plus the number of Shares (if any) withheld for income taxes and
employment taxes (plus any selling commissions) with respect to such original
exercise.  “Annual SORP Exercise Date” shall mean August 1, or if August 1 is
not a Business Day, “Annual SORP Exercise Date” shall mean the next succeeding
Business Day.  Notwithstanding the foregoing, the Committee may delay the Annual
SORP Exercise Date to the extent it determines necessary to comply with
regulatory or administrative requirements.

 

Section 6.6                                   Transferability of Awards.  No
Award shall be assignable or transferable by the Awardee; provided, however,
that an Award Agreement may provide that Options are transferable by will or the
laws of descent and distribution; and provided, further, that the Committee may
(but need not) permit other transfers of an Award where the Committee concludes
that such transferability (a) does not result in accelerated taxation, and (b)
is otherwise appropriate and desirable, taking into account any state or Federal
securities laws applicable to Awards and the purposes of the Plan.

 

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ARTICLE 6A
Performance Awards

 

Section 6A.1.  Performance Awards.  The Committee may grant an Award to a
Covered Employee that is either a Performance Award or not a Performance Award.

 

Section 6A.2.  Individual Award Limitations.  In each calendar year during any
part of which the Plan is in effect, an Eligible Executive (who may also be a
Covered Employee) may not be granted Awards, Performance Awards or otherwise,
that have, in the aggregate, more than 750,000 “points,” with each Option Award
having one “point” for each Share with respect thereto, and each Award of
Restricted Stock having three “points” with respect to each Share.  For
illustrative purposes, a grant of an Option for ten Shares has ten “points,” and
a grant of ten Shares of Restricted Stock has 30 “points.”  If an Award is
canceled, the canceled Award continues to be counted against the maximum number
of Shares that may be granted to the Eligible Executive under the Plan.

 

Section 6A.3.  Performance Goals for Performance Awards.  Each Performance Award
shall be structured so as to qualify as “performance-based compensation” under
Section 162(m)(4)(C) of the Code.

 

(a)                                  Option Performance Awards.  The exercise
price of a Performance Award that is an Option Award shall not be less than 100%
of the Fair Market Value of the Shares on the date of grant of such Performance
Award.

 

(b)                                 Restricted Stock Performance Awards.  The
grant, vesting and/or settlement of a Performance Award that is a Restricted
Stock Award shall be contingent upon achievement of pre-established performance
goals and other terms set forth in this Section 6A.3.

 

(i)                                     Performance Goals Generally.  The
performance goals for Performance Awards shall consist of one or more business
criteria and a targeted level or levels of performance with respect to each such
criteria, as specified by the Committee consistent with this Section 6A.3. 
Performance goals shall be objective and shall otherwise meet the requirements
of Section 162(m) of the Code, including the requirement that the level or
levels of performance targeted by the Committee result in the achievement of
such performance goals being “substantially uncertain.”  The Committee may
condition the grant, exercise, vesting and/or settlement of any Performance
Award upon achievement of any one or more performance goals.  Performance goals
may differ for Performance Awards granted to any one Eligible Executive or to
different Eligible Executives.

 

(ii)                                  Business Criteria.  Any or all of the
following business criteria (including or excluding extraordinary and/or
non-recurring items to be determined by the Committee in advance) for the
Company on a consolidated basis, and/or for specified Subsidiaries or business
or geographical units of the Company (except with respect to the total
stockholder return and earnings per share criteria), shall be used by the
Committee in establishing performance goals for Performance Awards: (1) earnings
per share; (2) increase in revenues; (3) increase in cash flow; (4) increase in
cash flow return; (5) return on net assets;

 

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(6) return on assets; (7) return on investment; (8) return on capital; (9)
return on equity; (10) economic value added; (11) operating margin; (12)
contribution margin; (13) net income; (14) pre-tax earnings; (15) pre-tax
earnings before interest, depreciation and amortization; (16) pre-tax operating
earnings after interest expense and before incentives, service fees, and
extraordinary or special items; (17) operating income; (18) total stockholder
return; (19) debt reduction; and (20) any of the above goals determined on an
absolute or relative basis, or as adjusted in any manner which may be determined
in the discretion of the Committee, or as compared to the performance of a
published or special index deemed applicable by the Committee including, but not
limited to, the Standard & Poor’s 500 Stock Index or a group of competitor
companies, including the group selected by the Company for purposes of any stock
performance graph contained in the proxy statement for the Company’s most recent
annual meeting of stockholders.

 

(iii)                               Performance Period; Timing for Establishing
Performance Goals.  Achievement of performance goals shall be measured over a
performance period of up to ten years, as specified by the Committee. 
Performance goals shall be established not later than 90 days (or, for
performance periods of less than 1 year, the passage of 25% of the performance
period) after the beginning of any performance period applicable to such
Performance Award, or at such other date as may be required or permitted for
“performance-based compensation” under Section 162(m) of the Code.

 

(iv)                              Settlement of Performance Awards; Other
Terms.  After the end of each performance period, the Committee shall determine
the amount, if any, of such Performance Award payable to the Covered Employee. 
Settlement of such Performance Awards shall be in cash, Shares, or other awards
or property, as determined in the sole discretion of the Committee.  The
Committee may, in its discretion, reduce the amount of any Performance Award to
be settled upon achievement of the associated performance goals, but may not
exercise discretion to increase any such amount payable to a Covered Employee
with respect to such Performance Award.

 

Section 6A.4.  General.  The Committee shall retain full power and discretion to
accelerate, waive or modify, at any time, any term or condition of a Performance
Award that is not mandatory under the Plan; provided, however, that
notwithstanding any other provision of the Plan, the Committee shall not have
any discretion to accelerate, waive or modify any term or condition of an Award
that is intended to qualify as “performance-based compensation” for purposes of
Section 162(m) of the Code if such discretion would cause such Performance Award
not to so qualify.

 

Section 6A.5.  Written Determinations.  All determinations by the Committee as
to the establishment of performance goals, the amount of any potential
individual Performance Awards, and the achievement of performance goals relating
to Performance Awards that are Restricted Stock Awards, shall be made in writing
in the case of any award intended to qualify under Section 162(m) of the Code. 
The Committee may not delegate any responsibility relating to Performance
Awards.  The determination as to whether any performance goal, with respect to
any Performance Award, has been satisfied shall be made prior to the payment of
any compensation relating to a Performance Award.

 

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Section 6A.6.  Performance Awards under Section 162(m) of the Code.  It is the
intent of the Company that Performance Awards granted to persons who are or
likely will become “covered employees” (within the meaning of Section 162(m) of
the Code) shall constitute “performance-based compensation” within the meaning
of Section 162(m) of the Code.  Accordingly, the terms of this Article 6A,
including the definition of “Covered Employee” and other terms used herein,
shall be interpreted in a manner consistent with Section 162(m) of the Code.  If
any provision of the Plan as in effect on the date of adoption or any agreements
relating to Performance Awards that are designated as intended to comply with
Section 162(m) of the Code do not comply or are inconsistent with the
requirements of Section 162(m) of the Code, then such provisions shall be
construed or deemed amended to the extent necessary to conform to such
requirements.

 

Section 6A.7.  Conflicts Among Plan Provisions.  To the extent this Article 6A
conflicts with another provision of the Plan, this Article 6A shall control.

 

ARTICLE 7
Shares Subject to the Plan

 

Section 7.1                                   Shares Subject to the Plan. 
Subject to adjustment as provided in Article 9, the total number of Shares
reserved and available for issuance in connection with Awards under the Plan
shall not exceed 3,750,000 Shares.  Shares delivered under the Plan may be newly
issued Shares or previously issued and reacquired Shares.  To the extent that
Shares subject to an outstanding Award are not issued or delivered by reason of
the expiration, termination, cancellation or forfeiture of such Award or by
reason of the delivery of Shares to pay all or a portion of the exercise price
of an Award, then such Shares shall again be available for issuance under the
Plan, except that if such Shares could not again be available for Awards to a
particular Participant under any applicable law or regulation, such Shares shall
be available exclusively for Awards to Participants who are not subject to such
limitation.

 

In the case of Options exercised with payment in Shares under a SORP provision,
the number of Shares transferred by the Awardee in payment of the exercise price
plus the number of Shares withheld for income and employment taxes (plus any
selling commissions) on such exercise will be netted against the number of
Shares issued to the Awardee in the exercise, and only the net number shall be
charged against the 3,750,000 limitation set forth above.

 

ARTICLE 8
Amendment, Suspension and Termination

 

Section 8.1.  Amendment, Suspension and Termination.  The Board may amend,
suspend or terminate the Plan or any Award Agreement at any time; provided,
however, that the Board may condition any amendment or modification on the
approval of stockholders of the Company if such approval is necessary or deemed
advisable with respect to tax, securities or other applicable laws, policies or
regulations, or securities exchange listing standards, and no such amendment,
modification or termination shall adversely affect any outstanding Awards
without the consent of the Participant.  Notwithstanding the foregoing, a
Repricing (as defined below) is prohibited without prior stockholder approval.
 For purposes of the Plan, “Repricing” means any of the following or any other
action that has the same purpose and effect: (a) lowering the

 

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exercise price of an outstanding Option after it is granted or (b) canceling an
outstanding Option at a time when its exercise or purchase price exceeds the
then Fair Market Value of the Shares underlying such outstanding award, in
exchange for another award or a cash payment, unless the cancellation and
exchange occurs in connection with a merger, amalgamation, consolidation, sale
of substantially all the Company’s assets, acquisition, spin-off or other
similar corporate transaction.

 

ARTICLE 9
Adjustment Provisions

 

Section 9.1                                   Change in Corporate Structure
Affecting Shares.  If the Company shall at any time change the number of issued
Shares without new consideration to the Company (such as by stock dividend,
stock split, recapitalization, reorganization, exchange of shares, liquidation,
combination or other change in corporate structure affecting the Shares) or make
a distribution of cash or property which has a substantial impact on the value
of issued Shares, the total number of Shares reserved for issuance under the
Plan shall be appropriately adjusted and the exercise price per Share, if any,
and the number of Shares underlying each outstanding Award shall be adjusted so
that the aggregate consideration payable to the Company and the value of each
such Award shall not be changed.  In addition, the aggregate number of Shares
available for issuance to any Participant pursuant to Section 6.2 shall be
adjusted to take into account any change in corporate structure affecting
Shares.  Adjustments pursuant to this Section 9.1 shall not be made to the
extent the Plan has been amended to reflect any adjustment contemplated in this
Section 9.1.

 

Section 9.2                                   Certain Reorganizations. 
Notwithstanding any other provision of the Plan, and without affecting the
number of Shares reserved or available hereunder, the Committee shall authorize
the issuance, continuation or assumption of outstanding Awards or provide for
other equitable adjustments after changes in the Shares resulting from any
merger, consolidation, sale of assets, acquisition of property or stock,
recapitalization, reorganization or similar occurrence in which the Company is
the continuing or surviving corporation, upon such terms and conditions as it
may deem necessary to preserve Awardees’ rights under the Plan.

 

Section 9.3                                   Acquisitions.  In the case of any
sale of assets, merger, consolidation or combination of the Company with or into
another entity, other than a transaction in which the Company is the continuing
or surviving corporation and which does not result in the outstanding Shares
being converted into or exchanged for different securities, cash or other
property, or any combination thereof (an “Acquisition”), any Awardee who holds
an outstanding Award shall have the right (subject to the provisions of the Plan
and any limitation applicable to the Award) thereafter and during the term of
the Award, to receive upon exercise or vesting thereof, the Acquisition
Consideration receivable upon the Acquisition by a holder of the number of
Shares which would have been obtained upon exercise of the Option or portion
thereof or vesting of all or a portion of the Restricted Stock subject to an
Award, as the case may be, immediately prior to the Acquisition; provided,
however, the Committee, in its sole discretion, may settle the value of any
Award on the basis of the Acquisition Consideration as of the date the
Acquisition occurs, or such other date as the Committee may determine prior to
the Acquisition, in cash, stock or other property, or any combination thereof. 
To the extent any such settlement made in the sole discretion of the Committee
is made in Shares, such Shares will be deemed to have been distributed under the
Plan.

 

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ARTICLE 10
Miscellaneous

 

Section 10.1.  Withholding.  If any Award granted under the Plan is or becomes
subject to any withholding requirement, the Committee may require the Awardee to
remit such withholding as a condition to exercising an Option or any portion
thereof, or to receiving any Shares underlying an Award of Restricted Stock or
the lapsing of restrictions thereon.

 

Section 10.2.  Compliance with SEC Regulations.  All grants, vesting, lapsing of
restrictions, and exercises of Awards under the Plan shall be executed in
accordance with the requirements of Section 16 of the Exchange Act, and any
regulations promulgated thereunder, to the extent applicable.  To the extent
that any of the provisions contained herein do not conform with Rule 16b-3 of
the Exchange Act or any amendments thereto or any successor regulations, then
the Committee may make such modifications so as to conform the Plan and any
Awards granted thereunder to the requirements of Rule 16b-3.

 

Section 10.3.  Validity.  In the event that any provision of the Plan or any
related Award Agreement is held to be invalid, void or unenforceable, the same
shall not affect, in any respect whatsoever, the validity of any other provision
of the Plan or any related Award Agreement.

 

Section 10.4.  Inurement of Rights and Obligations.  The rights and obligations
under the Plan and any related agreements shall inure to the benefit of, and
shall be binding upon the Company, its successors and assigns, and the Eligible
Executives and their beneficiaries.

 

Section 10.5.  Titles.  Titles are provided herein for convenience only and are
not to serve as a basis for interpretation or construction of the Plan.

 

Section 10.6.  Governing Law.  The Plan shall be construed, governed and
enforced in accordance with the laws of the State of Delaware, except as such
laws are preempted by applicable Federal law.

 

Section 10.7.  Tax Status of Plan.  The Plan is not intended to be a
“nonqualified deferred compensation plan” under Section 409A of the Code and
shall be construed and administered accordingly.  If any term or provision
contained herein would otherwise cause the Plan to be characterized as a
“nonqualified deferred compensation plan” under Section 409A of the Code, then,
without further action by the Company, such term or provision shall
automatically be modified to the extent necessary to avoid such
characterization.

 

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EXHIBIT A

 

Bonus Conversion Election Form

for Calendar Year 20

 

Election to Convert Annual Bonus to Restricted Stock pursuant to the

Waddell & Reed Financial, Inc. 1998 Executive Stock Award Plan

As Amended and Restated

 

The following constitutes the irrevocable election of the undersigned under the
Waddell & Reed Financial, Inc. 1998 Executive Stock Award Plan, As Amended and
Restated (the “Plan”) with respect to the undersigned’s Annual Bonus as an
executive officer of Waddell & Reed Financial, Inc. (the “Company”) or its
Affiliates to be earned by the undersigned during the calendar year identified
above (“Current Year Bonus”).  Capitalized terms used herein and not otherwise
defined have the meanings assigned such terms in the Plan.

 

I hereby irrevocably elect to convert into an Award of Restricted Stock pursuant
to the Plan for the year identified above,     % [indicate any percentage up to
100%, in 10% increments] or $                   [indicate any dollar amount in
increments of $10,000] of my Current Year Bonus.

 

Executed to be effective as of                   , 20    .

 

 

 

 

(Signature)

 

 

 

 

 

(Print Name)

 

A-1

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EXHIBIT B

 

Salary Conversion Election Form

for Calendar Year 20

 

Election to Convert Salary to Restricted Stock Pursuant to the

Waddell & Reed Financial, Inc. 1998 Executive Stock Award Plan

As Amended and Restated

 

The following constitutes the irrevocable election of the undersigned under the
Waddell & Reed Financial, Inc. 1998 Executive Stock Award Plan, As Amended and
Restated (the “Plan”) with respect to the undersigned’s Salary as an executive
officer of Waddell & Reed Financial, Inc. (the “Company”) or its Affiliates to
be earned by the undersigned during the calendar year identified above. 
Capitalized terms used herein and not otherwise defined have the meanings
assigned such terms in the Plan.

 

I hereby irrevocably elect to convert into an Award of Restricted Stock pursuant
to the Plan for the year identified above,     % [indicate any percentage up to
100%, in 10% increments] or $                 [indicate any dollar amount in
increments of $10,000] of my Salary.

 

Executed to be effective as of                 , 20    .

 

 

 

 

 

(Signature)

 

 

 

 

 

(Print Name)

 

B-1

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