Document:

Exhibit 10.12

 

WADDELL & REED FINANCIAL, INC.

 

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

 

 

As Amended and Restated Effective as of
January 1, 2005

 

 

WADDELL & REED FINANCIAL, INC.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

As Amended and Restated Effective January 1, 2005

 

PURPOSE

 

The purpose of
the Waddell & Reed Financial, Inc. Supplemental Executive Retirement Plan
is to provide deferred compensation that otherwise would be paid currently to a
select group of management or highly compensated employees of the Company (as
defined below) and any subsidiaries or affiliates of the Company that may adopt
this Plan (as defined below) with the consent of the Board of Directors of the
Company.  This Plan is designed to
constitute a nonqualified deferred compensation arrangement.  This amendment and restatement, effective
January 1, 2005, is intended to bring the Plan into compliance with section
409A of the Code (as defined below) and guidance issued pursuant thereto.

 

ARTICLE I

DEFINITION OF TERMS

 

The following
words and phrases when used herein, unless the context clearly requires
otherwise, will have the following respective meanings:

 

1.1                               “Administrator” means the
Compensation Committee.

 

1.2                               “Approved Domestic Relations Order”
means a Domestic Relations Order that is determined by the Administrator, in
its sole discretion, to be an Approved Domestic Relations Order in accordance
with the provisions of Section 6.2.

 

1.3                               “Aggregate Contribution Amount”
means the amount, if any, determined by the Compensation Committee in its sole
discretion, to be credited as a Supplemental Executive Retirement Benefit among
Participants’ Deferred Compensation Accounts for a Plan Year in accordance with
the provisions of Section 4.2(b).

 

1.4                               “Base Pay” means a Participant’s
base salary for a Plan Year, excluding extraordinary pay such as bonuses,
commissions, incentive payments, benefits, expense allowances, expense
reimbursements, or income from restricted stock or stock option awards, as
designated by the Compensation Committee in its sole discretion.

 

1.5                               “Claim for Benefits” has the
meaning specified in Section 6.6(a).

 

1.6                               “Code” means the Internal Revenue
Code of 1986, as amended.

 

1.7                               “Company” means Waddell & Reed
Financial, Inc., a Delaware corporation.

 

1.8                               “Compensation Committee” means the
Compensation Committee of the Board of Directors of Waddell & Reed
Financial, Inc.

 

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1.9                               “Deferred Compensation Account”
means the memorandum account established pursuant to Section 4.1 and maintained
for each Participant on the Company’s books and records.

 

1.10                        “Domestic Relations Order” means a
final judgment, decree, order, or property settlement agreement made pursuant
to a state domestic relations law.

 

1.11                        “Effective Date” means January 1,
2005.  The Plan was originally effective
December 10, 1998 and was subsequently amended and restated effective July 14,
2004.

 

1.12                        “Employee” means a common-law
employee of the Company or a Participating Employer who is a member of a select
group of management or highly compensated employees.

 

1.13                        “ERISA” means the Employee
Retirement Income Security Act of 1974, as amended.

 

1.14                        “Notice of Denial” has the meaning
specified in Section 6.6(b).

 

1.15                        “401(k) Plan” means the Waddell
& Reed Financial, Inc. 401(k) and Thrift Plan, as such plan may be amended
from time to time, or any similar plan in which a Participating Employer
participates.

 

1.16                        “Participant” means an Employee
who has satisfied the requirements for eligibility under Article III and is
participating in the Plan.

 

1.17                        “Participating Employer” means a
subsidiary or affiliate of the Company that adopts this Plan by a properly
executed document evidencing such intent with the consent of the Board of
Directors of the Company.

 

1.18                        “Plan” means the Waddell &
Reed Financial, Inc. Supplemental Retirement Benefit Plan, as may be amended,
modified or supplemented from time to time.

 

1.19                        “Plan Year” means the period
commencing January 1 and ending December 31.

 

1.20                        “Request for Review” has the
meaning specified in Section 6.6(d).

 

1.21                        “Supplemental Executive Retirement Benefit”
means the allocations, if any, made pursuant to Section 4.2(b).

 

1.22                        “Total Disability” means a
Participant is, by reason of any medically determinable physical or mental
impairment which can be expected to last for a continuous period of not less
than twelve months, receiving long-term disability benefits under the Company’s
(or his or her Participating Employer’s) long-term disability insurance plan.

 

1.23                        “Valuation Date” means December 31
and such other or additional dates as provided herein or otherwise designated
by the Administrator as Valuation Dates for the purpose of making valuation
adjustments to the Deferred Compensation Accounts in accordance with Section
4.2(c).

 

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ARTICLE II

ADMINISTRATION

 

The Plan will
be administered by the Administrator and benefits under the Plan will be paid
only if the Administrator decides, in its sole discretion, that a Participant
is entitled to them.  The decision of a
majority of the members of the Compensation Committee will control; provided,
however, that a member will not be entitled to participate in discretionary
decisions directly related to such person’s own participation in the Plan.

 

The
Administrator will have full power and authority to adopt rules, regulations,
and practices governing the administration of the Plan, to interpret and apply
the provisions of the Plan in its sole discretion, to alter, amend, or revoke
any rules and regulations so adopted, to enter into contracts on behalf of the
Company with respect to the Plan, and to make discretionary decisions under the
Plan, except where that authority is retained by the Company under the Plan.  The Administrator will administer this Plan
and render decisions in a uniform and consistent manner so that all
Participants in similar circumstances are generally treated similarly.  The Administrator’s decision as to all
aspects of Plan operations, including but not limited to, the eligibility of
persons to participate in this Plan, the benefits payable under this Plan, and
the interpretation of this Plan, cannot be overturned unless it has no
foundation.

 

ARTICLE III

ELIGIBILITY

 

An Employee
who has been designated by the Administrator as eligible for participation in
the Plan will be eligible for participation beginning in the Plan Year with
respect to which the designation is made. 
A Participant will continue to participate in the Plan until he or she
ceases to be a member of a select group of management or highly compensated
employees, or until the Administrator in its sole discretion determines
otherwise.

 

ARTICLE IV

DEFERRED COMPENSATION ACCOUNTS

 

4.1                               Establishment of Deferred Compensation
Accounts.  At the time an Employee
becomes a Participant in the Plan, the Company will establish a Deferred
Compensation Account for the Participant on its books.

 

4.2                               Additions to Deferred Compensation Accounts.

 

(a)                                  401(k) Plan Benefit Restoration.  For each Plan Year, the Administrator will
credit the Deferred Compensation Account of each Participant with an amount
equal to four percent (4%) of his or her Base Pay, less the amount of the
maximum employer matching contribution that could be made pursuant to the terms
of the 401(k) Plan on the Participant’s behalf under the 401(k) Plan with
respect to that Plan Year.

 

(b)                                 Supplemental Executive Retirement Benefit.  For each Plan Year, the Compensation
Committee will credit the Aggregate Contribution Amount among the Deferred
Compensation Accounts of Participants in proportion to their Base Pay for the
Plan Year.

 

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(c)                                  Valuation and Adjustments.  As of each Valuation Date, the Administrator
will also credit (or charge) the Participant’s Deferred Compensation Account
with valuation adjustments determined in accordance with this Section
4.2(c).  The valuation adjustment to be
credited (or charged) to the Participant’s Deferred Compensation Account as of
any Valuation Date will be an amount equal to the performance of certain
hypothetical investments or investment vehicles since the last preceding
Valuation Date as described below.  The
performance of such hypothetical investments or investment vehicles taken into
account for purposes of this Section 4.2(c) will include, but not be limited
to, in the sole discretion of the Administrator, interest, expenses, and
realized and unrealized gains and losses. 
The crediting (or charging) of amounts under this Section 4.2(c) will
occur so long as there is a balance in the Participant’s Deferred Compensation
Account; provided, however, the crediting (or charging) of amounts under this
Section 4.2(c) will cease as close as reasonably practicable (as determined by
the Administrator in its sole discretion) prior to the date a complete
distribution of a Participant’s benefit under this Plan is made.  The value of the Participant’s Deferred
Compensation Account as of the relevant Valuation Date will be determined as if
the balance of the Deferred Compensation Account as of the preceding Valuation
Date, together with any amounts subsequently credited to (less any amounts
distributed from) such Deferred Compensation Account, had been invested since
the preceding Valuation Date or the date credited to the Deferred Compensation
Account, as the case may be, in the hypothetical investments or investment
vehicles specified for the Participant’s Deferred Compensation Account.

 

(d)                                 Investments.  Each Participant, in a manner prescribed by
the Administrator, may designate the hypothetical investments or investment
vehicles in which his or her Deferred Compensation Account is to be deemed
invested under the investment options permitted by the Administrator.  Notwithstanding any other provision of this
Plan, a Participant may not designate the hypothetical investment of his or her
Deferred Compensation Account in stock or other securities of the Company or a
Participating Employer.  The
Administrator (or trustee of a grantor trust if a grantor trust is used in
connection with this Plan), in its sole discretion, may determine whether any
Deferred Compensation Accounts will, in fact, be invested according to the
hypothetical investments or investment vehicles or will be invested
otherwise.  Such hypothetical investment
designations may be made up to two times per calendar year for each Participant
by making an election with the Administrator, in a manner prescribed by the
Administrator.  The designation will
continue until changed by the submission of a new designation, which change
will be effective as soon as administratively feasible.

 

4.3                               Forfeiture.  All amounts credited to, and not withdrawn
from, a Participant’s Deferred Compensation Account are nonforfeitable, except
as otherwise provided in this Section 4.3 and Sections 6.1 and 6.4.

 

Notwithstanding
any other provision of this Plan, a Participant’s Deferred Compensation Account
will be forfeited in its entirety if the Administrator determines that the
Participant has engaged in any activity that is (a) illegal and involves fraud,
dishonesty, or theft, or (b) intentionally detrimental to the Company, a
Participating Employer, or any subsidiary or affiliate thereof.

 

5

 

ARTICLE V

DISTRIBUTION OF BENEFITS

 

5.1                               Distribution on Termination of Employment.  Unless otherwise elected pursuant to Section
5.4, amounts credited to, and not withdrawn from, a Participant’s Deferred
Compensation Account (less applicable tax and other withholdings pursuant to
Section 5.6) will be distributed in a single lump sum payment in cash, other
property, or both, in the Administrator’s sole discretion, within 90 days after
the Participant’s termination of employment with the Company or, if applicable,
the Participating Employer.

 

5.2                               Distribution on Total Disability.  Unless otherwise elected pursuant to Section
5.4, amounts credited to, and not withdrawn from, a Participant’s Deferred
Compensation Account (less applicable tax and other withholdings pursuant to
Section 5.6) as of the date the Participant has sustained a Total Disability
will be distributed in a single lump sum payment in cash, other property, or
both, in the Administrator’s sole discretion, within 90 days after such
determination.

 

5.3                               Distribution on Death.  Unless otherwise elected pursuant to Section
5.4, payment of the amounts credited to, and not withdrawn from, a Participant’s
Deferred Compensation Account (less applicable tax and other withholdings
pursuant to Section 5.6) as of the date of the Participant’s death will be
distributed in a single lump sum payment in cash, other property, or both, in
the Administrator’s sole discretion, within 90 days after the Participant’s
death, to the Participant’s designated beneficiary in accordance with the last
such designation received by the Administrator, or if none, to the Participant’s
surviving spouse, or if there is no surviving spouse, to the personal
representative of the Participant’s estate.

 

A Participant
will have the right, at any time prior to his or her death, to submit, in a manner
prescribed by the Administrator, a written designation of primary and secondary
beneficiaries to whom payment under this Plan will be made in the event of his
or her death prior to complete distribution of the benefits due and payable to
the Participant under this Plan.  Each
beneficiary designation will become effective only when received by the
Administrator.

 

5.4                               Form and Timing of Benefit Distribution.  A Participant or beneficiary, in a manner
prescribed by the Administrator, may elect, or elect to change, the form and
timing, subject to the Administrator’s approval, of distribution of his or her
benefits pursuant to this Section 5.4, by delivering such election to the
Administrator, in accordance with procedures established by the Administrator.

 

(a)                                  Initial Election.   On or before December 31, 2006, a
Participant may elect the time and/or form of distribution of his or her
Deferred Compensation Account; provided, however, that such election, to the
extent made in calendar year 2006, will apply only to amounts that are not
otherwise payable in 2006 and may not cause a payment to be made in 2006 that
would not otherwise be payable in 2006. 
In the case of the first year in which a Participant becomes a Participant,
such Participant will be entitled to deliver his or her election, with respect
to amounts credited to his or her Deferred Compensation Account for services to
be performed subsequent to the election, 

 

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within 30 days after the date the Participant has been designated by
the Administrator as eligible for participation in the Plan.

 

(b)                                 Time
of Payment.  A
Participant may elect, pursuant to an initial election under Section 5.4(a) or
a subsequent election under Section 5.4(d), to receive, within 90 days of the
distribution time or event, the amounts credited to, and not withdrawn from,
the Participant’s Deferred Compensation Account (less applicable tax and other
withholdings pursuant to Section 5.6) in the form elected or specified in
Section 5.4(c) upon the earlier of death (which amount will be payable pursuant
to Section 5.3) or the following:

 

(1)                                  The Participant’s termination of employment
with the Company or, if applicable, the Participating Employer;

 

(2)                                  The determination by the Administrator that
the Participant has sustained a Total Disability;

 

(3)                                  The Participant’s termination of employment
with the Company or, if applicable, the Participating Employer, or the
determination by the Administrator that the Participant has sustained a Total
Disability; or

 

(4)                                  January 1 of a calendar year specified by the
Participant, which calendar year may be specified as a number of years
following a Participant’s termination of employment with the Company or, if
applicable, the Participating Employer.

 

(c)                                  Form of Payment.  A
Participant may elect, pursuant to an
initial election under Section 5.4(a) or a subsequent election under Section
5.4(d), distribution of benefits under the Plan in one of the following
forms:

 

(1)                                  Lump Sum — a single payment of the entire
balance in the Participant’s Deferred Compensation Account (less applicable tax and other withholdings
pursuant to Section 5.6).

 

(2)                                  Installments — periodic payments over a
specified period of time (less
applicable tax and other withholdings pursuant to Section 5.6),
beginning as of the date specified in the Participant’s election, which time
period may not extend beyond the life expectancy of the Participant (or the
Participant’s designated beneficiary) as determined under the 1983 Group Annuity
Mortality Table or such other mortality table prescribed by the Internal
Revenue Service as the prevailing commissioners’ standard table described in
Code section 807(d)(5)(A), as determined by the Administrator in its sole
discretion.

 

(d)                                 Change in Form and Timing of Benefit Distribution.  A
Participant may change the time and/or form of distribution elected with
respect to his or her Deferred Compensation Account by delivering a subsequent
election; provided, that, such election may not result in the acceleration of
the time or schedule of any payment.  
For purposes of this Section 5.4(d), installment payments will be
treated as a single payment.

 

7

 

In addition, any change in the form or timing of benefits may not:

 

(1)                                  take
effect for at least 12 months after the date on which the election is made;

 

(2)                                  in
the case of an election related to a payment described in Sections 5.1, or
5.4(c) or (d), the first payment with respect to which the new election is made
must be deferred for a period of not less than five years from the date the
payment would otherwise have been made; and

 

(3)                                  any
election to delay a payment previously elected pursuant to this Section 5.4 may
not be made less than 12 months prior to the date of the first scheduled
payment under the prior election.

 

5.5                               Key Employees.  In the event a distribution pursuant to
Section 5.1 is made to a “key employee,” as defined in section 416(i) of the
Code without regard to paragraph (5) thereof, such distribution may not be made
before the date that is six (6) months after the date of separation from
service (or, if earlier, the date of death of the key Employee).

 

5.6                               Incapacity.  In the event of the Participant’s incapacity
(as determined by the Administrator), payment pursuant to Sections 5.1 through
5.4 will be made to the Participant, to the legal guardian or conservator of
the Participant, or to an adult with whom the Participant maintains his or her
residence, as the Administrator in its sole discretion will determine.  Such payment to a legal guardian,
conservator, or adult will fully discharge the Administrator, the Company, each
Participating Employer, and this Plan from further liability on account thereof.

 

5.7                               Withholding.  The Company may withhold or cause to be
withheld from, or with respect to, any benefit under this Plan any federal,
state, or local taxes required by law to be withheld with respect to such
benefit and such sum as the Company may reasonably estimate as necessary to
cover any taxes for which the Company may be liable and which may be assessed
with regard to such payment.

 

ARTICLE VI

GENERAL PROVISIONS

 

6.1                               Non-Transferability of Interests.  Notwithstanding any other provision of this
Plan, all Deferred Compensation Accounts maintained by the Company will be
general assets of the Company and will be subject to the claims of such
Employer’s general creditors.

 

Except as
provided in Section 6.2, benefits payable to Participants under this Plan may
not in any manner be anticipated, assigned (either at law or in equity),
alienated, sold, transferred, pledged, encumbered, or subjected to attachment,
garnishment, levy, execution, or other legal or equitable process by creditors
of the Participant.

 

6.2                               Domestic Relations Orders.

 

(a)                                  The
Administrator shall establish written procedures to determine whether any
Domestic Relations Order directed to this Plan is an Approved Domestic
Relations

 

8

 

Order in its sole discretion.  To
the extent required under an Approved Domestic Relations Order, any portion of
a Participant’s Deferred Compensation Account may be paid or set aside for
payment to a spouse, former spouse, or child of the Participant in cash, other
property, or both, in the Administrator’s sole discretion.

 

(b)                                 Where
necessary to carry out the terms of an Approved Domestic Relations Order, a
separate account may be established with respect to the spouse, former spouse,
or child.  Any amount so set aside for a
spouse, former spouse, or child shall be paid out in a single lump sum payment
in cash, other property, or both, in the Administrator’s sole discretion, at
the earliest date that benefits may be paid to the Participant, unless the
Domestic Relations Order directs a different form of payment.  Nothing in this Section 6.2 shall be
construed to authorize any amount to be distributed under this Plan at a time
or in a form that is not permitted under the Plan or the Code.

 

(c)                                  A
Participant’s right to receive benefits under this Plan will be reduced to the
extent that any portion of a Participant’s Deferred Compensation Account has
been paid or set side for payment to a spouse, former spouse, or child pursuant
to an Approved Domestic Relations Order or to the extent that the Company, a Participating
Employer, or the Plan is otherwise subject to a binding Domestic Relations
Order for the attachment, garnishment, or execution or any portion of the
Participant’s Deferred Compensation Account or of any distributions
therefrom.  The Participant shall be
deemed to have released the Company, each Participating Employer, the
Administrator, and the Plan from any claim with respect to such amounts in any
case in which (1) the Company, a Participating Employer, the Plan, or any Plan
representative has been served with legal process or otherwise joined in a
proceeding relating to such amounts, (2) the Participant has been notified of
the pendency of such proceeding in the manner prescribed by the law of the
jurisdiction in which the proceeding is pending for service of process or by
mail from the Company, a Participating Employer, the Plan, or a Plan
representative to the Participant’s last known mailing address, and (3) the
Participant fails to obtain an order of the court in the proceeding relieving the
Company, each Participating Employer, the Administrator, or this Plan from the
obligation to comply with the Domestic Relations Order.

 

(d)                                 Neither
the Company, any Participating Employer, the Plan, nor any Plan representative
will be obligated to incur any cost to defend against or set aside any Domestic
Relations Order relating to the division, attachment, garnishment, or execution
of the Participant’s Deferred Compensation Account or of any distribution
therefrom.  Notwithstanding the
foregoing, if the Company, a Participating Employer, the Plan, or a Plan
representative is joined in any such proceeding, a Plan representative will
take such steps as it deems necessary and appropriate to protect the terms of
the Plan.

 

6.3                               Amendment, Suspension, and Termination.  The Company, in its sole discretion, at any
time may amend, suspend, or terminate this Plan or any portion thereof in any
manner and to any extent.  Such
amendment, suspension, or termination of the Plan will be final and binding on
each Participating Employer.  No
amendment, suspension, or termination will alter or impair any then existing
Deferred Compensation Accounts without the consent of the affected
Participant.  Upon termination of the
Plan, but only if and to the extent allowed by

 

9

 

section 409A of the Code and
guidance published thereunder, amounts credited to each Participant’s Deferred
Compensation Account will be distributed at the Administrator’s election
(provided such election applies uniformly to all such Participants) in a single
lump sum payment (in cash, other property, or both, at the Administrator’s
election) either (a) at any time after 30 days following the termination of the
Plan, or (b) at such time and in such event as are otherwise provided under the
Plan.

 

6.4                               Unfunded Obligation.  This Plan is intended to be, and will be
operated and administered so as to be, a plan that is unfunded and maintained
primarily for the purpose of providing deferred compensation for a select group
of management or highly compensated employees. 
Neither the Company nor any Participating Employer will make any
provision for funding or insuring the Deferred Compensation Accounts that would
cause the Plan to be (a) a “funded” plan for purposes of Section 404(a)(5) of
the Code or Title I of ERISA, or (b) other than an “unfunded and unsecured
promise to pay money or property in the future” under Treasury Regulations
Section 1.83-3(e).  A Participant will be
treated as a general, unsecured creditor of the Company and, if applicable, his
or her Participating Employer at all times under the Plan.  This Plan constitutes a mere promise by the
Company to make the benefit payments as provided in the future.  It is the intention of the Company that the
Deferred Compensation Accounts be unfunded for tax purposes and for purposes of
Title I of ERISA.

 

The foregoing
notwithstanding, the Company may establish a grantor trust described in
Treasury Regulation Sections 1.677(a)-(d) to accumulate assets to pay the Deferred
Compensation Accounts, provided that the trust assets will be subject to the
claims of the Company’s general creditors and will be required to be used to
satisfy the claims of the Company’s general creditors in the event the Company
or a Participating Employer is “insolvent” under the terms of such trust.

 

6.5                               No Right to Employment or Other Benefits.  Nothing contained herein will be construed as
conferring upon any Participant the right to continue in the employ of the
Company or any Participating Employer. 
Any compensation deferred and any benefits paid under this Plan will be
disregarded in computing benefits under any employee benefit plan of the
Company or any Participating Employer.

 

6.6                               Claims Procedures.

 

(a)                                  In
the event benefits provided under this Plan are not timely paid, any
Participant or, if the Participant is deceased, the Participant’s designated
beneficiary, may file a claim requesting benefits under this Plan by submitting
to the Administrator (or such officer or agent of the Company as the
Administrator may designate for such purpose) a written statement setting out
the general nature of the claim (the “Claim for Benefits”).

 

(b)                                 If
a duly submitted Claim for Benefits has not been granted within 90 days of the
submission of the claim, the Claim for Benefits will be deemed denied for the
purposes hereof.  If a duly submitted
Claim for Benefits is wholly or partly denied, written notice of the denial
(the “Notice of Denial”) will be furnished as provided in

 

10

 

Section 6.6(c) hereunder to the Participant within 90 days after
receipt of the Claim for Benefits by the Administrator.

 

(c)                                  Any
Notice of Denial provided to a Participant shall set forth in a manner
reasonably calculated to be understood by the Participant:

 

(1)                                  The
specific reason or reasons for the denial;

 

(2)                                  Reference
to the specific Plan provisions on which the denial is based;

 

(3)                                  A
description of any additional material or information necessary for the
Participant to perfect the Claim for Benefits and an explanation of why such
material or information is necessary; and

 

(4)                                  A
description of the Plan’s review procedures and the time limits applicable to
such procedures, including a statement of the Participant’s right to bring a
civil action under section 502(a) of ERISA following denial of the Claim for
Benefits or Request for Review (as defined below).

 

(d)                                 Within
60 days after receipt of any Notice of Denial as herein provided, the
Participant may request review of the denied Claim for Benefits by submitting a
written request therefor to the Administrator (the “Request for Review”).

 

(e)                                  Upon
submission of the Request for Review, and before issuance of the decision on
review, the Participant will be provided, upon request and free of charge,
reasonable access to, and copies of, all documents, records, and other
information relevant, in the Administrator’s sole discretion, to the
Participant’s Claim for Benefits.

 

(f)                                    Within
30 days after submission of the Request for Review, the Participant may submit
written comments, documents, records, and other information relating to the
Claim for Benefits to the Administrator. 
In addition, upon request of the Participant, or upon its own motion,
the Administrator may, but will not be required to, provide the Participant an
opportunity for a hearing before the Administrator.

 

(g)                                 Within
60 days after receipt of a Request for Review, the Administrator will render
its decision unless special circumstances (such as the need to hold a hearing)
require an extension of time for processing the Request for Review and the
Administrator furnishes written notice of the extension to the Participant, in
which case a decision will be rendered as soon as possible, but in no event
later than 120 days after receipt of the Request for Review.

 

(h)                                 The
decision on review will be in writing and will include:

 

(1)                                  Specific
reasons for the decision, written in a manner reasonably calculated to be
understood by the Participant;

 

11

 

(2)                                  Reference
to the specific Plan provisions on which the decision is based;

 

(3)                                  A
statement that the Participant is entitled to receive, upon request and free of
charge, reasonable access to, and copies of, all documents, records, and other
information relevant to the Participant’s Claim for Benefits; and

 

(4)                                  A
statement of the Participant’s right to bring an action under section 502(a) of
ERISA.

 

6.7                               Inurement.  This Plan will be binding upon and inure to
the benefit of the Company, each Participating Employer, their successors and
assigns, the Participant, and his or her heirs, executors, personal
representatives, administrators and beneficiaries.

 

6.8                               Notice.  Any notice, consent, or demand required or
permitted to be given under the provisions of this Plan will be in writing, and
will be signed by the party giving or making the same.  If such notice, consent, or demand is mailed
to a party pursuant hereto, it will be sent by United States certified mail,
postage prepaid, addressed to such party’s last known address as shown in the
records of the Company.  The date of such
mailing will be deemed the date of notice, consent, or demand.  Either party may change the address to which
notice is to be sent by giving notice of change of address in the manner
aforesaid.

 

6.9                               Governing Law.  This Plan, and the rights of the parties
hereunder, will be governed by and construed in accordance with the laws of the
State of Kansas, without reference to the principles of conflict of laws.

 

6.10                        Taxation.  This Plan is intended to provide tax-deferred
benefits under certain provisions of the Code, including section 409A of the
Code and the guidance promulgated thereunder. 
To the extent the Plan fails to satisfy the requirements of section 409A
of the Code and related guidance, the Company may, but shall not be required
to, modify the Plan, in its sole discretion, to the limited extent necessary to
satisfy section 409A of the Code and related guidance without the consent of
any Participant.  Upon any Internal
Revenue Service finding that compensation intended to be deferred for federal
income tax purposes pursuant to this Plan is immediately taxable to a
Participant for such purposes, the Company may, but shall not be required to,
amend this Plan to comply with the Internal Revenue Service requirements
necessary to achieve the desired federal income tax benefits relating to this
Plan without the consent of any Participant. 
Notwithstanding the foregoing, each Participant agrees to be liable for
any tax that may be imposed by the Internal Revenue Service or any other taxing
entity with respect to any benefits provided pursuant to this Plan (including,
without limitation, any and all withholding taxes), irrespective of whether
such tax consequences were intended pursuant to this Plan.

 

12Exhibit 10.13

 

WADDELL & REED FINANCIAL, INC.

 

2003 EXECUTIVE INCENTIVE PLAN

As Amended and Restated

 

Effective January 1, 2006

 

1.                                      Purposes

 

The purposes
of the Plan are to advance the interests of stockholders of the Company by
providing performance-based incentives to eligible Participants and to enable
the Company and its Subsidiaries to attract, retain, motivate and reward the
best qualified executive officers and key employees by providing them with the
opportunity to earn competitive compensation directly linked to the Company’s
performance. The Plan is designed to assure that amounts paid to certain
executive officers and employees of the Company will not fail to be deductible
by the Company for Federal income tax purposes because of the limitations imposed
by Section 162(m). With respect to individuals who are Covered Employees, the
Plan is intended to provide “qualified performance based compensation,” as such
term is defined in Treas. Reg. Section 1.162-27(e), to the extent deemed
appropriate by the Committee at the time Performance Goals are established for
a Performance Period. Nothing herein shall be construed as preventing the Plan
from providing both “qualified performance-based compensation” and nonqualified
compensation for the same Performance Period in the manner permitted under
Section 162(m). The Plan shall be administered and construed in a manner
consistent with Section 162(m) and regulations thereunder for any Performance
Period in which the Plan is intended to provide “qualified performance based
compensation.”

 

2.                                      Definitions

 

Unless the
context requires otherwise, the following words as used in the Plan shall have
the meanings ascribed to each below, it being understood that masculine,
feminine, and neuter pronouns are interchangeable and that each comprehends the
others.

 

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

 

“Committee” means the Compensation Committee of the Board (or such
other committee of the Board that the Board shall designate from time to time)
or any subcommittee thereof comprised of two or more directors each of whom is
an “outside director” within the meaning of Section 162(m).

 

“Company” means Waddell & Reed Financial, Inc.

 

“Covered Employee” means (i) the chief executive officer of the
Company, and (ii) a person designated by the Committee, at the time that
Performance Goals are established, who the Committee believes is likely to be a
“covered employee” (within the meaning of Section 162(m)(3)) with respect to
the Fiscal Year during which the Incentive Plan Award is granted or in the
foreseeable future.

 

 

“Fiscal Year” means the twelve month period beginning on each January 1
and ending on the following December 31.

 

“Incentive Percentage” means the pre-established award formula
established by the Committee which specifies a percentage of a pool of funds,
as determined by the Committee, to be paid as an Incentive Plan Award.

 

“Incentive Plan Award” means the annual incentive compensation award
granted under the Plan, which is contingent and based upon the attainment of
the Performance Goals with respect to a Performance Period.

 

“Participant” means (i) each executive officer of the Company, and (ii)
each other individual employee or member of a class of employees of the Company
or a Subsidiary who the Committee designates as a participant under the Plan.

 

“Performance Goals” means the pre-established objective performance
goals established by the Committee for each Performance Period.

 

“Performance Period” means the Fiscal Year or such shorter period as
shall be established with respect to a Participant by the Committee.

 

“Plan” means the Waddell & Reed Financial, Inc. 2003 Executive
Incentive Plan, as Amended and Restated, as set forth herein and as may be
amended, modified or supplemented from time to time.

 

“Section 162(m)” means Section 162(m) of the Internal Revenue Code of
1986, as amended, and any regulations promulgated thereunder (including any
proposed regulations).

 

“Stock” means the Company’s Class A common stock, $0.01 par value.

 

“Subsidiary” means any entity of which the Company owns, directly or
indirectly, equity representing more than 50% of the voting power of all
classes of equity entitled to vote.

 

3.                                      Administration

 

(a)                                  Plan
Administrator.  The Plan shall be
administered by the Committee, except as may be delegated pursuant to Section
3(b).  The Committee shall act pursuant
to a majority vote at a meeting at which quorum, as defined by the Committee
Charter, is present or by unanimous written consent. The Committee may employ
such legal counsel, consultants, and agents (including counsel or agents who
are employees of the Company or a Subsidiary) as it may deem desirable for the
administration of the Plan and may rely upon any opinion received from any such
counsel, consultant, or agent and any computation received from such consultant
or agent. All expenses incurred in the administration of the Plan, including,
without limitation, for the engagement of any counsel, consultant, or agent
shall be paid by the Company.

 

(b)                                 Authority
of the Committee.  Subject to the
provisions of the Plan, the Committee shall have full discretionary authority
to administer and interpret the Plan, to exercise all powers either
specifically granted to it under the Plan or as are necessary or advisable in
the

 

2

 

administration of the Plan, to
prescribe, amend and rescind rules and regulations relating to the Plan, and to
make all other determinations necessary or advisable for the administration of
the Plan; provided that, in no event, shall the Plan be interpreted in a manner
which would cause any amount payable under the Plan to any Covered Employee to
fail to qualify as performance based compensation under Section 162(m) to the
extent the Committee intends compensation to so qualify. The Committee may
delegate its responsibilities for administering the Plan to one or more persons
as the Committee deems necessary. However, the Committee may not delegate its
responsibilities under the Plan relating to any Covered Employee where such
delegation is prohibited under Section 162(m) pertaining to “qualified
performance based compensation.”

 

(c)                                  Effect
of Committee Determinations.  Any
determination made by the Committee under the Plan shall be final and
conclusive on all persons, including the Company, the Participants (or any
person claiming any rights under the Plan from or through any Participant), and
any stockholder of the Company, but shall be based on such objective
information or financial data as is relevant to the Performance Goal(s).  No member or former member of the Board or
the Committee shall be liable for any act, omission, interpretation,
construction, or determination made in connection with the Plan other than as a
result of such individual’s willful misconduct.

 

4.                                      Participation

 

(a)                                  General
Participation.  For any Performance
Period, the Committee shall determine which of such executive officers and
other individual employees or class of employees shall participate in the Plan.

 

(b)                                 Participation by Covered Employees.  For
any Performance Period for which “qualified performance-based compensation” is
to be provided, the Committee shall designate the individual or classes of
Covered Employees to whom such compensation shall be paid no later than 90 days
(or, for Performance Periods of less than one year, the passage of 25% of the
Performance Period) after the beginning of any Performance Period.

 

5.                                      Incentive Plan
Awards

 

The Committee shall establish the Incentive
Percentages and Performance Goals for any Performance Period in accordance with
Section 5 and certify whether such goals have been obtained.

 

(a)                                  Performance
Goals. On or before the passage of 25% of any Performance Period (or such
other date as may be required or permitted under Section 162(m)), the Committee
shall establish the Performance Goals that must be satisfied in order for a
Participant to receive an Incentive Plan Award for such Performance
Period.  Solely with respect to Covered
Employees, for any Performance Period for which the Plan is intended to provide
“qualified performance-based compensation,” Performance Goals applicable to the
Covered Employees must be established by the Committee no later than 90 days
(or, for Performance Periods of less than one year, the passage of 25% of the Performance
Period) after the beginning of any Performance Period applicable to the
relevant award, and the attainment of such Performance Goal must be

 

3

 

substantially uncertain, for
purposes of Section 162(m), at the time such Performance Goals are established.

 

(1)                                  Performance
Goal 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
shareholder return and earnings per share criteria), shall be used by the
Committee in establishing Performance Goals for awards:  (i) earnings per share; (ii) increase in
revenues; (iii) increase in cash flow; (iv) increase in cash flow return; (v)
return on net assets; (vi) return on assets; (vii) return on investment; (viii)
return on capital; (ix) return on equity; (x) economic value added; (xi)
operating margin; (xii) contribution margin; (xiii) net income; (xiv) pre-tax
earnings; (xv) pre-tax earnings before interest, depreciation and amortization;
(xvi) pre-tax operating earnings after interest expense and before incentives,
service fees, and extraordinary or special items; (xvii) operating income;
(xviii) total stockholder return; (xix) debt reduction; and (xx) 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 annual meetings of stockholders.

 

(b)                                 Incentive
Percentage.  On or before the passage
of 25% of any Performance Period (or such other date as may be required or
permitted under Section 162(m)), the Committee shall establish the Incentive
Percentage applicable to a Participant’s Incentive Plan Award for such
Performance Period.  The Committee may
establish different Incentive Percentages for individual Participants or
different classes of Participants, and/or, if applicable, the achievement
levels of the Performance Goals. Solely with respect to Covered Employees, for
any Performance Period for which the Plan is intended to provide “qualified
performance based compensation,” the Incentive Percentages applicable to the
Covered Employees must be established by the Committee no later than 90 days
(or, for Performance Periods of less than one year, the passage of 25% of the
Performance Period) after the beginning of the Performance Period for which the
Incentive Plan Award pertains.

 

(c)                                  Certification
and Maximum Amount Payable. The Committee shall, promptly after the date on
which the necessary financial, individual or other information for a particular
Performance Period becomes available, certify (i) whether, or the degree to
which, if applicable, each of the Performance Goals has been attained; and (ii)
with respect to each qualifying Participant, the amount of the Incentive Plan
Award, if any, payable to such Participant. 
If the Committee certifies in writing that any of the Performance Goals
established for the relevant Performance Period under Section 5(a) have been satisfied,
each Participant who is employed by the Company or one of its Subsidiaries on
the last day of the Fiscal Year related to the Performance Period for which the
Incentive Plan Award is payable shall receive the Incentive Plan Award. The
Incentive Plan Award shall be determined by multiplying the Incentive
Percentage applicable to the Participant by the dollar amount of the pool of
funds available with

 

4

 

respect to the Performance
Period to which the Incentive Plan Award pertains. In no event, however, will a
Covered Employee be paid compensation pursuant to an Incentive Plan Award in
excess of $5,000,000 with respect to any Fiscal Year.

 

(d)                                 Eligibility.  To be eligible for payment of any Incentive
Plan Award, the Participant must (i) have performed the Participant’s duties to
the satisfaction of the Committee, (ii) have not engaged in any act deemed by
the Committee to be contrary to the best interests of the Company, and (iii)
otherwise complied with Company policies at all times prior to the date the
Incentive Plan Award is actually paid. 
No Incentive Plan Award shall be paid to any Participant who does not
satisfy each of the above.

 

(e)                                  Termination
of Employment.  If a Participant’s
employment terminates due to death, disability or a change of control of the
Company and such termination occurs prior to the last day of the Fiscal Year an
Incentive Plan Award is payable, such Participant may, in the discretion of the
Committee, receive an Incentive Plan Award equal to the maximum Incentive Plan
Award payable to such Participant multiplied by a fraction, the numerator of
which is the number of days that have elapsed during the Performance Period in
which the termination occurs prior to and including the date of the Participant’s
termination of employment and the denominator of which is the total number of
days in the Performance Period.

 

(f)                                    Negative
Discretion. Notwithstanding any provision in this Section 5 to the
contrary, the Committee shall have the right, in its absolute discretion, (i) to
reduce or eliminate the amount otherwise payable to any Participant under
Section 5 based on individual performance or any other factors that the
Committee, in its discretion, shall deem appropriate and (ii) to establish
rules or procedures that have the effect of limiting the amount payable to each
Participant to an amount that is less than the maximum amount otherwise
authorized under Section 5(c) . 
Notwithstanding the foregoing, in no event shall reduction of any
Participant’s payment amount have the effect of increasing the amount paid to
any Covered Employee.

 

(g)                                 Affirmative
Discretion. Notwithstanding any other provision in the Plan to the
contrary, with respect to any annual Incentive Plan Award that is not intended
to be “qualified performance based compensation” for purposes of Section
162(m), (i) the Committee shall have the right, in its discretion, to pay to
any Participant who is not a Covered Employee an annual Incentive Plan Award
for such Performance Period in an amount up to the maximum bonus payable under
Section 5(c), based on individual performance or any other criteria that the
Committee deems appropriate, and (ii) in connection with the hiring of any
person who is or becomes a Covered Employee, the Committee may provide for a
minimum Incentive Plan Award amount in any calendar year, regardless of whether
performance objectives are attained.

 

6.                                      Payment

 

Except as
otherwise provided hereunder, payment of any Incentive Plan Award amount
determined under Section 5 shall be made to each Participant as soon as
practicable after the Committee certifies that one or more of the applicable
Performance Goals have been attained (or, in the case of any Incentive Plan
Award payable under the provisions of Section 5(g), after the Committee
determines the amount of any such Incentive Plan Award), but, except as
provided below with respect to Stock-based payments, in no event later than
March 15 of the year

 

5

 

following the year to which the
Performance Period relates.  The
Incentive Plan Award may be paid in whole or in part, in the discretion of the
Committee, in either options to purchase Stock or in shares of Stock which will
be subject to certain restrictions and/or a risk of forfeiture, with the remainder,
if any, to be paid in cash.  The value of
any Stock-based payment under an Incentive Plan Award shall be determined in
the sole and absolute discretion of the Committee.  The Committee will establish a formula to
convert an Incentive Plan Award into a Stock-based payment of equivalent fair
market value.  All options to purchase
Stock and restricted Stock issued as payment for all or any part of an
Incentive Plan Award shall be distributed from the total number of shares of
Stock reserved and available for distribution under the Waddell & Reed
Financial, Inc. 1998 Executive Deferred Compensation Stock Award Plan, as
amended and restated, and as may be further amended, modified or restated, and
shall comply in full with all of the terms and provisions regarding stock
options and restricted stock, as applicable, set forth in such stock award
plan, including, without limitation, Section 6A thereof.   To the extent the Committee converts a
portion of an Incentive Plan Award into a Stock-based payment, the Stock-based
payment need not be granted to the Participant by March 15 of the year
following the year to which the Performance Period relates so long as the
Committee establishes the dollar amount of the Stock-based payment and the date
the Stock-based payment will be granted to the Participant prior to the end of
the Fiscal Year to which the Incentive Plan Award relates.

 

7.                                      General
Provisions

 

(a)                                  Effectiveness
of the Plan. The Plan became effective with respect to calendar years
beginning on or after January 1, 1999 and shall remain effective until December
31, 2008, unless the term is extended by action of the Board.

 

(b)                                 Amendment
and Termination. Notwithstanding Section 7(a), the Board or the Committee
may at any time amend, suspend, discontinue, or terminate the Plan; provided,
however, that no such amendment, suspension, discontinuance, or termination
shall adversely affect the rights of any Participant with respect to any Fiscal
Year which has already commenced and no such action shall be effective without
approval by the stockholders of the Company to the extent necessary to continue
to qualify the amounts payable hereunder to Covered Employees as “qualified
performance-based compensation” under Section 162(m).

 

(c)                                  Designation
of Beneficiary. Each Participant may designate a beneficiary or
beneficiaries (which beneficiary may be an entity other than a natural person)
to receive any payments which may be made following the Participant’s death.
Such designation may be changed or canceled at any time without the consent of
any such beneficiary. Any such designation, change or cancellation must be made
in a form approved by the Committee and shall not be effective until received
by the Committee. If no beneficiary has been named, or the designated beneficiary
or beneficiaries shall have predeceased the Participant, the beneficiary shall
be the Participant’s spouse or, if no spouse survives the Participant, the
Participant’s estate. If a Participant designates more than one beneficiary,
the rights of such beneficiaries shall be payable in equal shares, unless the
Participant has designated otherwise.

 

(d)                                 No
Right of Continued Employment. Nothing in this Plan shall be construed as
conferring upon any Participant any right to continue in the employment of the Company
or any of its Subsidiaries.

 

6

 

(e)                                  No
Limitation on Corporate Actions. Nothing contained in the Plan shall be
construed to prevent the Company or any Subsidiary from taking any corporate
action which is deemed by it to be appropriate or in its best interest, whether
or not such action would have an adverse effect on any awards made under the
Plan. No employee, beneficiary or other person shall have any claim against the
Company or any Subsidiary as a result of any such action.

 

(f)                                    Non-alienation
of Benefits. Except as expressly provided herein, no Participant or
beneficiary shall have the power or right to transfer, anticipate, or otherwise
encumber the Participant’s interest under the Plan. The Company’s obligations
under this Plan are not assignable or transferable except to (i) a corporation
which acquires all or substantially all of the Company’s assets, or (ii) any
corporation into which the Company may be merged or consolidated. The
provisions of the Plan shall inure to the benefit of each Participant and the
Participant’s beneficiaries, heirs, executors, administrators, or successors in
interest.

 

(g)                                 Withholding.
Any amount payable to a Participant or a beneficiary under this Plan shall be
subject to any applicable Federal, state, and local income and employment taxes
and any other amounts that the Company or a Subsidiary is required by law to
deduct and withhold from such payment.

 

(h)                                 Severability.
If any provision of this Plan is held unenforceable, the remainder of the Plan
shall continue in full force and effect without regard to such unenforceable
provision and shall be applied as though the unenforceable provision were not
contained in the Plan.

 

(i)                                     Governing
Law. The Plan shall be construed in accordance with and governed by the
laws of the State of Kansas, without reference to the principles of conflict of
laws except that any matters relating to the internal governance of the Company
shall be governed by the general corporate laws of the state of Delaware.

 

(j)                                     Headings.
Headings are inserted in this Plan for convenience of reference only and are to
be ignored in a construction of the provisions of the Plan.

 

(k)                                  Plan
not Funded. Plan awards shall be made solely from the general assets of the
Company. To the extent any person acquires a right to receive payments from the
Company under the Plan, the right is no greater than the right of any other
unsecured general creditor.

 

(l)                                     No
Guarantee. While a discretionary Incentive Plan Award may have been paid in
the past, whether such payments will be made in the future will depend upon
various factors, such as the Company’s financial condition and performance.
There is no guarantee that the Company will pay any such discretionary
award.  The Committee may, in its sole
discretion, reduce, eliminate or increase, any Incentive Plan Award, except
that the amount of any Incentive Plan Award intended to be “qualified
performance-based compensation” may not be increased above the amount
established for the Performance Goal and Incentive Percentage. The Company may
withhold an Incentive Plan Award, or portions thereof, for any reason including
gross misconduct (e.g., theft, dishonesty/compromised integrity, fraud,
harassment, etc.) or any actions deemed to be contrary to the best interests of
the Company by the Committee.

 

7

 

(m)                               Rights
to Payments. No Participant shall have any enforceable right to receive any
Incentive Plan Award made with respect to a Performance Period or to retain any
payment made with respect thereto if for any reason the requirements of Section
5 are not satisfied.

 

8

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