Document:

Exhibit 10.3

 

WADDELL
& REED FINANCIAL, INC.

1998
NON-EMPLOYEE DIRECTOR STOCK AWARD PLAN

As
Amended and Restated

 

Waddell & Reed Financial, Inc. previously
established the Waddell & Reed Financial, Inc. 1998 Non-Employee Director
Stock Award Plan (formerly named the Waddell & Reed Financial, Inc. 1998
Non-Employee Director Stock Option Plan), as amended effective April 28, 1999
and as further amended effective on each of December 12, 2002 and October
14, 2004 (as amended, the “Original Plan”). 
Pursuant to the powers reserved in Section 8.1 of the
Original Plan, the Original Plan is amended and restated effective
October 19, 2005 as follows (the Original Plan, as amended and restated
hereby, the “Plan”).

ARTICLE 1

Purposes of the Plan

 

Section 1.1. 
Purposes.  The purposes of the Plan are to attract and
retain highly qualified Non-Employee Directors and to promote the long-term
growth of the Company by providing a vehicle for Non-Employee Directors to
increase their proprietary interest in the Company.

ARTICLE 2

Definitions

 

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

“Accounting Firm” has the meaning assigned such term
in Section 11.1(b).

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

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

“Annual Compensation” means the annual cash retainer
and meeting fees payable by the Company to a Non-Employee Director for services
as a director (and, if applicable, as a member or chairman of a committee of
the Board) of the Company, as such amount may be determined from time to
time.  For purposes of an election to
convert Annual Compensation into Awards pursuant to the Plan, meeting fees will
be deemed to be earned at the beginning of the year for all scheduled meetings
during the year, whether or not the Awardee later attends such meetings.

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

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

 

“Award Grant Date” means the date on which an Award of
Options or Restricted Stock, as the context applies, is made under the Plan which,
unless the Committee determines otherwise, shall be the first Business Day in
January of the calendar year in which Annual Compensation will be earned.

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

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

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

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

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

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

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

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

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

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

 

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

“Committee” means the Compensation Committee of the
Board.

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

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

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

“Election Date” means the date established by the Plan
as the date by which a Participant must submit a valid Conversion Election Form
to the Plan Administrator in order to participate in the Plan for a calendar
year.  For each calendar year, the
Election Date is December 31 of the preceding calendar year; provided, however,
that the Election Date for the first year in which a Non-Employee Director
becomes eligible to participate in the Plan shall be the 30th day following the
date on which such individual becomes a Non-Employee Director.

“Excess Parachute Payment” has the meaning assigned
such term in Section 11.1(a).

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

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

“Gross-Up Payment” has the meaning assigned such term
in Section 11.1(a).

“Non-Employee Director” means a director of the
Company who is not an employee of the Company or of any Subsidiary.

“Option” means an option to purchase Shares granted
pursuant to Article 6.

“Participant” means any Non-Employee Director who is
participating in the Plan.

“Potential Change in 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 in Control; or

 

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                (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 outstanding securities and the adoption by the Board of a resolution
to the effect that a Potential Change in Control of the Company has occurred
for purposes of this Plan.

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

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

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

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

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

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

“Subsidiary” means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company if
each of the corporations (other than the last 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 such term in Section 11.1(a).

ARTICLE 3

Administration of the Plan

 

                Section
3.1.  Administrator of the Plan. 
The Plan shall be administered by the Committee, except as may be
delegated pursuant to Section 3.2.

 

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

 

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

 

ARTICLE 4

Participation

 

                Section
4.1.  Election to Participate. 
Each Non-Employee Director is automatically eligible to participate in
the Plan.  A Non-Employee Director may
participate in the Plan for a calendar year by delivering a properly completed
and signed Conversion Election Form to the Plan Administrator on or before the
Election Date.  The Non-Employee Director’s
participation in the Plan will be effective as of the date the Plan
Administrator receives the Non-Employee Director’s Conversion Election
Form.  A Non-Employee Director shall not
be entitled to any benefit hereunder unless such Non-Employee Director has
properly completed a Conversion Election Form.

 

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

 

                Section
4.3.  No Right to Continue as a Director. 
Nothing contained in the Plan shall be deemed to give any Non-Employee
Director the right to be retained as a director of the Company.

 

ARTICLE 5

Plan Benefits

 

                Section
5.1.  Conversion of Annual Compensation.  A
Non-Employee Director may elect to convert up to 100% of his or her Annual
Compensation (in increments of 10% (but not less than 50%) or $10,000) to
Awards in accordance with the terms of the Plan.

 

                Section
5.2.  Time of Conversion Election.  A Non-Employee Director who wishes to convert
Annual Compensation for a calendar year to Awards pursuant to Article 6
must irrevocably elect to do so on or prior to the Election Date for such
calendar year, by delivering a valid Conversion Election Form to the Plan
Administrator.  The Conversion Election
Form shall indicate the percentage or dollar amount of Annual Compensation to
be converted.

 

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

 

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ARTICLE 6

Terms and Conditions of Awards

 

If a Participant remains in service as a Non-Employee
Director of the Company through the Award Grant Date for Annual Compensation
converted pursuant to Section 5.1, the Participant shall be granted Awards
subject to the following terms and conditions:

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

Section
6.2            Number of Shares Subject to
Awards.  

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

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

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

In determining the number of
Shares subject to an Option, (i) the Committee may designate the assumptions to
be used in the selected option valuation model, and (ii) any fraction of a
Share will be rounded down to the next whole number of Shares.

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

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

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

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

 

Effective January
1, 2004, a Participant will only be entitled to convert Annual Compensation
into Options and/or Restricted Stock as determined by the Committee.

 

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Section
6.3            Term of Awards.

(a)           Exercise
of Options.  All Options shall be fully nonforfeitable, but shall be exercisable only at the
time provided in this Section 6.3 and Section 6.4 below.  Each Option shall be first exercisable, cumulatively, as
to 10% of the total Shares subject to the Option commencing on each of the
first through tenth annual anniversaries of the Award Grant Date.  An Awardee’s death, Disability, retirement or other termination of his
or her status as a Non-Employee Director shall not shorten the term of
any outstanding Option.  In no event shall the period
of time over which the Option may be exercised exceed 11 years from the Award Grant Date.  An Option, or portion thereof, may be exercised in
whole or in part only with respect to whole Shares.  Options may be exercised in whole or in part at any
time during the exercise period by giving written notice of exercise to the
Company specifying the number of Shares to be purchased, accompanied by payment
in full of the exercise price, in cash, by check or such other instrument as
may be acceptable to the Committee (including instruments providing for “cashless
exercise”).  Payment in full or in part
may also be made in the form of unrestricted Shares already owned by the Awardee
(based on the Fair Market
Value of the Shares on the date the Option is exercised).  An Awardee shall have rights to dividends and other
stockholder rights with respect to Shares subject to an Option only after the Awardee has given written notice of the exercise and
has paid in full for such Shares.

(b)           Terms
of Restricted Stock Awards.

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

                (ii)           Forfeiture.  Subject to Section
6.4, upon termination of an Awardee’s status as a Non-Employee Director,
Restricted Stock that is at the time of such termination subject to
restrictions shall be forfeited and reacquired by the Company.

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

 

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Company or transfer
agent, as applicable, endorsed in blank, relating to the Restricted Stock.  Any such legend shall be substantially in the
following form:

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

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

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

Section 6.5            Award Agreement.  Each Award granted under the Plan shall be
evidenced by an Award Agreement, which shall be executed by an authorized
officer of the Company.  The Award
Agreement shall contain provisions regarding (a) the number of Shares
subject to the Award, (b) the exercise price per Share, if any, of the
Award and the means of payment therefor, (c) the term of the Award, and
(d) such other terms and conditions not inconsistent with the Plan as may
be determined from time to time by the Committee.  The Committee, in its discretion,
may include in the grant of any Option under the Plan, a stock option
restoration program (“SORP”) provision. 
A SORP provision shall provide, without limitation, that, if payment of
the exercise price of an Option is made in the form of
Shares, and the exercise of such Option occurs on the Annual SORP Exercise
Date, an additional option to
purchase Shares (a “SORP Option”)
will automatically be granted to the Awardee effective as of the Annual SORP
Exercise Date.  A SORP Option shall
(i) have an exercise price equal to 100% of the Fair Market Value of the
Shares on the Annual SORP Exercise Date, (ii) have a term equal to that of
the originally exercised Option giving rise to the SORP Option, not to exceed a
maximum term of ten years and two days from the

 

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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 Option, plus the number of Shares
(if any) withheld for income taxes and employment taxes (plus any selling commissions)
with respect to such original exercise. “Annual SORP Exercise Date” shall mean
August 1, or if August 1 is not a Business Day, “Annual SORP Exercise Date”
shall mean the next succeeding Business Day. 
Notwithstanding the foregoing, the Committee may delay the Annual SORP
Exercise Date to the extent it determines necessary to comply with regulatory
or administrative requirements.

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

ARTICLE 7

Shares Subject to the Plan

Section
7.1            Shares Subject to the Plan.  Subject to adjustment as provided in Article
9, the total number of Shares reserved and available for issuance in
connection with Awards under the Plan shall not exceed 1,200,000 Shares.  Shares delivered under the Plan may be newly
issued Shares or previously issued and reacquired Shares.  To the extent that Shares subject to an
outstanding Award are not issued or delivered by reason of the expiration,
termination, cancellation or forfeiture of such Award or by reason of the
delivery of Shares to pay all or a portion of the exercise price of an Award,
then such Shares shall again be available for issuance under the Plan.

In the case of Options exercised with payment in Shares under a SORP provision, the number
of Shares transferred by the Awardee in payment of the exercise price plus the number of Shares withheld for
income and employment taxes (plus any selling commissions) on such exercise
will be netted against the number of Shares issued to the Awardee
in the exercise, and only
the net number shall be charged against the 1,200,000 limitation set forth
above.

ARTICLE 8

Amendment, Suspension and Termination

 

                Section
8.1.  Amendment, Suspension and
Termination.  The Board may
amend, suspend or terminate the Plan or any Award Agreement at any time;
provided, however, that the Board may condition any amendment or modification
on the approval of stockholders of the Company if such approval is necessary or
deemed advisable with respect to tax, securities or other applicable laws,
policies or regulations, or securities exchange listing standards, and no such
amendment, modification or termination shall adversely affect any outstanding
Awards without the consent of the Participant.

 

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ARTICLE 9

Adjustment Provisions

 

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

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

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

ARTICLE 10

Miscellaneous

 

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

 

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

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

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

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

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

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

ARTICLE 11

Limitations on Payments

 

Section 11.1.  Limitations on Payments.

                (a)           Excess Parachute Payments.  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 11.1(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
6.4 were made (when added to any other payments or benefits contingent on a
change of control under any

 

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other agreement,
arrangement or plan), the payments due under Section 6.4 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 Article 11, a payment (or portion
thereof) made is an Excess Parachute Payment, then, the Company shall pay to
the 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)           Determination of Gross-Up
Payments.  Subject to the provisions
of Section 11.1(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 11.1(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)           Claims Procedures.  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.

 

12

 

Without limitation on the foregoing provisions of this
Section 11.1(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 in respect of 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 to a determination before any administrative 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)           Payment of Gross-Up
Payments.  In the event the
Company exhausts its remedies pursuant to Section 11.1(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)           Claim Refunds.  If, after the receipt by the
Participant of an amount advanced by the Company pursuant to Section 11.1(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 advanced by the
Company pursuant to Section 11.1(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 advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.

                (f)            Exception to  Limitation on Payments.  Notwithstanding
the foregoing, the limitation set forth in Section 11.1(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 11.1(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 further reduced by the
state and Federal income taxes on amounts paid in excess of the limitation set
forth in Section 11.1(a), would exceed such total amounts payable after
application of the limitation of Section 11.1(a).  No Gross-Up Payment shall be made in such
case.

 

13

 

EXHIBIT A

 

Conversion
Election Form

for
Calendar Year 20  

 

Election
to Convert Director Compensation to Restricted Stock pursuant to the

1998
Non-Employee Director Stock Award Plan

As
Amended and Restated

 

The following
constitutes the irrevocable election of the undersigned under the Waddell &
Reed Financial, Inc. 1998 Non-Employee Director Stock Award Plan, as Amended and
Restated ( the “Plan”) with respect to the conversion to Restricted Stock of
the Annual Compensation payable to the undersigned by Waddell & Reed
Financial, Inc. (the “Company”) for services as a director (and, if applicable,
as a member or chairman of a committee of the Board) of the Company during the
calendar year identified above. 
Capitalized terms used herein and not otherwise defined have the
meanings assigned such terms in the Plan.

 

                I hereby
irrevocably elect to convert, as of the first Business Day of the calendar year
identified above, into an Award of Options to purchase common stock of the
Company, to be granted at an exercise price of 100% of the Fair Market Value of
the Company’s common stock on the Award Grant Date, pursuant to the Plan for
the calendar year identified above,    % [indicate
any percentage from 50% to 100% (in 10% increments)] or $           [indicate any dollar amount in increments of $10,000]
of my Annual Compensation.

 

 

I hereby irrevocably elect to convert, as of the first
Business Day of the calendar year identified above, into an Award of Restricted
Stock pursuant to the Plan for the calendar year identified above,    %
[indicate any percentage from 50% to 100% (in 10%
increments)] or $           [indicate any dollar amount in increments of $10,000]
of my Annual Compensation.

 

                Executed effective
as of            , 20   .

 

 

	
                                                                                                          

  	
   

  
	
   

  	
  (Signature)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Print Name)

  

 

A-1Exhibit 10.4

 

WADDELL & REED FINANCIAL, INC.

 

RESTRICTED STOCK AWARD AGREEMENT

 

WADDELL &
REED FINANCIAL, INC., a corporation organized and existing under the laws of
the state of Delaware (or any successor corporation) (the “Company”), does
hereby grant and give unto             
(the “Awardee”), an award of restricted shares of Company Class A common
stock (the “Restricted Stock”) upon the terms and conditions hereinafter set
forth (the “Award”).

 

AUTHORITY FOR GRANT

 

1.             Stock Incentive Plan.  The
Restricted Stock is granted under the provisions of the Waddell & Reed
Financial, Inc. 1998 Stock Incentive Plan, as amended and restated (the “Plan”),
and is subject to the terms and conditions set forth in this Restricted Stock
Award Agreement (the “Agreement”) and not inconsistent with the Plan.  Capitalized terms used but not defined herein
shall have the meaning given them in the Plan, which is incorporated by
reference herein.

 

TERMS OF AWARD

 

2.             Number of Shares.  In
consideration of future services to the Company, the Awardee is hereby granted              
shares of Restricted Stock (the “Shares”) of the Company’s Class A common
stock, par value $.01 (the “Stock”) on              ,
20    (the “Grant Date”), subject to repurchase of a portion
thereof by the Company pursuant to Section 12 below.

 

3.             Restrictions; Forfeiture.  The
Restricted Stock may not be sold, transferred, pledged, assigned or otherwise
alienated or hypothecated until its restrictions are removed or expire.  The Restricted Stock may be forfeited to the
Company pursuant to Section 5(b), at which time the Company shall have the
right to instruct the Company’s transfer agent to transfer the Restricted Stock
to the Company to be held by the Company in treasury or by any designee of the
Company.

 

4.             Expiration of Restrictions and Risk of
Forfeiture.  The restrictions and risk of forfeiture for
the Restricted Stock will expire as set forth in this Section 4, as of the
vesting dates set forth in this Section 4, provided that (a) Awardee
is an employee of the Company, a Subsidiary or an Affiliate continuously from
the Grant Date through the applicable vesting date, and (b) the
restrictions and risk of forfeiture have not previously expired pursuant to
this Agreement.

 

	
  Percentage of Shares
  Vesting

  	
   

  	
  Vest Date

  
	
   

  	
   

  	
   

  
	
  331/3%

  	
   

  	
                                 ,
  20   

  
	
  331/3%

  	
   

  	
                                 ,
  20   

  
	
  331/3%

  	
   

  	
                                 ,
  20   

  

 

 

TERMINATION OF AWARD

 

5.             Termination of Employment.

 

(a)           Termination of Employment Due to Death or
Disability.  If an Awardee’s employment with the Company
or any of its Subsidiaries or Affiliates terminates by reason of death or
Disability, the restrictions and risk of forfeiture with respect to the
Restricted Stock which have not expired shall immediately lapse and all shares
of the Restricted Stock shall be deemed fully vested and nonforfeitable.

 

(b)           Termination of Employment Other Than Due to
Death or Disability.  If an Awardee’s employment with the Company
or any of its Subsidiaries or Affiliates terminates for a reason other than
death or Disability, the shares of Restricted Stock for which the restrictions
and risk of forfeiture have not expired as of the date of termination shall be
immediately forfeited without further action by the Company; provided, however,
that the portion, if any, of those shares of Restricted Stock for which the
restrictions and risk of forfeiture have expired as of the date of such
termination shall not be forfeited.

 

6.             Change
in Control or Potential Change in Control of the Company. 
In the event of (a) a Change in Control, unless otherwise
determined by the Committee in writing at or after the Grant Date, but prior to
the occurrence of such Change in Control, or (b) a Potential Change in
Control, if and to the extent so determined by the Committee in writing at or
after the Grant Date (subject to any right of approval expressly reserved by
the Committee at the time of such determination), the restrictions with respect
to the Restricted Stock shall lapse and such shares shall be deemed fully
vested and nonforfeitable.

 

7.             No Limitation on Excess Parachute Payments.  The
provisions of Section 12 of the Plan regarding the payment of any “Excess
Parachute Payment” within the meaning of Section 280G(b)(1) of the
Internal Revenue Code of 1986, as amended, shall not apply to this Agreement.

 

GENERAL TERMS AND PROVISIONS

 

8.             Administration of Award.  The
Restricted Stock shall be maintained in a book-entry account (the “Account”) by
and at the Company’s transfer agent until the restrictions associated with such
Restricted Stock expire pursuant to Sections 4, 5 or 6.  The Awardee shall execute and deliver to the
transfer agent one or more stock powers in blank for the Restricted Stock.  The Awardee hereby agrees that the transfer
agent shall maintain such Account and the related stock power(s) pursuant to
the terms of this Agreement until such restrictions expire pursuant to Sections
4, 5 or 6.

 

9.             Ownership of Restricted Stock.  From
and after the time that the Account representing the Restricted Stock has been
activated and prior to forfeiture, the Awardee will be entitled to all the
rights of absolute ownership of the Restricted Stock, including the right to
vote those shares and to receive dividends thereon if, as, and when declared by
the Board, subject, however, to the terms, conditions and restrictions set
forth in this Agreement.  Dividends paid
in stock of the Company or stock received in connection with a Stock split with
respect to the 

 

2

 

Restricted Stock shall be subject to the same
restrictions as on such Restricted Stock. 
The shares of Restricted Stock subject to this Award are not eligible to
be enrolled in any dividend re-investment program until the restrictions thereon
expire.

 

10.           Adjustment of Shares for Recapitalization,
Etc.  In the event there is any change in the
outstanding Stock of the Company by reason of any reorganization,
recapitalization, stock split, stock dividend, combination of shares or
otherwise, there shall be substituted for or added to each share of Stock
theretofore appropriated or thereafter subject, or which may become subject, to
this Award, the number and kind of shares of stock or other securities into
which each outstanding share of Stock shall be so changed or for which each
such share shall be exchanged, or to which each such share shall be entitled,
as the case may be.  Adjustment under the
preceding provisions of this Section 10 will occur automatically upon any such
change in the outstanding Stock of the Company. 
No fractional interest will be issued under the Plan on account of any
such adjustment.

 

11.           Conditions to Delivery of Stock and
Registration.  Nothing herein shall require the Company to
issue or the transfer agent to deliver any shares with respect to the Award if (a) that
issuance would, in the opinion of counsel for the Company, constitute a
violation of the Securities Act of 1933, as amended, or any similar or
superseding statute or statutes, any other applicable statute or regulation, or
the rules of any applicable securities exchange or securities association,
as then in effect; or (b) the withholding obligation as provided in Section 12
of this Agreement has not been satisfied. 
From time to time, the Board and appropriate officers of the Company are
authorized to and shall take whatever actions are necessary to file required
documents with governmental authorities, stock exchanges, and other appropriate
persons to make shares of Stock available for issuance.

 

12.           Payment of Taxes.  The
delivery of shares of Stock pursuant to this Award is conditioned upon
satisfaction of any withholding obligation described in this Section 12.  The Awardee may be required, from time to
time, in the Company’s discretion, to pay to the Company (or any Subsidiary or
Affiliate as applicable), the amount that the Company deems necessary to
satisfy the Company’s or its Subsidiary’s or Affiliate’s current or future
obligation to withhold federal, state or local income or other taxes incurred by
the Awardee as a result of the Award. 
With respect to any required tax withholding obligation, the Awardee may
(a) upon election at the time and in the manner prescribed by the Company,
direct the Company to purchase from the Awardee the number of shares of
Restricted Stock to be issued upon vesting equal in value to the amount of such
obligation, based on the shares’ Fair Market Value at the time such obligation
is incurred; (b) deliver to the Company sufficient shares of Stock to
satisfy such obligation, based on the shares’ Fair Market Value at the time
such obligation is incurred; or (c) deliver sufficient cash to the Company
to satisfy such obligation.  The Company
may, in its sole discretion, deny any request to satisfy withholding
obligations through Stock instead of cash. 
In the event the Company subsequently determines that the aggregate Fair
Market Value of any shares of Stock withheld as payment of any tax withholding
obligation is insufficient to discharge that tax withholding obligation, then
the Awardee shall pay to the Company, immediately upon the Company’s request,
the amount of that deficiency in cash.

 

13.           Company Records. 
Records of the Company or its Subsidiaries or Affiliates regarding any
period(s) of employment, termination of employment and the reason therefor, 

 

3

 

leaves of absence, re-employment, and other
matters shall be conclusive for all purposes hereunder, unless determined by
the Company to be incorrect.

 

14.           Right of the Company and Subsidiaries to
Terminate Employment.  Nothing contained in this Agreement shall
confer upon the Awardee the right to continue in the employ of the Company or
any Subsidiary or Affiliate, or interfere in any way with the rights of the
Company or any Subsidiary or Affiliate to terminate the Awardee’s employment at
any time.

 

15.           No Liability for Good Faith Determinations.  The
members of the Board and the Committee shall not be liable for any act,
omission, interpretation or determination taken or made in good faith with
respect to this Agreement or the Restricted Stock granted hereunder 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.

 

16.           Severability.  If
any provision of this Agreement is held to be illegal or invalid for any
reason, the illegality or invalidity shall not affect the remaining provisions
hereof, but such provision shall be fully severable and this Agreement shall be
construed and enforced as if the illegal or invalid provision had never been
included herein.

 

17.           Successors.  This Agreement shall be
binding upon the Awardee, their legal representatives, heirs, legatees and
distributees, and upon the Company, its successors and assigns.

 

18.           Notices.  Any notices required by or
permitted to be given to the Company under this Agreement shall be made in
writing and addressed to the Secretary of the Company in care of the Company’s
Legal Department, 6300 Lamar Avenue, Overland Park, Kansas 66202.  Any such notice shall be deemed to have been
given when received by the Company.

 

19.           Headings.  The titles and headings herein
are included for convenience of reference only, do not constitute a part of
this Agreement and shall not be deemed to limit or affect any of the provisions
hereof.

 

20.           Rules of Construction.  This
Agreement has been executed and delivered by the Company in Kansas and shall be
construed and enforced in accordance with the laws of said State, other than
any choice of law rules calling for the application of laws of another
jurisdiction.  Should there be any
inconsistency or discrepancy between the provisions of this Agreement and the
terms and conditions of the Plan under which this Award is granted, the
provisions in the Plan shall govern and prevail.

 

21.           Amendment.  This Agreement may be amended
by the Committee; provided, however, that no amendment may decrease rights
inherent in this Award prior to such amendment without the express written
consent of the parties hereto. 
Notwithstanding the provisions of this Section 21, this Agreement
may be amended by the Committee to the extent necessary to comply with
applicable laws and regulations and to conform the provisions of this Agreement
to any changes thereto.

 

4

 

22.           Effective Date.  This
Agreement has been executed this       day of            ,
20     , effective as of                ,
20     .

 

 

	
   

  	
  WADDELL &
  REED FINANCIAL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Daniel P. Connealy, Senior Vice President

  and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  “Company”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  [Name]

  
	
   

  	
   

  
	
   

  	
  “Awardee”

  

 

5

 

STOCK POWER

 

FOR VALUE RECEIVED,               does hereby assign and transfer unto Waddell & Reed Financial, Inc. (51-0261715)           
shares of Class A common stock of Waddell & Reed Financial, Inc.,
a Delaware corporation, granted on            ,
20     , as evidenced by the Restricted Stock Award
Agreement of even date herewith and standing in the name of the undersigned on
the books of Waddell & Reed Financial, Inc.  The undersigned does hereby appoint EquiServe
Trust Company, N.A. as attorney-in-fact to transfer the said stock on the books
of Waddell & Reed Financial, Inc. with full power of substitution
in the premises.

 

Dated
as of this      day of             ,
20     .

 

	
   

  	
   

  	
   

  
	
   

  	
  [Name]

  

 

6

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