Exhibit 10.1


WADDELL & REED FINANCIAL, INC.


1998 STOCK INCENTIVE PLAN


As Amended and Restated


Waddell & Reed Financial, Inc., previously
established the Waddell & Reed Financial, Inc. 1998 Stock Incentive Plan,
as Amended and Restated, as amended effective December 12, 2002 and as further
amended effective on each of January 16, 2003 (which January 16, 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 15, 2005 (as amended and restated, the “Original Plan”).  Pursuant to the powers reserved in Section 11
of the Original Plan, the Original Plan is amended effective April 11, 2007 as
follows (the Original Plan as amended and restated hereby, the “Plan”).


SECTION
1.  Purposes of the Plan; Definitions.


The purposes of the Plan are to enable the Company,
its Subsidiaries and Affiliates to attract and retain employees, directors and
consultants who contribute to the Company’s success by their ability, ingenuity
and industry, and to enable such employees, directors and consultants to
participate in the long-term success and growth of the Company through an
equity interest in the Company.


For purposes of the Plan, the
following terms shall be defined as set forth below:


“Accounting
Firm” has the meaning assigned to such term in Section 12(b).


“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 10% beneficial ownership interest, and (b) the Company’s parent
company, if any.


“Annual
SORP Exercise Date” has the meaning assigned to such term in Section 5(m).


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


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


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


“Cause”
means a participant’s willful misconduct or dishonesty, either of which is
directly and materially harmful to the business or reputation of the Company or
any Subsidiary or Affiliate; provided, however, that in the case where there is
an employment or 













consulting
agreement between a participant and the Company or any Subsidiary or Affiliate
at the time of grant which defines “cause” (or words of like import), it shall
have the meaning ascribed to such term (or words of like import) under such
agreement.


“Change
of Control” has the meaning assigned to such term in Section 11(b).


“Change of Control Price”
has the meaning assigned to such term in Section 11(d).


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


“Committee”
means the Compensation Committee of the Board.


“Commission”
means the United States Securities and Exchange Commission.


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


“Covered Employee” means
(a) the chief executive officer of the Company, and (b) a person
designated by the Committee, at the time of grant of Performance Awards, whom
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.


“Deferral
Period” means the period of time during which the receipt of Shares underlying
a Deferred Stock award is deferred.


“Deferred Stock” means an
award of the right to receive Shares at the end of a specified Deferral Period
granted pursuant to Section 9.


“Director Restricted
Stock” means any Shares of Restricted Stock granted pursuant to Section 6
to an Outside Director.


“Director Stock Option”
means any option to purchase Shares granted pursuant to Section 6
to an Outside Director.


“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 director shall be determined in good faith by the Board (excluding such
director).


“Early
Retirement” means retirement from active employment with the Company, any
Subsidiary, or any Affiliate pursuant to the early retirement provisions of the
applicable tax-qualified Company pension plan.



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“Excess
Parachute Payment” has the meaning assigned to such term in Section 12(a).


“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and any successor
thereto.


“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.


“Gross-Up
Payment” has the meaning assigned to such term in Section 12(a).


“Immediate
Family” means the children, grandchildren or spouse of any optionee.


“Normal
Retirement” means retirement from active employment with the Company, any
Subsidiary, or any Affiliate pursuant to the normal retirement provisions
specified in the applicable tax-qualified Company pension plan.


“Outside
Director” means any director of the Company who is not an officer or employee
of the Company, any Subsidiary or any Affiliate.


“Performance
Award” means any Stock Option, Stock Appreciation Right, or Restricted Stock or
Deferred Stock award 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 Stock Incentive Plan, as
Amended and Restated, as set forth herein and as may be amended, modified or supplemented
from time to time.


“Potential
Change of Control” has the meaning assigned to such term in Section 11(c).


“Restricted
Stock” means Shares that are subject to certain restrictions and/or a risk of
forfeiture granted pursuant to Section 8.


“SAR/Option
Performance Award” means any Performance Award that is a Stock Option or Stock
Appreciation Right.


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


“SORP”
has the meaning assigned to such term in Section 5(m).


“SORP
Option” has the meaning assigned to such term in Section 5(m).



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“Stock
Appreciation Right” means a right to surrender to the Company all or a portion
of a Stock Option in exchange for an amount in cash or Shares as determined in
the manner prescribed in Section 7(b)(ii), granted pursuant to Section 7.


“Stock
Option” means an option to purchase Shares granted pursuant to Section 5
that is not intended to be, nor designated as, an “incentive stock option”
within the meaning of Section 422 of the Code.


“Stock
Performance Award” means any Performance Award other than a SAR/Option
Performance Award.


“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 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.


“Tax
Counsel” has the meaning assigned to such term in Section 12(a).


SECTION 2.  Administration.


The Plan shall be administered by the Committee which
shall at all times comply with any applicable requirements of Rule 16b-3
of the Exchange Act. All members of the Committee shall also be “outside
directors” within the meaning of Section 162(m) of the Code.  If at any
time no Committee shall be in office, then the functions of the Committee
specified in the Plan shall be exercised by the Board.


The Board shall have the power
and authority to determine all terms, conditions and provisions of Director
Stock Option and Director Restricted Stock awards pursuant to Section 6.


The Committee shall have the power and authority to
grant to eligible persons, pursuant to the terms of the Plan: (i) Stock
Options; (ii) Stock Appreciation Rights; (iii) Restricted Stock
and/or (iv) Deferred Stock.  In
particular, the Committee shall have the authority:


(a)       to select the
consultants, officers and other key employees of the Company, its Subsidiaries,
and its Affiliates to whom Stock Options, Stock Appreciation Rights, Restricted
Stock or Deferred Stock, or a combination of the foregoing, from time to time
will be granted hereunder;


(b)      to determine whether and
to what extent Stock Options, Stock Appreciation Rights, Restricted Stock or
Deferred Stock, or a combination of the foregoing, are to be granted hereunder;


(c)       to determine the number
of Shares to be covered by each such award granted hereunder; and



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(d)      to determine the terms and
conditions, not inconsistent with the terms of the Plan, of any award granted
hereunder, including, but not limited to, any restriction on any award and/or
the Shares relating thereto based on performance and/or such other factors as
the Committee may determine, in its sole discretion, and any vesting
acceleration features based on performance and/or such other factors as the
Committee may determine, in its sole discretion.


The Committee shall have the authority to adopt, alter
and repeal such administrative rules, guidelines and practices governing the
Plan as it shall, from time to time, deem advisable; to interpret the terms and
provisions of the Plan, any award issued thereunder, and any Award Agreements
relating thereto; and to otherwise supervise the administration of the Plan.


All decisions made by the
Committee pursuant to the provisions of the Plan shall be final and binding on
all persons, including the Company and Plan participants.


Each award granted under the
Plan shall be evidenced by, and subject to terms of, an Award Agreement, in
such form as the Committee shall from time to time approve, which shall be
executed by an authorized officer of the Company and the awardee.
 Director Stock Options and Director Restricted Stock under the Plan shall
be evidenced by an Award Agreement, in such form as the Committee shall from
time to time approve, in conformity with the terms and conditions the Board has
specified with respect to such awards and the terms of Section 6 and the
Plan.  The Award Agreement shall contain
provisions regarding (i) the number of Shares subject to the award, (ii) the
exercise price per Share, if any, of the award and the means of payment
therefor, (iii) the term of the award, and (iv) such other terms and conditions
not inconsistent with the Plan as may be determined from time to time by the
Committee.  A prospective awardee shall not have any rights with respect
to any such award, unless and until such awardee has executed an Award
Agreement evidencing the award, has delivered a fully executed copy thereof to
the Company, and has otherwise complied with the then applicable terms and
conditions.


SECTION 3.  Shares Subject to Plan.


Subject to adjustment as
provided in this Section 3, the total number of Shares reserved and available
for issuance in connection with awards under the Plan shall not exceed 30,000,000
Shares.


If any Shares subject to any award granted pursuant to
the Plan are forfeited or such award otherwise terminates, such Shares shall
again be available for distribution in connection with future awards under the
Plan.


In the event of any merger, reorganization,
consolidation, recapitalization, stock dividend, or other change in corporate
structure affecting the Shares, an equitable substitution or adjustment shall
be made in (i) the aggregate number of Shares reserved for issuance under
the Plan, (ii) the number and exercise price of Shares subject to
outstanding Stock Options granted under the Plan, (iii) the number of
Shares subject to Restricted Stock or Deferred Stock awards granted under the
Plan, (iv) the aggregate number of Shares available for issuance to any
participant pursuant to Section 4A(a), and (v) the number and
exercise price, if any, of Shares subject to Director Stock Option and Director
Restricted Stock awards to be granted each year pursuant to Section 6,
as may 



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be
determined to be appropriate by the Committee, in its sole discretion, provided
that the number of Shares subject to any award shall always be a whole number.
Such adjusted number and exercise price of Shares shall also be used to
determine the amount payable by the Company upon the exercise of any Stock
Appreciation Right associated with any Stock Option.


SECTION 4.  Eligibility.


(a)       Consultants and Employees.  Consultants, officers and other key
employees of the Company, its Subsidiaries or its Affiliates who are responsible
for or contribute to the management, growth and/or profitability of the
business of the Company, its Subsidiaries, or its Affiliates are eligible to be
granted Stock Options, Stock Appreciation Rights, Restricted Stock or Deferred
Stock.  Except as provided in Section 6,
Plan participants shall be selected from time to time by the Committee, in its
sole discretion, from among those eligible, and the Committee shall determine,
in its sole discretion and subject to Section 4A(a), the number of
Shares covered by each award.


(b)      Outside Directors.  Each Outside Director is eligible to receive
Director Stock Option and/or Director Restricted Stock awards pursuant to Section
6.


SECTION 4A.  Performance Awards and Award Limit.


(a)       Individual Award Limitations.  The Committee may grant awards to a Covered
Employee that are either Performance Awards or not Performance Awards.  In any calendar year during any part of which
the Plan is in effect, a participant (whether or not a Covered Employee) may
not be granted awards under the Plan (Performance Awards or otherwise) that
have, in the aggregate, more than 3,750,000 “points,” with each Stock
Appreciation Right and Stock Option having one “point” for each Share granted
with respect thereto, and each Restricted Stock and Deferred Stock award having
three “points” with respect to each Share granted with respect thereto.  For illustrative purposes, a grant of a Stock
Option for 10 Shares has 10 “points,” and a grant of 10 Shares of Restricted
Stock has 30 “points.”  If an award is
canceled, such award continues to be counted against the maximum number of
Shares for which awards may be granted to the participant under the Plan, as
set forth in this Section 4A(a).


(b)      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, as described below.


(i)            SAR/Option Performance Awards.  The exercise price (in the case of a Stock
Option) or the base price (in the case of a Stock Appreciation Right) of a
SAR/Option Performance Award shall not be less than 100% of the Fair Market
Value of the Shares on the date of grant of such SAR/Option Performance Award.


(ii)           Stock Performance Awards.  The grant, vesting and/or settlement of a
Stock Performance Award shall be contingent upon achievement of 



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pre-established performance goals and other terms set forth in
this Section 4A(b)(ii).


(A)          Performance
Goals Generally.  The
performance goals for such 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 4A(b)(ii).  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, vesting, exercise 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 awardee or to different awardees.


(B)           Business Criteria.  One or more 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; (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 the
stock performance graph contained in the proxy statement for the Company’s most
recent annual meeting of stockholders.


(C)           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  



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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.


(D)          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 a 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 goal or goals, but
may not exercise discretion to increase any such amount payable to a Covered
Employee with respect to such Performance Award.


(c)       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.


(d)      Written Determinations.  The Committee may not delegate any
responsibility relating to Performance Awards. 
All determinations by the Committee as to the establishment of performance
goals, the amount of any potential individual Performance Award, and the
achievement of performance goals relating to Stock Performance Awards shall be
made in writing in the case of any award intended to qualify as “performance-based
compensation” under Section 162(m) of the Code.  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.


(e)       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 such Section
of the Code.  Accordingly, the terms of
this Section 4A, including the definitions 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 thereof or as of the
date of any Award Agreements relating to Performance Awards intended to comply
with Section 162(m) of the Code does not comply or is inconsistent with the
requirements of such Section of the Code, then such provision shall be
construed or deemed amended to the extent necessary to conform to such
requirements.



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(f)       Conflicts
Among Plan Provisions.  To
the extent this Section 4A conflicts with any other provision of the
Plan, this Section 4A shall control.


SECTION 5.  Stock Options for Consultants and Employees.


Stock Options may be granted either alone or in
addition to other awards granted under the Plan. Any Stock Option granted under
the Plan shall be in such form as the Committee may from time to time approve,
and the provisions thereof need not be the same with respect to each optionee.


The Committee shall have the authority to grant any
consultant, officer or key employee Stock Options (with or without Stock
Appreciation Rights).  Stock Options granted under the Plan shall be
subject to the following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms of the Plan, as the
Committee shall deem desirable:


(a)       Exercise
Price.  The exercise price
per Share of any Stock Option shall be determined by the Committee at the time
of grant but shall not be less than 100% of the Fair Market Value of the Shares
on the date of grant, and shall be indicated in the Award Agreement.


(b)      Option
Term.  The term of each
Stock Option shall be fixed by the Committee.


(c)       Exercisability.  Stock Options shall be exercisable at such
time or times and subject to such terms and conditions as shall be determined
by the Committee; provided, however, that except as provided in Sections 5(f),
5(g), 5(h) or 11, no Stock Option shall be exercisable
prior to six months from the date of grant. 
Notwithstanding the limitations set forth in the preceding sentence, the
Committee may accelerate the exercisability of any Stock Option, at any time in
whole or in part, based on performance and/or such other factors as the
Committee may determine in its sole discretion.


(d)      Exercise
of Stock Options.  A Stock
Option, or portion thereof, may be exercised in whole or in part only with
respect to whole Shares.  Stock Options
may be exercised in whole or in part at any time during the exercise period by
giving written notice of 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”).  To the extent provided by the Committee,
payment in full or in part may also be made in the form of unrestricted Shares
already owned by the optionee (based on the Fair Market Value of the Shares on
the date the Stock Option is exercised). 
An optionee shall have rights to dividends and other stockholder rights with
respect to Shares subject to a Stock Option only after the optionee has given
written notice of exercise and has paid in full for such Shares.


(e)       Transferability
of Options.  A Stock
Option Award Agreement may permit an optionee to transfer such Stock Option to
members of his or her Immediate Family, to 



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one or more trusts for the benefit of such Immediate Family members, or
to one or more partnerships where such Immediate Family members are the only
partners if (i) the Award Agreement setting forth such Stock Option
expressly provides for the transfer thereof with the express written consent of
the Committee, and (ii) the optionee does not receive any consideration in
any form whatsoever for such transfer. 
Any Stock Option so transferred shall continue to be subject to the same
terms and conditions in the hands of the transferee as were applicable to such
Stock Option immediately prior to the transfer thereof.  Any Stock Option (A) not granted
pursuant to an Award Agreement expressly allowing the transfer of such Stock
Option, or (B) that the Award Agreement for which has not been amended
expressly to permit its transfer shall not be transferable by the optionee
other than by will or by the laws of descent and distribution.


(f)       Termination
by Death.  Unless
otherwise determined by the Committee, if an optionee’s employment with the
Company, any Subsidiary, or any Affiliate terminates by reason of death, any
Stock Option held by such optionee shall become immediately exercisable, and
thereupon (or if an optionee dies following termination of employment by reason
of Disability or Early or Normal Retirement), such Stock Option may thereafter
be exercised by the legal representative of the estate or by the legatee of the
optionee under the will of the optionee during the period ending on the first
anniversary of the optionee’s death.


(g)      Termination
by Reason of Disability. 
Unless otherwise determined by the Committee, if an optionee’s
employment with the Company, any Subsidiary or any Affiliate terminates by
reason of Disability, any Stock Option held by such optionee shall be
immediately exercisable and may thereafter be exercised during the period
ending on the expiration of the stated term of such Stock Option.


(h)      Termination
by Reason of Retirement. 
Unless otherwise determined by the Committee, if an optionee’s
employment with the Company, any Subsidiary or any Affiliate terminates by
reason of (i) Normal Retirement, any Stock Option held by such optionee
shall become immediately exercisable and shall expire at the end of the stated
term of such Stock Option, or (ii) Early Retirement, any Stock Option held
by such optionee shall terminate three years from the date of such Early
Retirement or upon the expiration of the stated term of the Stock Option,
whichever is earlier.  In the event of
Early Retirement, there shall be no acceleration of vesting of the Stock
Option, unless otherwise determined by the Committee at or after grant, and
such Stock Option may only be exercised to the extent it is or has become
exercisable prior to termination of the Stock Option.


(i)     Termination
for Cause.  If the
optionee’s employment with the Company, any Subsidiary or any Affiliate is
terminated for Cause, any Stock Option held by such optionee shall immediately
be terminated upon the giving of notice of termination of employment.


(j)     Other
Termination.  Unless
otherwise determined by the Committee, if the optionee’s employment with the
Company, any Subsidiary or any Affiliate is (i) involuntarily terminated
by the optionee’s employer without Cause, any Stock Option held by such
optionee shall terminate three months from the date of termination of 



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employment or upon the expiration of the stated term of the Stock
Option, whichever is earlier, or (ii) voluntarily terminated for any
reason, any Stock Option held by such optionee shall terminate one month from
the date of termination of employment or upon the expiration of the stated term
of the Stock Option, whichever is earlier. 
In either event, there shall be no acceleration of vesting of the Stock
Option unless otherwise determined by the Committee and such Stock Option may
only be exercised to the extent it is or has become exercisable prior to
termination of the Stock Option.


(k)       Termination
upon Change of Control. 
Notwithstanding the provisions of Section 5(j), but subject
to Section 11, if the optionee’s employment with the Company, any
Subsidiary or any Affiliate is involuntarily terminated by the optionee’s
employer without Cause by reason of, or within three months after, a Change of
Control, any Stock Option held by such optionee shall terminate six months and
one day after such Change of Control.


(l)        For purposes of the
Plan, all references to termination of employment shall be construed to mean
termination of all employment and consultancy relationships with the Company
and its Subsidiaries and Affiliates; provided, however, that nothing in the
Plan shall be construed to create or continue a common law employment
relationship with any individual characterized by the Company, a Subsidiary or
an Affiliate as an independent contractor or consultant.


(m)      The Committee, in its
discretion, may include in any Stock Option Award Agreement, a “stock option
restoration program” (“SORP”) provision. Such provision shall provide, without
limitation, that, if payment on exercise of a Stock Option is made in the form
of Shares, and the exercise occurs on the Annual SORP Exercise Date, an
additional Stock Option to purchase Shares (a “SORP Option”) will automatically
be granted to the optionee 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 equal to that of the originally exercised
Stock Option giving rise to the SORP Option, not to exceed a maximum term of
10 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), (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
Stock Option, plus the number of Shares (if any) withheld or sold to cover
income 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.  Director Stock Options and Director
Restricted Stock.


(a)       Awards. 
Except to the extent otherwise provided in this Section 6 and Section 11,
all terms and conditions of Director Stock Option and Director Restricted Stock
awards shall be established by the Board in its sole discretion including,
without 



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limitation,
the nontransferability thereof and the time or times within which such Restricted
Stock may be subject to forfeiture.  Director Restricted Stock shall be subject to
the provisions of Sections 8(b) and 8(c).


(i)       Formula-based Director Stock Options and Director Restricted Stock.  For
each calendar year, either (A) Director Stock Options for 4,500 Shares, or
(B) an award of 1,500 Shares of Director Restricted Stock shall be
automatically granted to each Outside Director on the first Business Day of
each calendar year.  The determination as
to whether an award is made pursuant to clause (A) or (B) of this
Section 6(a)(i) shall be made in the sole discretion of the Board.  The exercise price per Share of any Director
Stock Option granted pursuant to this Section 6(a)(i) shall be 100%
of the Fair Market Value per Share on the date of grant.  Subject to Sections 6(d) and 11,
(1) Director Stock Options granted pursuant to this Section 6(a)(i)
shall become exercisable six months from the date of grant for a term of ten
years and two days from the date of grant, and (2) the price, if any, to
be paid, and the time or times within which Director Restricted Stock may be
subject to forfeiture, or may be nontransferable, will be determined by the
Board in its sole discretion.


(ii)      Non-Formula
Based Director Stock Options and Director Restricted Stock.  In
its sole discretion, the Board may, from time to time, award Director Stock
Options and/or Director Restricted Stock on a non-formula basis to individual
Outside Directors as it shall select.  Director
Stock Options or Director Restricted Stock granted pursuant to this Section 6(a)(ii)
may be awarded at such times and for such number of Shares as the Board in its
sole discretion determines.  The exercise
price of such Director Stock Options shall be 100% of the Fair Market Value of
the Shares on the date of grant. 
Director Stock Options granted pursuant to this Section 6(a)(ii)
shall become first exercisable and have a term as determined by the Board in
its sole discretion; provided, however, that subject to Sections 6(d)
and 11, no Director Stock Option shall be first exercisable until six
months from the date of grant.  Subject
to Sections 6(d) and 11, the price, if any, to be paid, and
the time or times within which Director Restricted Stock may be subject to
forfeiture, or may be nontransferable, will be determined by the Board in its
sole discretion.


(b)      Exercise
of Director Stock Options.  Any Director Stock Option, or portion
thereof, granted pursuant to the Plan may be exercised in whole or in part only
with respect to whole Shares.  Director
Stock Options may be exercised in whole or in part at any time during the
exercise period by giving written notice of 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”).  As determined by the Committee, in its sole
discretion, payment in full or in part may also be made in the form of
unrestricted Shares already owned by the optionee (based on the Fair Market
Value of the Shares on the date the Director Stock Option is exercised).  An optionee shall have rights to dividends
and other stockholder rights with respect to Shares 



 12
 









subject to a Director Stock Option only after the
optionee has given written notice of exercise and has paid in full for such
Shares.


(c)       Transferability.  No
Director Stock Option shall be transferable by the optionee other than by will
or by the laws of descent and distribution, and all Director Stock Options
shall be exercisable, during the optionee’s lifetime, only by the optionee;
provided, however, that the Committee may (but need not) permit other transfers
where the Committee concludes, in its sole discretion, that such
transferability (i) does not result in accelerated taxation, and (ii) is
otherwise appropriate and desirable, taking into account any factors considered
relevant by the Committee, including, without limitation, any state or Federal
securities laws applicable to transferable options.


(d)      Termination
of Service.  Upon an optionee’s termination of status as
an Outside Director for any reason, any Director Stock Options held by such
optionee shall become immediately exercisable and may thereafter be exercised
during the period ending on the expiration of the stated term of such Director
Stock Option or, upon such optionee’s death, during the period ending on the
first anniversary thereof. 
Notwithstanding the foregoing sentence, but subject to Section 11,
if the optionee’s status as an Outside Director terminates by reason of or
within three months after a Change of Control, each Director Stock Option held
by such optionee shall terminate upon the latest of (i) six months and one
day after the Change in Control, or (ii) the expiration of the stated term
of such Director Stock Option.  Upon the
termination of an awardee’s status as an Outside Director by reason of death or
Disability, all restrictions, including restrictions regarding forfeiture and
nontransferability, placed upon any Director Restricted Stock held by such
awardee shall immediately lapse and such shares shall be deemed fully vested
and nonforfeitable.  Upon the termination
of an awardee’s status as an Outside Director for any reason other than death
or Disability, all Shares of Director Restricted Stock granted pursuant to this
Section 6 still subject to restriction shall be forfeited by such
Outside Director, and the Outside Director shall only receive the amount, if
any, paid by the Outside Director for such forfeited Director Restricted Stock.


SECTION 7.  Stock Appreciation Rights.


(a)       Grant and Exercise.  Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan either
at or after the time of the grant of such Stock Option.


A Stock Appreciation Right, or applicable portion
thereof, granted with respect to a given Stock Option shall terminate and no
longer be exercisable upon the termination or exercise of the related Stock
Option, except that, unless otherwise provided by the Committee at the time of
grant, a Stock Appreciation Right granted with respect to less than the full
number of Shares covered by a related Stock Option shall only be reduced if and
to the extent that the number of Shares covered by the exercise or termination
of the related Stock Option exceeds the number of Shares not covered by the
Stock Appreciation Right.



 13
 









 


A Stock Appreciation Right may be exercised by an
optionee in accordance with Section 7(b),
by surrendering the applicable portion of the related Stock Option. Upon such
exercise and surrender, the optionee shall be entitled to receive an amount
determined in the manner prescribed in Section 7(b).  Stock Options which have been so surrendered,
in whole or in part, shall no longer be exercisable to the extent the related
Stock Appreciation Rights have been exercised.


(b)      Terms and
Conditions.  Stock
Appreciation Rights shall be subject to such terms and conditions, not
inconsistent with the provisions of the Plan, as shall be determined from time
to time by the Committee, including the following:


(i)     Stock Appreciation Rights
shall be exercisable only at such time or times and to the extent that the
related Stock Options shall be exercisable in accordance with the provisions of
Section 5 and this Section 7; provided, however, that
any Stock Appreciation Right granted subsequent to the grant of the related
Stock Option shall not be exercisable during the first six months of the term
of the Stock Appreciation Right, except that this additional limitation shall
not apply in the event of death or Disability of the optionee prior to the
expiration of the six-month period.


(ii)    Upon the exercise of a
Stock Appreciation Right, an optionee shall be entitled to receive up to, but
not more than, an amount in cash or Shares equal in value to the excess of the
Fair Market Value of one Share over the exercise price per Share specified in
the related Stock Option Award Agreement multiplied by the number of Shares
with respect to which the Stock Appreciation Right shall have been exercised,
with the Committee having the right to determine the form of payment.


(iii)   Stock Appreciation Rights
shall be transferable only when and to the extent that the underlying Stock
Option would be transferable under Section 5(e) of the Plan.


(iv)   Upon the exercise of a Stock
Appreciation Right, the related Stock Option or part thereof shall be deemed to
have been exercised for the purpose of the limitation set forth in Section 3
on the number of Shares to be issued under the Plan.


(v)      In its sole discretion,
the Committee may provide, at the time of grant of a Stock Appreciation Right,
that such Stock Appreciation Right can be exercised only in the event of a
Change of Control and/or a Potential Change of Control and that upon such
event, the amount to be paid upon the exercise of a Stock Appreciation Right
shall be based on the Change of Control Price.


 



 14















 


SECTION 8.   Restricted
Stock.


(a)           Administration.  Shares of Restricted Stock may be granted
either alone or in addition to other awards granted under the Plan.  Any Restricted Stock award granted under the
Plan shall be in such form as the Committee may from time to time approve, and
the provisions thereof need not be the same with respect to each awardee.  The Committee shall determine the
consultants, officers, and key employees of the Company and its Subsidiaries and
Affiliates to whom, and the time or times at which, Restricted Stock will be
awarded; the number of Shares of Restricted Stock to be awarded to any awardee;
the price, if any, to be paid by the awardee; the time or times within which
such awards may be subject to forfeiture and nontransferability; and all other
terms and conditions of the awards (subject to this Section 8 and Section 11).
The Committee may also condition the grant and/or vesting of Restricted Stock
upon the attainment of one or more specified performance goals, or such other criteria
as the Committee may determine, in its sole discretion.


(b)           Restrictions and Conditions. 
Shares of Restricted Stock awarded shall be subject to the following
restrictions and conditions:


(i)            Subject
to the provisions of the Plan and the applicable Award Agreement, during such
period as may be set by the Committee commencing on the grant date, Restricted
Stock awarded pursuant to the Plan shall not be sold, assigned, transferred,
pledged or otherwise encumbered.  The
Committee may, in its sole discretion, provide for the lapse of such
restrictions in installments and may accelerate or waive such restrictions in
whole or in part, before or after the awardee’s termination of employment,
based on performance and/or such other factors as the Committee may determine,
in its sole discretion.


(ii)           Except
as provided in clause (i) above, the awardee
shall have, with respect to the Shares of Restricted Stock, all of the rights
of a stockholder of the Company, including the right to receive any dividends.
Dividends paid in stock of the Company or stock received in connection with a
stock split with respect to Restricted Stock shall be subject to the same
restrictions as on such Restricted Stock. 
Certificates, if issued, for unrestricted Shares, shall be delivered to
the awardee promptly after, and only after, the period of forfeiture shall
expire without forfeiture with respect to such Shares of Restricted Stock.


(c)           Book-Entry Accounts; Certificates for Restricted
Stock.  An account for
each awardee shall be opened with the Company’s transfer agent or such other
administrator designated by the Committee for the deposit of the Shares of
Restricted Stock subject to the award, or, in the sole discretion of the
Committee, each awardee may be issued a stock certificate registered in the
name of the awardee evidencing such Shares of Restricted Stock. The Committee
shall specify that any such certificate bear a legend, as provided in clause (i)
below, and/or be held in custody by the Company, as provided in clause (ii)
below.



 15
 









 


(i)            Any
certificate evidencing Restricted Stock shall bear an appropriate legend
referring to the terms, conditions and restrictions applicable to such
Restricted Stock, 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
Stock Incentive 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.”


(ii)           The
Committee shall require that stock certificates evidencing such Restricted
Stock be held in custody by the Company or the transfer agent or such other
administrator designated by the Committee until the restrictions thereon shall
have lapsed, and that, as a condition of any Restricted Stock award, the
awardee shall have delivered to the Company a stock power, endorsed in blank,
relating to the Shares covered by such award.


(d)           Termination.  Subject to the provisions of the Award
Agreement and this Section 8, upon termination of employment by
reason of death or Disability, the restrictions upon any Restricted Stock
granted pursuant to Section 8(a) held by the awardee shall
immediately lapse and such shares shall become fully vested and
nonforfeitable.  Upon termination of
employment for any reason other than death or Disability, all Shares of
Restricted Stock granted pursuant to Section 8(a) still subject to
restriction shall be forfeited by the awardee, and the awardee shall only
receive the amount, if any, paid by the awardee for such forfeited Restricted
Stock.


SECTION 9.   Deferred Stock
Awards.


(a)           Administration.  Deferred Stock may be granted either alone or
in addition to other awards granted under the Plan.  Any Deferred Stock granted under the Plan
shall be in such form as the Committee may from time to time approve, and the
provisions thereof need not be the same with respect to each awardee.  The Committee shall determine the
consultants, officers and key employees of the Company, its Subsidiaries or
Affiliates to whom, and the time or times at which, Deferred Stock shall be
awarded; the number of Shares of Deferred Stock to be awarded to any awardee;
the Deferral Period during which, and the conditions under which, receipt of
the Shares will be deferred; and all other terms and conditions of the award
(subject to this Section 9 and Section 11).  The Committee may also condition the grant
and/or vesting of Deferred Stock upon the attainment of specified performance
goals, or such other criteria as the Committee shall determine, in its sole
discretion.


(b)           Terms and Conditions.  Shares of Deferred Stock awarded pursuant to
this Section 9 shall be subject to the following terms and
conditions:


 



 16
 









 


(i)            Subject
to the provisions of the Plan and the applicable Award Agreement, during the
Deferral Period, Deferred Stock awarded pursuant to the Plan may not be sold,
assigned, transferred, pledged or otherwise encumbered.  At the expiration of the Deferral Period,
stock certificates shall be delivered to the awardee, or his legal
representative, in a number equal to the Shares covered by the Deferred Stock
award.


(ii)           At
the time of the award, the Committee may, in its sole discretion, determine
that amounts equal to any dividends declared during the Deferral Period with
respect to the number of Shares covered by a Deferred Stock award will be paid
to the awardee currently, deferred and deemed to be reinvested, or that such
awardee has no rights with respect thereto.


(iii)          Subject
to the provisions of the applicable Award Agreement and this Section 9, upon termination of employment for any
reason during the Deferral Period, the Deferred Stock held by such awardee
shall be forfeited by the awardee.


(iv)          Based
on performance and/or such other criteria as the Committee may determine, the
Committee may, at or after grant (including after the awardee’s termination of
employment), accelerate the vesting of all or any part of any Deferred Stock
award and/or waive the deferral limitations for all or any part of such award.


SECTION 10.   Amendments and
Termination.


The Board may amend, alter, or discontinue the Plan,
but no such amendment, alteration, or discontinuation shall be made which would
impair the right of an optionee or awardee
under a Stock Option, Director Stock Option, Stock Appreciation Right,
Restricted Stock, Director Restricted Stock or Deferred Stock award granted
prior thereto, without the optionee’s or awardee’s
consent.


Amendments may be made without stockholder approval
except as required to satisfy Sections 162(m) of the Code, stock exchange
listing requirements, or other applicable law or regulatory requirements.


The Committee may amend the terms
of any Stock Option, Stock Appreciation Right, Restricted Stock or Deferred
Stock award granted, and the Board may amend the terms of any Director Stock
Option or Director Restricted Stock
award, prospectively or retroactively, but no such amendment shall be
made which would impair the rights of an optionee or awardee without the
optionee’s or awardee’s consent.


SECTION 11.  Change of Control.


The following acceleration and
valuation provisions shall apply in the event of a Change of Control or
Potential Change of Control:


 



 17
 









 


(a)           In the event of (1) a Change of Control, unless otherwise
determined by the Committee in writing at or after grant, but prior to the
occurrence of such Change of Control, or (2) a Potential Change of Control,
only if and to the extent so determined by the Committee in writing at or after
grant (subject to any right of approval expressly reserved by the Committee at
the time of such determination):


(i)            any
Stock Appreciation Rights, Stock Options and Director Stock Options awarded
under the Plan not previously exercisable and vested shall become fully
exercisable and vested;


(ii)           the
restrictions and deferral limitations applicable to any Restricted Stock,
Director Restricted Stock and Deferred Stock awards under the Plan shall lapse
and such Shares and awards shall be deemed fully vested and nonforfeitable; and


(iii)          the
value of all outstanding Stock Option, Director Stock Option, Stock
Appreciation Right, Restricted Stock, Director
Restricted Stock and Deferred Stock awards, shall, to the extent determined by
the Committee at or after grant, be settled on the basis of the Change of
Control Price as of the date the Change of Control occurs or Potential Change
of Control is determined to have occurred, or such other date as the Committee
may determine prior to the Change of Control or Potential Change of Control. In
the sole discretion of the Committee, such settlements may be made in cash,
stock or other property, or any combination thereof; provided, however, to the
extent any such settlement is made in Shares, such Shares will be deemed to
have been distributed under the Plan.


(b)           A “Change of Control” means the occurrence of any of the
following:


(i)            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 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;


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


(iii)          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



 18
 









 


(iv)          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 through purchase of assets, or by merger, or otherwise.


(c)           A “Potential Change of Control” means the occurrence of
any of the following:


(i)            the entering into of an agreement by the Company, the
consummation of which would result in a Change of Control; or


(ii)           the acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group (other than the Company or a
Subsidiary or any Company employee benefit plan) of securities of the Company
representing 5% or more of the combined voting power of the Company’s then
outstanding securities and the adoption by the Board of Directors of a
resolution to the effect that a Potential Change of Control of the Company has
occurred for purposes of the Plan.


(d)           “Change of Control Price” means the highest price per
Share paid in any transaction reported on the New York Stock Exchange or other
national securities exchange or over-the-counter market on which the Shares are
then traded, or paid or offered in any transaction related to a potential or
actual Change of Control at any time during the preceding 60-day period
as determined by the Committee, except that in the case of Director Stock
Options and Director Restricted Stock, the 60-day period shall be the
period immediately prior to a potential or actual Change of Control.


SECTION 12.   Limitations on
Payments.


(a)           Notwithstanding any other provision of the Plan or any
other agreement, arrangement or plan, in no event shall the Company pay or be
obligated to pay any participant an amount which would be an Excess Parachute
Payment, except as provided in Section 12(f) and except as the
Committee specifically provides otherwise in the participant’s Award
Agreement.  For purposes of the Plan, the
term “Excess Parachute Payment” shall mean any payment or any portion thereof
which would be an “excess parachute payment” within the meaning of
Section 280G(b)(1) of the Code, and would result in the imposition of an
excise tax under Section 4999 of the Code, in the opinion of tax counsel
selected by the Company (“Tax Counsel”). 
In the event it is determined that an Excess Parachute Payment would
result if the full acceleration of vesting and exercisability provided in Section 11
were made (when added to any other payments or benefits contingent on a change
of control under any other agreement, arrangement or plan), the payments due
under Section 11(a) shall be reduced to the minimum extent
necessary to prevent an Excess Parachute Payment; then, if necessary to prevent
an Excess Parachute Payment, benefits or payments under any other plan,
agreement or arrangement shall be reduced. If it is established pursuant to a
final determination of a court or an Internal Revenue Service administrative
appeals proceeding that, notwithstanding the good faith of the participant and
the Company in applying the terms of this Section 12(a), a payment
(or portion thereof) made is an Excess Parachute Payment, then, the Company
shall pay to the 


 



 19
 









 


participant
an additional amount in cash (a “Gross-Up Payment”) equal to the amount
necessary to cause the amount of the aggregate after-tax compensation and
benefits received by the participant hereunder (after payment of the excise tax
under Section 4999 of the Code with respect to any Excess Parachute
Payment, and any state and Federal income taxes with respect to the Gross-Up
Payment) to be equal to the aggregate after-tax compensation and benefits the
participant would have received as if Sections 280G and 4999 of the Code had
not been enacted.


(b)           Subject to the provisions of Section 12(c),
the amount of any Gross-Up Payment and the assumptions to be utilized in
arriving at such amount shall be determined by a nationally recognized
certified public accounting firm designated by the Company (the “Accounting
Firm”). All fees and expenses of the Accounting Firm shall be borne solely by
the Company. Any Gross-Up Payment, as determined pursuant to Section 12(a),
shall be paid by the Company to the participant within five Business Days after
the receipt of the Accounting Firm’s determination. Any determination by the
Accounting Firm shall be binding upon the Company and the participant.


(c)           A participant shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of a Gross-Up Payment. Such notification shall be given
no later than ten Business Days after the participant is informed in writing of
such claim and shall apprise the Company of the nature of the claim and the
date of requested payment.  A participant
shall not pay the claim prior to the expiration of the 30-day period
following the date on which it gives notice to the Company. If the Company
notifies such participant in writing prior to the expiration of the 30-day
period that it desires to contest such claim, the participant shall:


(i)            provide the Company with any information reasonably
requested by the Company relating to such claim;


(ii)           take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney selected by the Company and reasonably acceptable to
the participant;


(iii)          cooperate with the Company in good faith in order to
effectively contest such claim; and


(iv)          permit
the Company to participate in any proceedings relating to such claim.


Without limitation on the
foregoing provisions of this Section 12(c), the Company shall
control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority with respect to such claim
and may, at its sole option, either direct the participant to pay the tax
claimed and sue for a refund or contest the claim in any permissible manner,
and the participant agrees to prosecute such contest 


 



 20
 









 


to a determination before
any administration tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company shall determine; provided, however, that
the Company shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such contest and
shall indemnify and hold the participant harmless, on an after-tax basis, for
any excise tax or income tax (including interest and penalties with respect
thereto) imposed as a result of the contest; provided, further, that if the
Company directs the participant to pay any claim and sue for a refund, the
Company shall advance the amount of the payment to the participant, on an
interest-free basis, and shall indemnify and hold the participant harmless, on
an after-tax basis, from any excise tax or income tax (including interest or
penalties with respect thereto) imposed with respect to the advance or with respect
to any imputed income with respect to the advance.


(d)           In the event the Company exhausts its remedies pursuant to
Section 12(c) and the participant thereafter is required to make a
payment of any excise tax, the Accounting Firm shall determine the amount of
the Gross-Up Payment required and such payment shall be promptly paid by the
Company to or for the benefit of such participant.


(e)           If, after the receipt by the participant of an amount
advanced by the Company pursuant to Section 12(c), the participant
becomes entitled to receive any refund with respect to such claim, the
participant shall promptly, after receiving such refund, pay to the Company the
amount of such refund (together with any interest paid or credited thereon
after taxes applicable thereto).  If,
after the receipt by the participant of an amount paid by the Company pursuant
to Section 12(c), a determination is made that the participant
shall not be entitled to any refund with respect to such claim and the Company
does not notify the participant in writing of its intent to contest such denial
of refund prior to the expiration of 30 days after such determination, then
such payment shall be forgiven and shall not be required to be repaid and the
amount of such payment shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.


(f)            Notwithstanding the foregoing, the limitation set forth
in Section 12(a) shall not apply to a participant if, in the
opinion of Tax Counsel or the Accounting Firm, the total amounts payable to the
participant hereunder and under any other agreement, arrangement or plan as a
result of a change of control (calculated without regard to the limitation of Section 12(a)),
reduced by the amount of excise tax imposed on the participant under Section 4999
of the Code with respect to all such amounts and reduced by the state and
Federal income taxes on amounts paid in excess of the limitation set forth in Section 12(a),
would exceed such total amounts payable after application of the limitation of 


Section 12(a). No Gross-Up Payment shall be made in such case.


SECTION 13.   General
Provisions.


(a)           All certificates for Shares delivered under the Plan shall
be subject to such stop transfer orders and other restrictions as the Committee
may deem advisable under the rules, regulations, and other requirements of the
Commission, any stock exchange upon which the Shares are then listed, and any
applicable Federal or state securities law, and the 


 



 21
 









 


Committee
may cause a legend or legends to be placed on any such certificates to make
appropriate reference thereto.


(b)           Nothing set forth in the Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to stockholder
approval if such approval is required. 
The adoption of the Plan shall not confer upon any employee or director
of the Company, any Subsidiary or any Affiliate, any right to continued
employment (or, in the case of a director, continued retention as a director)
with the Company, a Subsidiary or an Affiliate, as the case may be, nor shall
it interfere in any way with the right of the Company, a Subsidiary or an
Affiliate to terminate the employment of any of its employees at any time.


(c)           Each participant shall, no later than the date as of which
the value of an award first becomes includible in the gross income of the
participant for Federal income tax purposes, pay to the Company, or make
arrangements satisfactory to the Committee, in its sole discretion, regarding
payment of, any Federal, FICA, state, or local taxes of any kind required by
law to be withheld with respect to such award. 
The obligations of the Company under the Plan shall be conditional on
such payment or arrangements.  The
Committee may permit participants to elect to satisfy their Federal, and where
applicable, FICA, state and local tax withholding obligations with respect to
all awards, other than Stock Options which have related Stock Appreciation
Rights, by the reduction, in an amount necessary to pay all such withholding
tax obligations, of the number of Shares or amount of cash otherwise issuable
or payable to such participants with respect to an award. The Company and,
where applicable, its Subsidiaries and Affiliates shall, to the extent
permitted by law, have the right to deduct any such taxes owed hereunder by a
participant from any payment of any kind otherwise due to such participant.


(d)           At the time of grant or purchase, the Committee may
provide, in connection with any grant or purchase made under the Plan, that the
Shares received as a result of such grant or purchase shall be subject to a
right of first refusal, pursuant to which the participant shall be required to
offer to the Company any Shares that the participant wishes to sell, with the
price being the then Fair Market Value of the Shares, subject to the provisions
of Section 11 and to such other terms and conditions as the
Committee may specify at the time of grant.


(e)           No member of the Board or the Committee, nor any officer
or employee of the Company acting on behalf of the Board or the Committee,
shall be personally liable for any action, determination, or interpretation
taken or made in good faith with respect to the Plan, and all members of the
Board or the Committee and each and any officer or employee of the Company
acting on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such action,
determination or interpretation.


(f)            The Plan is not intended to be a “non-qualified
deferred compensation plan” under Section 409A of the Code and shall not
be construed or administered accordingly. 
If any term or provision contained herein would otherwise cause the Plan
to be characterized 



 22
 









 


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.


SECTION 14.   Effective Date
of Plan.


The Plan became effective on
March 3, 1998, the date it was originally approved by a majority vote of the
Company’s stockholders.


 



 23