-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UuQu7q65mLhjpvhVXesWK6j3rWHN5I+tZ+E+wz1ask60Fj+FfRHTQDgQsKgXCWhh AkjRVoDhvSKFA1/4I7LUUQ== 0000930661-98-002613.txt : 19981216 0000930661-98-002613.hdr.sgml : 19981216 ACCESSION NUMBER: 0000930661-98-002613 CONFORMED SUBMISSION TYPE: S-8 POS PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19981215 EFFECTIVENESS DATE: 19981215 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WADDELL & REED FINANCIAL INC CENTRAL INDEX KEY: 0001052100 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 510261715 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-8 POS SEC ACT: SEC FILE NUMBER: 333-65827 FILM NUMBER: 98769401 BUSINESS ADDRESS: STREET 1: P O BOX 29217 STREET 2: 6300 LAMAR AVE CITY: OVERLAND PARK STATE: KS ZIP: 66202-4200 BUSINESS PHONE: 9132362000 MAIL ADDRESS: STREET 1: P O BOX 29217 STREET 2: 6300 LAMAR AVE CITY: OVERLAND PARK STATE: KS ZIP: 66202-4200 S-8 POS 1 POST EFFECTIVE AMENDMENT NO 1 TO S8 As filed with the Securities and Exchange Commission on December 15, 1998. Registration No. 333-65827 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _______________________ POST EFFECTIVE AMENDMENT NO. 1 TO FORM S-8 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 WADDELL & REED FINANCIAL, INC. (Exact Name of Registrant as Specified in Its Charter) Delaware 51-0261715 -------- ---------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 6300 Lamar Avenue OVERLAND PARK, KANSAS 66202 (913) 236-2000 (Address of Principal Executive Offices, including Zip Code) _______________________ 1998 EXECUTIVE DEFERRED COMPENSATION STOCK OPTION PLAN, 1998 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN AND 1998 STOCK INCENTIVE PLAN (Full Title of the Plans) ---------------------------- DANIEL C. SCHULTE COPY TO: ASSISTANT SECRETARY ALAN J. BOGDANOW WADDELL & REED FINANCIAL, INC. HUGHES & LUCE, L.L.P. 6300 LAMAR AVENUE 1717 MAIN STREET, SUITE 2800 OVERLAND PARK, KANSAS 66202 DALLAS, TEXAS 75201 (913) 236-2000 (214) 939-5500 (Name, Address, and Telephone Number, including Area Code, of Agent for Service) _______________________ CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------- PROPOSED PROPOSED TITLE OF EACH CLASS AMOUNT MAXIMUM MAXIMUM AMOUNT OF OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE - --------------------------------------------------------------------------------------------------------------------- Class A Common Stock, $.01 par 16,300,000 $17.16 $279,708,000 $82,514(3) value - ---------------------------------------------------------------------------------------------------------------------
(1) This registration statement also covers an indeterminate additional amount of shares of the Registrant's Class A Common Stock to be offered or sold pursuant to the antidilution provisions of the 1998 Executive Deferred Compensation Stock Option Plan, 1998 Non-Employee Director Stock Option Plan and 1998 Stock Incentive Plan. (2) Estimated solely for the purpose of calculating the registration fee on the basis of the average of the high and low price paid per share of the Class A Common Stock, as reported on the New York Stock Exchange on October 9, 1998, in accordance with Rules 457(c) and (h)(1) promulgated under the Securities Act of 1933, as amended. (3) Previously paid. PROSPECTUS WADDELL & REED FINANCIAL, INC. 4,190,094 SHARES CLASS A COMMON STOCK, $.01 PAR VALUE ACQUIRED PURSUANT TO THE WADDELL & REED FINANCIAL, INC. 1998 EXECUTIVE DEFERRED COMPENSATION STOCK OPTION PLAN, 1998 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN AND 1998 STOCK INCENTIVE PLAN Our stockholders identified below under the caption "Selling Stockholders" may offer to sell up to 4,190,094 shares of our Class A common stock. We have already issued to the selling stockholders the shares being offered by the selling stockholders, or we will issue the shares being offered by the selling stockholders prior to the sale of the shares. This offering is not part of the original issuance of the shares of Class A common stock. We will not receive any of the proceeds from the selling stockholder's sale of their shares. The selling stockholders may offer the shares in transactions on the New York Stock Exchange, in negotiated transactions, or through a combination of these methods. The selling stockholders may offer the shares at prices relating to the prevailing market prices or at negotiated prices. The Class A common stock is quoted on the NYSE under the symbol "WDR". On December 11, 1998 the last sale price of the Class A common stock, as reported on the NYSE, was $22.6875 per share. ____________________________________ INVESTING IN THE CLASS A COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE ONLY IF YOU CAN AFFORD A COMPLETE LOSS. SEE "RISK FACTORS" BEGINNING ON PAGE 4. ____________________________________ The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if the prospectus is truthful or complete. Any representation to the contrary is a criminal offense. ____________________________________ You should rely only on the information contained in this document or that we have referred you to. We have not authorized anyone to provide you with information that is different from that contained in this Prospectus. The selling stockholders may offer to sell, and seek offers to buy, shares of Class A common stock only in jurisdictions where offers and sales are permitted. The information contained in this Prospectus is accurate only as of the date of this Prospectus, regardless of the time of delivery of this Prospectus or of any sale of the Class A common stock. This Prospectus is dated December 15, 1998. AVAILABLE INFORMATION The Company is subject to the informational reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, files reports and other information with the Securities and Exchange Commission (the "Commission"). Reports, proxy statements, information statements, and other information may be inspected without charge at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549-1004 and at the following regional offices of the Commission: New York Regional Office, Seven World Trade Center, Suite 1300, New York, New York 10048; and Chicago Regional Office, Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60606. Copies of such material may be obtained from the Public Reference Room of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Information on the operation of the Public Reference Section is available by calling the Commission at 1-800-SEC- 0330. Reports, proxy statements, information statements and other information can also be inspected at the offices of the NYSE, 20 Broad Street, New York, New York 10005. The Commission maintains a Web site that contains information filed with the Commission. The Commission's Web site address is http://www.sec.gov. The Company intends to furnish its stockholders with annual reports containing audited financial statements and such other periodic reports as it may determine to furnish or as may be required by law. The Company has filed with the Commission a Registration Statement on Form S-8, (together with all exhibits thereto, the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the shares of Class A common stock offered hereby. This Prospectus does not contain all information set forth in the Registration Statement. Certain parts of the Registration Statement have been omitted in accordance with the rules and regulations of the Commission. For further information, reference is made to the Registration Statement which can be inspected at the public reference rooms at the offices of the Commission. 1 DOCUMENTS INCORPORATED BY REFERENCE The Company will provide without charge to each person to whom a copy of this Prospectus is delivered, including any beneficial owner, upon the written or oral request of such person, a copy of any or all of the documents incorporated by reference herein (other than exhibits to such documents, unless such exhibits are specifically incorporated by reference into the information that this Prospectus incorporates). Requests should be directed to: Waddell & Reed Financial, Inc. 6300 Lamar Avenue Overland Park, Kansas 66202 Attn: Assistant Secretary (913) 236-2000 The following documents previously filed with the Commission pursuant to the Securities Act and the Exchange Act are incorporated herein by reference and shall be deemed a part hereof: (a) The Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998; (b) The Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998; (c) The Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998; (d) The description of the Registrant's Class A common stock contained in the Registrant's Registration Statement on Form 8-A, (the "Form 8-A") filed with the Commission on February 27, 1998, including any amendment or report filed for the purpose of updating such description; and (e) All reports filed by the Registrant pursuant to Sections 13(a) or 15(d) of the Exchange Act, since the filing of the Form 8-A. All documents filed with the Commission by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering relating to this Prospectus will be deemed to be incorporated by reference into this Prospectus and to be a part hereof from the date of filing of such documents. Any statement incorporated or deemed to be incorporated by reference herein will be deemed to be modified, replaced or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document that also is or is deemed to be incorporated by reference herein modifies, replaces or supersedes such statement. Any such statement so modified, replaced or superseded will be deemed, except as so modified, replaced or superseded, to constitute a part of this Prospectus. 2 THE COMPANY We were founded in 1937 and are the third oldest mutual fund complex in the United States, having introduced the United family of funds in 1940. We focus on selling investment products to middle income Americans through our sales force. We are the exclusive underwriter and distributor of 36 mutual fund portfolios. Seventeen of these funds make up the United Group of Mutual Funds, 8 make up the Waddell & Reed Funds, Inc., and 11 make up the Target/United Funds, Inc. We also distribute underwritten variable annuities and life insurance products of Torchmark Corporation to our customers. We sell front-end loaded and contingent deferred sales charge mutual fund products. We are a Delaware corporation with our principal offices located at 6300 Lamar Avenue, Overland Park, Kansas 66202 (telephone number 913-236-2000). RISK FACTORS You should carefully consider the following risk factors and warnings before making an investment decision. The risks described below are not the only ones that we face. Additional risks that we do not yet know of or that we currently think are immaterial may also impair our business operations. If any of the following risks actually occur, our business, financial condition or results of operations could be materially adversely affected. In such case, the trading price of our Class A common stock could decline, and you may lose all or part of your investment. You should also refer to the other information set forth in this Prospectus. This Prospectus contains forward-looking statements. These statements refer to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expects", "anticipates", "plans", "believes", "estimates", "predicts", "potential" or "continue" or the negative of such terms and other comparable terminology. These statements are only predictions. Actual events or results may differ materially. In evaluating these statements, you should specifically consider various factors, including the risks outlined below. These factors may cause our actual results to differ materially from any forward-looking statement. POTENTIAL ADVERSE EFFECTS ON OUR BUSINESS FROM A DECLINE IN SECURITIES MARKETS Our results of operations are affected by certain economic factors, including the level of the securities markets. The United States securities markets performed well for the last five years and the first half of 1998. This performance attracted a substantial increase in the investments in these markets, which benefited us and the funds. The United States securities markets have, however, been highly volatile. Most equity market indices have declined significantly since July 1998. In recent months the United States mutual fund industry experienced net redemptions for the first time in several years. If there is (1) a further decline in the securities markets; (2) a failure of the securities markets to return to prior levels or to sustain the levels of growth achieved prior to July 1998; or (3) continued or additional short-term 3 volatility in the securities markets, there could be an adverse effect on our business. This could adversely and materially affect the market price of the Class A common stock. Because our revenues are largely based on the value of the assets that we manage, a decline in the value of these assets would adversely affect our revenues. Our growth is dependent to a significant degree upon the ability of the funds to attract and retain mutual fund assets. This may be difficult if there is an adverse economic environment. Our growth rate has varied from year to year, and we cannot assure you that our recent growth rates will continue. POTENTIAL ADVERSE EFFECTS ON OUR BUSINESS IF THE FUNDS' PERFORMANCE DECLINES In order for us to succeed, the funds must have good investment performance. Good performance generally leads to (1) selling more shares in our funds, which results in higher revenues; (2) fewer owners of shares in the funds redeeming those shares and (3) us obtaining additional private institutional accounts, for which we may act as a subadvisor. If the funds have poor investment performance, this generally leads to (1) selling less shares in our funds; (2) more owners of shares in the funds redeeming those shares and (3) private institutional accounts being withdrawn from us, with corresponding decreases in our revenues. If the funds do not perform well, this could adversely and materially affect the market price of the Class A common stock. OUR CONTRACTS CONTAIN TERMINATION PROVISIONS AND RENEWALS RISKS A substantial majority of our revenues are derived from investment management agreements with the funds that are terminable on 60 days' notice. In addition, the disinterested members of each fund's board or its shareholders must annually approve and renew each investment management agreement. If the board or shareholders of a significant number of the funds vote to terminate or not renew the agreements, this could have a material adverse effect on our business, financial condition and results of operations. DIFFICULTIES IF WE CANNOT RECRUIT AND RETAIN KEY PERSONNEL AND SALES FORCE Our future success depends to a substantial degree on our ability to attract and retain qualified personnel to conduct our business. There is a great deal of competition for qualified fund managers, investment analysts and financial advisers, and this competition has increased in recent periods due to the growth of the mutual fund management industry. We anticipate that it will be necessary for us to add fund managers and investment analysts, and we have adopted a strategy intended to attract and retain fund managers and investment analysts. We cannot assure you, however, that we will be successful in our efforts to recruit and retain the required personnel. We are currently dependent on our sales force to sell our mutual fund and other investment products. Our future growth will be directly affected by the quality and quantity of financial advisers we are able to successfully recruit and retain. 4 WE HAVE COMPETITORS WITH GREATER RESOURCES The mutual fund distribution and service and investment management industries are very competitive and are undergoing substantial consolidations. Many organizations in these industries are attempting to market to and service the same clients as we are. These organizations offer mutual fund investments and services and a wide range of other financial products and services. Many of our competitors have more products and product lines, services and may also have substantially greater assets under management and financial resources. Many larger mutual fund complexes have developed relationships with brokerage houses with large distribution networks, which may enable these fund complexes to reach broader client bases. WE MAY HAVE DIFFICULTIES IN EXECUTING OUR ACQUISITION STRATEGY We have no history of finding, acquiring or integrating other companies. We cannot assure you that we will (1) find suitable acquisition candidates at acceptable prices; (2) have sufficient capital resources to realize our acquisition strategy; (3) be successful in entering into definitive agreements for desired acquisitions or (4) successfully integrate acquired companies. We also cannot assure you that any such acquisitions, if consummated, will be advantageous to us. WE MAY NOT SUCCESSFULLY IMPLEMENT OUR NEW INFORMATION SYSTEMS Some of our key information technology systems were developed solely to handle our particular information technology infrastructure. We are in the process of implementing new information technology and systems. We are implementing these new systems both internally and through outsourcing the data processing portion of our shareholder service functions. We believe that these new systems could facilitate the acquisition and integration of other mutual fund companies. We cannot, however, assure you that we will be successful in implementing the new information technology and systems or that the implementation of these systems will be completed in a timely manner or within our budget. RISKS RELATING TO YEAR 2000 PROBLEMS MAY ADVERSELY AFFECT OUR BUSINESS Some computers, software, and other equipment include computer code in which calendar year data is abbreviated to only two digits. As a result, some of these systems will not operate correctly after 1999 because they may interpret "00" to mean 1900, rather than 2000 - widely known as the "Year 2000 Problem". These problems are likely to increase in frequency and severity as the year 2000 approaches. The Year 2000 Problem affects some of our computers, software and other equipment. If we fail to properly recognize and address the Year 2000 Problem in our systems, our business, financial condition and results of operations could be materially and adversely affected. We believe that we have identified most of the major computers, software and other equipment used in connection with our internal operations that must be modified, upgraded or replaced to minimize the possibility of a material disruption to our business. We have 5 commenced the process of modifying, upgrading and replacing major systems that have been assessed as adversely affected, and we expect to complete this process before the occurrence of any material disruption of our business. We have commenced the process of identifying other computers, software and other equipment that may be affected by the Year 2000 Problem, and determining whether remedial action is needed. We expect to complete this process by the third quarter of 1999, and we estimate that the total costs of this effort will be $4.2 million for the five year period ending June 30, 2000. Total costs incurred to date are approximately $2.6 million. The Year 2000 Problem also affects some of our customers and major suppliers of computers, software, and other equipment. We have discussed the Year 2000 Problem with some of these customers and suppliers, but we cannot guarantee that they will resolve any or all Year 2000 Problems. If our customers and suppliers fail to resolve Year 2000 Problems, our business could be materially disrupted. We are developing contingency plans to minimize the impact of any Year 2000 Problems. We expect to complete these contingency plans by the end of the third quarter 1999. OUR FINANCIAL ADVISERS COULD MISUSE MONEY AND INFORMATION Our financial advisers handle a significant amount of money and financial and personal information for people that invest in the funds and for people that purchase other investment and insurance products from us. Although we have implemented a system of controls to minimize the risk of misuse of such money and information, we cannot assure you that these controls will be adequate. We also cannot assure you that we can prevent taking or misuse of money or information. In the event of any taking or misuse, we could have liability and could also be subject to regulatory sanctions. Although we believe that we are adequately insured against such risks, we cannot assure you that such insurance will be maintained or that it will be adequate to meet any future liability. POTENTIAL ADVERSE EFFECT ON CLASS A COMMON STOCK SHARE VALUE FROM DISPARATE VOTING RIGHTS OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK The holders of our Class A common stock and the Class B common stock have identical rights except that: . holders of Class A common stock have one vote per share while holders of Class B common stock have five votes per share; . holders of Class A common stock cannot vote on any alteration of the powers, preferences or special rights of the Class B common stock that would not adversely affect the Class A common stock; and . holders of Class B common stock cannot vote on any alteration of the powers, preferences or special rights of the Class A common stock that would not adversely affect the Class B common stock. 6 For example, holders of one class of common stock could not vote on proposals to: . decrease the voting power of the other class of common stock; . decrease the right of the other class of common stock to receive dividends; or . diminish the rights of the other class of common stock in liquidation. Investors or any potential future purchaser of our shares could view the superior voting rights of the Class B common stock to have value, which could adversely affect the value of the Class A common stock. The existence of two separate classes of common stock could result in less liquidity for either class of common stock than if there were only one class of common stock. WE MAY NOT PAY DIVIDENDS; OUR HOLDING COMPANY STRUCTURE MAY LIMIT OUR AVAILABLE CASH FOR DISTRIBUTION Our Board of Directors currently intends to declare quarterly dividends on both the Class A common stock and the Class B common stock. Our Board of Directors has discretion over declaring and paying dividends. Whether or not the Board of Directors decides to pay dividends, and the amount of such dividends, will depend on many factors, including: . general economic and business conditions; . our strategic plans; . our financial results and condition; . contractual, legal, and regulatory restrictions on the payment of dividends by us or our subsidiaries; and . such other factors as the Board of Directors may consider to be relevant. We are a holding company, and, as such, our ability to pay dividends is subject to the ability of our subsidiaries to provide us with cash. We cannot assure you that our initial quarterly dividend level will be maintained or that we will pay any dividends in any future period. WE COULD BE ADVERSELY AFFECTED BY CHANGES IN REGULATION Our investment management business is subject to extensive regulation in the United States, primarily at the Federal level, including regulation by the Commission. Changes in laws or regulations, or in governmental policies, could materially and adversely affect our business and operations. PROVISIONS IN OUR CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE LAW COULD DETER TAKEOVER ATTEMPTS Our Board of Directors may issue shares of preferred stock and may determine the price, rights, preferences, privileges and restrictions, including voting and conversion rights, of these 7 shares of preferred stock. These determinations may be made without any further vote our action by our stockholders. The rights of the holders of Class A common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future. The issuance of preferred stock may make it more difficult for a third party to acquire a majority of our outstanding voting stock. Some provisions in our Certificate of Incorporation and Bylaws and of Delaware law could also delay, prevent or make more difficult a merger, tender offer, or proxy contest involving our Company, including: . With certain exceptions, Section 203 of the Delaware General Corporation Law restricts certain mergers and other business combinations between us and any holder of 15% or more of our voting stock; . the prohibition of actions by stockholders without a meeting, unless our Board of Directors otherwise approves; . our Board of Directors is divided into three classes, each of which serves for a staggered three-year term; and . after Torchmark Corporation ceases to beneficially own at least a majority of the voting power, incumbent directors may not be removed without cause. 8 CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS This Prospectus contains or incorporates by reference certain forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, those listed under "Risk Factors" and elsewhere in this Prospectus. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expects", "anticipates", "plans", "believes", "estimates", "predicts", "potential" or "continue" or the negative of such terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of any such forward-looking statements. We are under no duty to update any of the forward-looking statements after the date of this Prospectus to conform such statements to actual results. 9 SELLING STOCKHOLDERS The table below sets forth information with respect to the beneficial ownership of the Class A common stock of Waddell & Reed Financial, Inc. (the "Company") by the selling stockholders immediately prior to this offering and as adjusted to reflect the sale of shares of Class A common stock pursuant to the offering. Of the selling stockholders, only Keith A. Tucker, Henry J. Herrmann and Robert L. Hechler own or have the right to acquire through exercise of stock options, on the date hereof, in excess of one percent of the outstanding Class A common stock. All information with respect to the beneficial ownership has been furnished by the selling stockholders. The number of shares which may be sold by each such selling stockholders from time to time will be updated in supplements to this Prospectus, which will be filed with the Commission in accordance with Rule 424(b) of the Securities Act.
Class A common stock Relationship with Owned as of Shares to Name Company October 31, 1998 (1) Be Sold (2) ---- ----------------- ---------------------- ----------- Keith A. Tucker Chairman of the Board, 1,436,370 180,000 (3) Chief Executive Officer and 131,736 (4) Director 135,496 (5) 416,911 (6) 270,992 (7) 340,808 (8) 465,689 (9) Tucker KA Child Trust 64,204 64,204 (9) Henry J. Herrmann President, Chief Investment 614,626 344,600 (3) Officer, Treasurer and 32,934 (4) Director 40,649 (5) 91,720 (6) 75,044 (7) 259,735 (9) Robert L. Hechler Executive Vice President, 341,582 292,200 (3) Chief Operating Officer and 32,934 (4) Director 50,029 (6) 33,353 (7) 144,876 (9) Harold T. McCormick Director 9,998 6,000 (10) 6,714 (11) 11,226 (12) 6,036 (13) 5,515 (23) 6,428 (9) 1,811 (14) Louis T. Hagopian Director 25,060 6,000 (10) 6,234 (11) 11,519 (12) 5,457 (23) 20,703 (9) 1,811 (14)
10 R. K. Richey Director 156,327 6,000 (10) 14,481 (15) 21,126 (16) 90,540 (6) 60,360 (17) Richey Capital Partners, LTD 189,519 94,814 (23) 94,705 (9) Richey RK Child Trust 25,985 25,985 (9) Joseph L. Lanier, Jr. Director 29,102 6,000 (10) 5,891 (11) 11,226 (12) 5,483 (18) 19,194 (9) 1,811 (14) William L. Rogers Director 0 10,000 (19) 10,933 (12) James M. Raines Director 0 10,000 (20) 12,307 (21) George J. Records Director 8,761 6,000 (10) 5,873 (11) 11,226 (12) 6,036 (13) 5,515 (23) 5,191 (9) 1,811 (14) David L. Boren Director 3,018 6,000 (10) 6,036 (13) 1,811 (14) Joseph M. Farley Director 18,229 6,000 (10) 9,215 (12) 16,418 (9) 1,811 (14) Michael D. Strohm Principal Accounting Officer 17,594 16,800 (3) 10,423 (6) 10,423 (7) 1,459 (9) D. Tyler Towery Vice President 33,740 5,420 (6) 5,420 (7) 17,510 (9)
11 Sharon K. Pappas Former Secretary 13,207 16,800 (22) 8,338 (24) 8,338 (24)
_________________________ (1) In each case, the indicated number of shares of Class A common stock include both the number of shares held on the date indicated and the number of shares issuable upon exercise of stock options held by the selling stockholder within the next sixty days. (2) Assumes all the shares of Class A common stock that may be offered are sold. (3) All such options were granted on March 4, 1998 pursuant to the 1998 Stock Incentive Plan. The options are exercisable in three increments of 33.33% each commencing on March 4, 2000 and on each of the two anniversaries thereafter and expire ten years and two days from the date of grant. (4) All such options were granted on March 4, 1998 pursuant to the 1998 Executive Deferred Compensation Stock Option Plan. The options are exercisable in ten increments of 10% each commencing on March 4, 1999 and on each of the nine anniversaries thereafter and expire eleven years from the date of grant. (5) All such options were granted on November 6, 1998 pursuant to the 1998 Stock Incentive Plan in conjunction with the spin-off of the Company by Torchmark, are immediately exercisable and expire on December 17, 2004. (6) All such options were granted on November 6, 1998 pursuant to the 1998 Stock Incentive Plan in conjunction with the spin-off of the Company by Torchmark. The options are exercisable in two increments of 50% each on December 20, 1997 and December 20, 1998 and expire on December 21, 2005. (7) All such options were granted on November 6, 1998 pursuant to the 1998 Stock Incentive Plan in conjunction with the spin-off of the Company by Torchmark. The options are exercisable in two increments of 50% each on December 16, 1998 and December 16, 1999 and expire on December 17, 2006. (8) All such options were granted on November 6, 1998 pursuant to the 1998 Executive Deferred Compensation Plan in connection with the spin-off of the Company by Torchmark. The options are exercisable in ten increments of 10% each commencing on January 31, 1998 and on each of the nine anniversaries thereafter and expire on January 30, 2008. (9) All such options were granted on November 6, 1998 pursuant to the 1998 Stock Incentive Plan in connection with the spin-off of the Company by Torchmark. The options are immediately exercisable and expire on September 26, 2007. (10) All such options were granted on March 4, 1998 pursuant to the 1998 Stock Incentive Plan. The options are exercisable in three increments of 33.33% each commencing on March 4, 2000 and on each of the two anniversaries thereafter and expire ten years and two days from the date of grant. (11) All such options were granted on March 4, 1998 pursuant to the 1998 Non- Employee Director Stock Option Plan. The options are exercisable in ten increments of 10% each commencing on March 4, 1999 and on each of the nine anniversaries thereafter and expire eleven years from the date of grant. (12) All such options were granted on April 23, 1998 pursuant to the 1998 Non- Employee Director Stock Option Plan. The options are exercisable in ten increments of 10% each commencing on March 4, 1999 and on each of the nine anniversaries thereafter and expire eleven years from the date of grant. (13) All such options were granted on November 6, 1998 pursuant to the 1998 Stock Incentive Plan in conjunction with the spin-off of the Company by Torchmark. The options are exercisable in ten increments of 10% each commencing on December 18, 1997 and on each of the nine anniversaries thereafter and expire on December 17, 2007. (14) All such options were granted on November 6, 1998 pursuant to the 1998 Stock Incentive Plan in conjunction with the spin-off of the Company by Torchmark, are immediately exercisable and expire on January 3, 2008. 12 (15) All such options were granted on November 6, 1998 pursuant to the 1998 Stock Incentive Plan in conjunction with the spin-off of the Company by Torchmark, are immediately exercisable and expire on December 8, 2002. (16) All such options were granted on November 6, 1998 pursuant to the 1998 Stock Incentive Plan in conjunction with the spin-off of the Company by Torchmark, are immediately exercisable and expire on December 17, 2004. (17) All such options were granted on November 6, 1998 pursuant to the 1998 Stock Incentive Plan in conjunction with the spin-off of the Company by Torchmark. The options are exercisable in two increments of 50% each on December 16, 1998 and December 16, 1999 and expire on December 17, 2006. (18) All such options were granted on November 6, 1998 pursuant to the 1998 Stock Incentive Plan in conjunction with the spin-off of the Company by Torchmark. The options are exercisable in ten increments of 10% each commencing on January 2, 1998 and expire on January 1, 2009. (19) All such options were granted on April 15, 1998 pursuant to the 1998 Stock Incentive Plan. The options are exercisable in three increments of 33.33% each commencing on March 4, 2000 and on each of the two anniversaries thereafter and expire ten years and two days from the date of grant. (20) All such options were granted on July 22, 1998 pursuant to the 1998 Stock Incentive Plan. The options are exercisable in three increments of 33.33% each commencing on March 4, 2000 and on each of the two anniversaries thereafter and expire ten years and two days from the date of grant. (21) All such options were granted on August 5, 1998 pursuant to the 1998 Non- Employee Director Stock Option Plan. The options are exercisable in ten increments of 10% each commencing on March 4, 1999 and on each of the nine anniversaries thereafter and expire eleven years from the date of grant. (22) All such options were granted on March 4, 1998 pursuant to the 1998 Stock Incentive Plan. The options are immediately exercisable and expire on October 31, 2001. (23) All such options were granted on November 6, 1998 pursuant to the 1998 Stock Incentive Plan in conjunction with the spin-off of the Company by Torchmark. The options are immediately exercisable and expire on January 30, 2008. (24) All such options were granted on November 6, 1998 pursuant to the 1998 Stock Incentive Plan in conjunction with the spin-off of the Company by Torchmark. The options are immediately exercisable and expire on October 31, 2001. PLAN OF DISTRIBUTION The Class A common stock being offered by the selling stockholders pursuant to this Prospectus may be sold from time to time by the selling stockholders, or by pledgees, donees, transferees or other successors in interest, regardless of whether such successors in interest are successors in interest with respect to the shares. Such sales may be made on one or more exchanges or in the over-the- counter market, or otherwise at prices and on terms then prevailing or at prices related to the then-current market price of the Class A common stock, or in negotiated transactions. In addition, any securities covered by this Prospectus which qualify for sale pursuant to Rule 144 under the Act may be sold under either of such rules rather than pursuant to this Prospectus. In effecting sales, brokers or dealers engaged by the selling stockholders may arrange for other brokers or dealers to participate. Brokers or dealers will receive commissions or discounts from selling stockholders in amounts to be negotiated immediately prior to the sale. The selling stockholders and agents who execute orders on their behalf may be deemed to be underwriters as that term is defined in Section 2(11) of the Act and a portion of any proceeds or sales discounts, commissions or other compensation may be deemed to be underwriting compensation for purposes of the Act. 13 USE OF PROCEEDS The Company will not receive any proceeds from this offering. LEGAL MATTERS The validity of the shares of Class A common stock offered hereby has been passed upon for us by Hughes & Luce, L.L.P., Dallas, Texas. EXPERTS The Consolidated Financial Statements of the Company as of December 31, 1996 and 1997, and for each of the years in the three-year period ended December 31, 1997 incorporated by reference into this Prospectus have been so included in reliance on the report of KPMG Peat Marwick LLP, independent certified public accountants, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing. INDEMNIFICATION The Company's Certificate of Incorporation provides that each person who was or is threatened to be made a party to or is involved in any action, suit or proceeding by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Company or is or was serving at the request of the Company as a director or officer of another company, partnership, joint venture, trust or other enterprise, will be indemnified and held harmless by the Company to the fullest extent authorized by the Delaware General Corporation Law as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than said law permitted the Company to provide prior to such amendment), against all expense, liability and loss reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of his or her heirs, executors and administrators. The Delaware General Corporation Law permits Delaware corporations to include in their certificates of incorporation a provision eliminating or limiting director liability for monetary damages arising from breaches of their fiduciary duty. The only limitations imposed under the statute are that the provision may not eliminate or limit a director's liability (i) for breaches of the director's duty of loyalty to the corporation or its stockholders; (ii) for acts or omissions not in good faith or involving intentional misconduct or known violations of law; (iii) for the payment of unlawful dividends or unlawful stock purchases or redemptions; or (iv) for transactions in which 14 the director received an improper personal benefit. In addition, directors and officers are insured, at the Registrant's expense, against certain liabilities which might arise out of their employment. Under Section 145 of the Delaware General Corporation Law, a corporation may indemnify a director, officer, employee or agent of the corporation against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. In the case of an action brought by or in the right of a corporation, the corporation may indemnify a director, officer, employee or agent of the corporation against expenses (including attorneys' fees) actually and reasonably incurred by him or her if he or she acted in good faith and in a manner he or she reasonably believed to be in the best interests of the corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless a court finds that, in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as the court shall deem proper. 15 4,190,094 SHARES WADDELL & REED FINANCIAL, INC. CLASS A COMMON STOCK -------------- PROSPECTUS -------------- TABLE OF CONTENTS Page -- Available Information 1 Documents Incorporated by Reference 2 The Company 3 Risk Factors 3 Cautionary Statement Concerning 9 Forward-Looking Statements Selling Stockholders 10 Plan of Distribution 13 Use of Proceeds 14 Legal Matters 14 Experts 14 Indemnification 14 December 15, 1998 PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE. The following documents heretofore filed with the Securities and Exchange Commission (the "Commission") by Waddell & Reed Financial, Inc. (the "Registrant" or the "Company") are incorporated by reference in this Registration Statement: (a) The Registrant's Rule 424(b) Prospectus, as filed under the Securities Exchange Act of 1933, as amended (the "Securities Act"), Registration Statement No. 333-43687; (b) The Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, as filed under Section 13(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"); (c) The Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, as filed under Section 13(a) of the Exchange Act; (d) The Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, as filed under Section 13(a) of the Exchange Act; (e) The description of the Registrant's Class A common stock, par value $.01 per share (the "Common Stock"), contained in the Registrant's Registration Statement on Form 8-A, (the "Form 8-A") filed with the Commission on February 27, 1998, including any amendment or report filed for the purpose of updating such description; and (f) All reports filed by the Registrant pursuant to Sections 13(a) or 15(d) of the Exchange Act, since the filing of the Form 8-A. All documents subsequently filed by the Registrant pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, after the date of the filing of the initial Registration Statement and any amendments thereto and prior to the filing of a post-effective amendment to this Registration Statement which indicates that all of the shares of Common Stock offered have been sold or which deregisters all of such shares then remaining unsold, shall be deemed to be incorporated by reference in this Registration Statement and to be a part hereof from the date of filing of such documents (such documents, and the documents enumerated above, being hereinafter referred to as "Incorporated Documents"). Any statement contained in an Incorporated Document shall be deemed to be modified, replaced or superseded for purposes of this Registration Statement to the extent that a statement contained herein or in any other subsequently filed Incorporated Document modifies, replaces or II-1 supersedes such statement. Any statement so modified, replaced or superseded shall not be deemed, except as so modified, replaced or superseded, to constitute a part of this Registration Statement. ITEM 4. DESCRIPTION OF SECURITIES. Not applicable. ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL. Not applicable. ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Registrant's Certificate of Incorporation provides that each person who was or is threatened to be made a party to or is involved in any action, suit or proceeding by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Registrant or is or was serving at the request of the Registrant as a director or officer of another company, partnership, joint venture, trust or other enterprise, will be indemnified and held harmless by the Registrant to the fullest extent authorized by the Delaware General Corporation Law as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Registrant to provide broader indemnification rights than said law permitted the Registrant to provide prior to such amendment), against all expense, liability and loss reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of his or her heirs, executors and administrators. The Delaware General Corporation Law permits Delaware corporations to include in their certificates of incorporation a provision eliminating or limiting director liability for monetary damages arising from breaches of their fiduciary duty. The only limitations imposed under the statute are that the provision may not eliminate or limit a director's liability (i) for breaches of the director's duty of loyalty to the corporation or its stockholders; (ii) for acts or omissions not in good faith or involving intentional misconduct or known violations of law; (iii) for the payment of unlawful dividends or unlawful stock purchases or redemptions; or (iv) for transactions in which the director received an improper personal benefit. In addition, directors and officers are insured, at the Registrant's expense, against certain liabilities which might arise out of their employment. Under Section 145 of the Delaware General Corporation Law, a corporation may indemnify a director, officer, employee or agent of the corporation against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. In the case of an action brought by or in the right of a corporation, the corporation may indemnify a director, officer, employee or agent of the corporation against expenses II-2 (including attorneys' fees) actually and reasonably incurred by him or her if he or she acted in good faith and in a manner he or she reasonably believed to be in the best interests of the corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless a court finds that, in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as the court shall deem proper. ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED. Not applicable. ITEM 8. EXHIBITS. 4.1 Specimen of Stock Certificate (filed as Exhibit 4.1 to the Company's Registration Statement on Form S-1 (Commission File No. 333-43687) and incorporated herein by reference). 4.2 1998 Executive Deferred Compensation Stock Option Plan (filed as Exhibit 10.10 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 and incorporated herein by reference). 4.3 1998 Non-Employee Director Stock Option Plan (filed as Exhibit 10.9 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 and incorporated herein by reference). 4.4* 1998 Stock Incentive Plan 4.5 Form of Option Exchange Mailing Documents (filed as Exhibit 4.5 to the Company's Registration Statement on Form S-8 (Commission File No. 333-65827) and incorporated herein by reference). 4.6* First Amendment to 1998 Executive Deferred Compensation Stock Option Plan. 5.1 Opinion of Hughes & Luce, L.L.P. (filed as Exhibit 5.1 to the Company's Registration Statement on Form S-8 (Commission File No. 333-65827) and incorporated herein by reference). 23.1 Consent of Hughes & Luce, L.L.P. (contained in Exhibit 5.1 hereto). 23.2* Consent of KPMG Peat Marwick LLP. 24.1 Powers of Attorney (filed as Exhibit 24.1 to the Company's Registration Statement on Form S-8 (Commission File No. 333-65827) and incorporated herein by reference). ______________________ * Filed herewith ITEM 9. UNDERTAKINGS. (a) The Registrant hereby undertakes: II-3 (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: Act; (i) To include any prospectus required by Section 10(a)(3) of the Securities (ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the Registrant pursuant to Section 13(a) or Section 15(d) of the Exchange Act that are incorporated by reference in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) The undersigned registrant hereby undertakes to deliver or cause to be delivered with the prospectus, to each person to whom the prospectus is sent or given, the latest annual report to security holders that is incorporated by reference in the prospectus and furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act; and, where interim financial information required to be presented by Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or cause to be delivered to each person to whom the prospectus is sent or given, the latest quarterly report that is specifically incorporated by reference in the prospectus to provide such interim financial information. (d) Insofar as indemnification by the Registrant for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant II-4 pursuant to the provisions described in Item 6, or otherwise, the Registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Post Effective Amendment No. 1 to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Overland Park, State of Kansas, on December 15, 1998. WADDELL & REED FINANCIAL, INC. By: /s/ Keith A. Tucker ---------------------------------- Keith A. Tucker, Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
/s/ Keith A. Tucker - ----------------------------------- Chairman of the Board, Chief December 15, 1998 Keith A. Tucker Executive Officer and Director (Principal Financial Officer) /s/ Henry J. Herrmann - ----------------------------------- President, Chief Investment December 15, 1998 Henry J. Herrmann Officer, Treasurer and Director /s/ Robert L. Hechler - ----------------------------------- Chief Operating Officer, Executive December 15, 1998 Robert L. Hechler Vice President and Director /s/ Michael D. Strohm - ----------------------------------- Principal Accounting Officer December 15, 1998 Michael D. Strohm * - ----------------------------------- Director December 15, 1998 Harold T. McCormick * - ----------------------------------- Director December 15, 1998 Louis T. Hagopian * - ----------------------------------- Director December 15, 1998 R. K. Richey * - ----------------------------------- Director December 15, 1998 Joseph L. Lanier, Jr.
II-6 * - ----------------------------------- Director December 15, 1998 William L. Rogers * - ----------------------------------- Director December 15, 1998 James M. Raines * - ----------------------------------- Director December 15, 1998 George J. Records * - ----------------------------------- Director December 15, 1998 David L. Boren * - ----------------------------------- Director December 15, 1998 Joseph M. Farley *By: /s/ Daniel C. Schulte December 15, 1998 ------------------------------- Daniel C. Schulte Attorney-in-fact
II-7 INDEX TO EXHIBITS ----------------- 4.1 Specimen of Stock Certificate (filed as Exhibit 4.1 to the Company's Registration Statement on Form S-1 (Commission File No. 333-43687) and incorporated herein by reference). 4.2 1998 Executive Deferred Compensation Stock Option Plan (filed as Exhibit 10.10 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 and incorporated herein by reference). 4.3 1998 Non-Employee Director Stock Option Plan (filed as Exhibit 10.9 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 and incorporated herein by reference). 4.4* 1998 Stock Incentive Plan 4.5 Form of Option Exchange Mailing Documents (filed as Exhibit 4.5 to the Company's Registration Statement on Form S-8 (Commission File No. 333-65827) and incorporated herein by reference). 4.6* First Amendment to 1998 Executive Deferred Compensation Stock Option Plan. 5.1 Opinion of Hughes & Luce, L.L.P. (filed as Exhibit 5.1 to the Company's Registration Statement on Form S-8 (Commission File No. 333-65827) and incorporated herein by reference). 23.1 Consent of Hughes & Luce, L.L.P. (contained in Exhibit 5.1 hereto). 23.2* Consent of KPMG Peat Marwick LLP. 24.1 Powers of Attorney (filed as Exhibit 24.1 to the Company's Registration Statement on Form S-8 (Commission File No. 333-65827) and incorporated herein by reference). -------------------------- *Filed herewith EX-4.4 2 1998 STOCK INCENTIVE PLAN EXHIBIT 4.4 WADDELL & REED FINANCIAL, INC. 1998 STOCK INCENTIVE PLAN SECTION 1. GENERAL PURPOSE OF PLAN; DEFINITIONS. The name of this plan is the Waddell & Reed Financial, Inc. 1998 Stock Incentive Plan (the "Plan"). The purpose of the Plan is to enable Waddell & Reed Financial, Inc. (the "Company") and its Subsidiaries to attract and retain employees, directors and consultants who contribute to the Company's success by their ability, ingenuity and industry, and to enable such employees and directors to participate in the long-term success and growth of the Company through an equity interest in the Company. For purposes of the Plan, the following terms shall be defined as set forth below: a. "Affiliate" means (i) any corporation (other than a Subsidiary), partnership, joint venture or any other entity in which the Company owns, directly or indirectly, at least a 10 percent beneficial ownership interest, and (ii) the Company's parent company or former parent company. b. "Board" means the Board of Directors of the Company. c. "Cause" means a participant's willful misconduct or dishonesty, any of which is directly and materially harmful to the business or reputation of the Company or any Subsidiary or Affiliate. d. "Code" means the Internal Revenue Code of 1986, as amended, or any successor thereto. e. "Committee" means the Compensation Committee of the Board. If at any time no Committee shall be in office, then the functions of the Committee specified in the Plan shall be exercised by the Board. f. "Commission" means the Securities and Exchange Commission. g. "Company" means Waddell & Reed Financial, Inc., a corporation organized under the laws of the State of Delaware (or any successor corporation). h. "Deferred Stock" means an award made pursuant to Section 9 below of the right to receive Stock at the end of a specified deferral period. i. "Director Stock Option" means any option to purchase shares of Stock granted pursuant to Section 6. j. "Disability" means total and permanent disability as determined under the Company's long term disability program. With respect to Director Stock Options, "Disability" shall be determined as if the Director was covered under the Company's long term disability program. k. "Early Retirement" means retirement from active employment with the Company, any Subsidiary, and any Affiliate pursuant to the early retirement provisions of the applicable tax-qualified Company pension plan. l. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and any successor thereto. m. "Fair Market Value" means, as of the date of the initial public offering, the initial public offering price for the stock, and thereafter the closing price of the Stock on the New York Stock Exchange Composite Tape on the date in question. n. "Incentive Stock Option" means any Stock Option intended to be and designated as an "incentive stock option" within the meaning of Section 422 of the Code. o. "Immediate Family" means the children, grandchildren or spouse of any optionee. p. "Non-Qualified Stock Option" means any Stock Option that is not an Incentive Stock Option. q. "Normal Retirement" means retirement from active employment with the Company, any Subsidiary, and any Affiliate on or after the normal retirement date specified in the applicable tax-qualified Company pension plan. r. "Plan" means this 1998 Stock Incentive Plan. s. "Restricted Stock" means an award of shares of Stock that are subject to restrictions under Section 8. t. "Retirement" means Normal or Early Retirement. u. "Stock" means the Class A Common Stock of the Company, par value $.01. v. "Stock Appreciation Right" means a right granted under Section 7 below to surrender to the Company all or a portion of a Stock Option in exchange for an amount equal to the difference between (i) the Fair Market Value, as of the date such Stock Option or such portion thereof is surrendered, of the shares of Stock covered by such Stock Option or such portion thereof, and (ii) the aggregate exercise price of such Stock Option or such portion thereof. w. "Stock Option" means any option to purchase shares of Stock granted to employees pursuant to Section 5. x. "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. SECTION 2. ADMINISTRATION. The Plan shall be administered by the Committee which shall at all times comply with any applicable requirements of Rule 16b-3 of the Exchange Act. All members of the Committee shall also be "outside directors" within the meaning of Section 162(m) of the Code. The Committee shall have the power and authority to grant to eligible employees, pursuant to the terms of the Plan: (i) Stock Options; (ii) Stock Appreciation Rights; (iii) Restricted Stock or (iv) Deferred Stock. In particular, the Committee shall have the authority: (i) to select the consultants, officers and other key employees of the Company, its Subsidiaries, and its Affiliates to whom Stock Options, Stock Appreciation Rights, Restricted Stock or Deferred Stock awards or a combination of the foregoing from time to time will be granted hereunder; (ii) to determine whether and to what extent Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock or Deferred Stock, or a combination of the foregoing, are to be granted hereunder; (iii) to determine the number of shares of Stock to be covered by each such award granted hereunder; (iv) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any award granted hereunder (other than Director Stock Options), including, but not limited to, any restriction on any Stock Option or other award and/or the shares of Stock relating thereto based on performance and/or such other factors as the Committee may determine, in its sole discretion, and any vesting acceleration features based on performance and/or such other factors as the Committee may determine, in its sole discretion; (v) to determine whether, to what extent and under what circumstances Stock and other amounts payable with respect to an award under this Plan shall be deferred either automatically or at the election of a participant, including providing for and determining the amount (if any) of deemed earnings on any deferred amount during any deferral period. The Committee shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall, from time to time, deem advisable; to interpret the terms and provisions of the Plan and any award issued under the Plan (and any agreements relating thereto); and to otherwise supervise the administration of the Plan. All decisions made by the Committee pursuant to the provisions of the Plan shall be final and binding on all persons, including the Company and Plan participants. SECTION 3. STOCK SUBJECT TO PLAN. The total number of shares of Stock reserved and available for distribution under the Plan shall be 13,000,000. If any shares of Stock that have been optioned cease to be subject to option, or if any shares subject to any Restricted Stock or Deferred Stock award granted hereunder are forfeited or such award otherwise terminates, such shares shall again be available for distribution in connection with future awards under the Plan. In the event of any merger, reorganization, consolidation, recapitalization, Stock dividend, or other change in corporate structure affecting the Stock, an equitable substitution or adjustment shall be made in (i) the aggregate number of shares reserved for issuance under the Plan, (ii) the number and option price of shares subject to outstanding Stock Options and Director Stock Options granted under the Plan, (iii) the number of shares subject to Restricted Stock or Deferred Stock awards granted under the Plan, (iv) the aggregate number of shares available for issuance to any employee pursuant to Section 4(a), and (v) the number of Director Stock Options to be granted each year pursuant to Section 6, as may be determined to be appropriate by the Committee, in its sole discretion, provided that the number of shares subject to any award shall always be a whole number. Such adjusted option price shall also be used to determine the amount payable by the Company upon the exercise of any Stock Appreciation Right associated with any Stock Option. SECTION 4. ELIGIBILITY. (a) Consultants, officers and other key employees of the Company, its Subsidiaries or its Affiliates (but excluding members of the Committee and any person who serves only as a director, except as provided in Section 6 below) who are responsible for or contribute to the management, growth and/or profitability of the business of the Company, its Subsidiaries, or its Affiliates are eligible to be granted Stock Options, Stock Appreciation Rights, Restricted Stock or Deferred Stock awards. Only employees of the Company and its Subsidiaries are eligible to be granted Incentive Stock Options. Except as provided in Section 6, the optionees and participants under the Plan shall be selected from time to time by the Committee, in its sole discretion, from among those eligible, and the Committee shall determine, in its sole discretion, the number of shares covered by each award or grant; provided, however, that no employee shall be granted Stock Options on more than 1,000,000 shares in any calendar year. (b) Directors of the Company (other than directors who are also officers or employees of the Company, its Subsidiaries or its Affiliates) are eligible to receive Director Stock Options pursuant to Section 6 of the Plan. SECTION 5. STOCK OPTIONS FOR EMPLOYEES. Stock Options may be granted either alone or in addition to other awards granted under the Plan. Any Stock Option granted under the Plan shall be in such form as the Committee may from time to time approve, and the provisions of Stock Option awards need not be the same with respect to each optionee. The Stock Options granted under the Plan may be of two types: (i) Incentive Stock Options and (ii) Non-Qualified Stock Options. The Committee shall have the authority to grant any optionee Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock Options (in each case with or without Stock Appreciation Rights) except that Incentive Stock Options shall not be granted to employees of an Affiliate. To the extent that any Stock Option does not qualify as an Incentive Stock Option, it shall constitute a separate Non-Qualified Stock Option. Except as provided in Section 5(1), no term of this Plan relating to Incentive Stock Options shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be so exercised, so as to disqualify either the Plan or any Incentive Stock Option under Section 422 of the Code. Notwithstanding the foregoing, in the event an optionee voluntarily disqualifies an option as an Incentive Stock Option within the meaning of Section 422 of the Code, the Committee may, but shall not be obligated to, make such additional grants, awards or bonuses as the Committee shall deem appropriate, to reflect the tax savings to the Company which results from such disqualification. Stock Options granted under the Plan shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem desirable: (a) Option Price. The option price per share of Stock purchasable under a Stock Option shall be determined by the Committee at the time of grant but shall be not less than 100% of the Fair Market Value of the Stock on the date of the grant of the Stock Option. (b) Option Term. The term of each Stock Option shall be fixed by the Committee, but no Incentive Stock Option shall be exercisable more than ten years after the date such Incentive Stock Option is granted. (c) Exercisability. Subject to paragraph (l) of this Section 5 with respect to Incentive Stock Options, Stock Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee, provided, however, that, except as provided in Section 5(f), 5(g), 5(h) or 13, no Stock Option shall be exercisable prior to six months from the date of the granting of the option. Notwithstanding the limitations set forth in the preceding sentence, the Committee may accelerate the exercisability of any Stock Option, at any time in whole or in part, based on performance and/or such other factors as the Committee may determine in its sole discretion. (d) Method of Exercise. Stock Options may be exercised in whole or in part at any time during the option 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 purchase price, in cash, by check or such other instrument as may be acceptable to the Committee (including instruments providing for "cashless exercise"). As determined by the Committee, in its sole discretion, at or after grant, payment in full or in part may also be made in the form of unrestricted Stock already owned by the optionee or, in the case of the exercise of a Non-Qualified Stock Option, Restricted Stock or Deferred Stock subject to an award hereunder (based, in each case, on the Fair Market Value of the Stock on the date the option is exercised, as determined by the Committee). If payment of the option exercise price of a Non-Qualified Stock Option is made in whole or in part in the form of Restricted Stock or Deferred Stock, the shares received upon the exercise of such Stock Option shall be restricted or deferred, as the case may be, in accordance with the original term of the Restricted Stock award or Deferred Stock award in question, except that the Committee may direct that such restrictions or deferral provisions shall apply to only the number of such shares equal to the number of shares of Restricted Stock or Deferred Stock surrendered upon the exercise of such option. No shares of unrestricted Stock shall be issued until full payment therefor has been made. An optionee shall have the rights to dividends or other rights of a stockholder with respect to shares subject to the option when the optionee has given written notice of exercise and has paid in full for such shares. (e) Transferability of Options. A Stock Option agreement may permit an optionee to transfer the Stock Option to members of his or her Immediate Family, to one or more trusts for the benefit of such Immediate Family members, or to one or more partnerships where such Immediate Family members are the only partners if (i) the agreement setting forth such Stock Option expressly provides that the Stock Option may be transferred only with the express written consent of the Committee, and (ii) the optionee does not receive any consideration in any form whatsoever for said transfer. Any Stock Option so transferred shall continue to be subject to the same terms and conditions in the hands of the transferee as were applicable to said Stock Option immediately prior to the transfer thereof. Any Stock Option not (i) granted pursuant to any agreement expressly allowing the transfer of said Stock Option or (ii) amended expressly to permit its transfer shall not be transferable by the optionee otherwise than by will or by the laws of descent and distribution and such Stock Option thus shall be exercisable during the optionee's lifetime only by the optionee. (f) Termination by Death. Unless otherwise determined by the Committee, if an optionee's employment with the Company, any Subsidiary, and any Affiliate terminates by reason of death (or if an optionee dies following termination of employment by reason of disability or Normal Retirement), any Stock Option shall become immediately exercisable and may thereafter be exercised by the legal representative of the estate or by the legatee of the optionee under the will of the optionee, during the period ending on the expiration of the stated term of such Stock Option or the first anniversary of the optionee's death, whichever is later. (g) Termination by Reason of Disability. Unless otherwise determined by the Committee, if an optionee's employment with the Company, any Subsidiary and any Affiliate terminates by reason of Disability, any Stock Option held by such optionee shall be immediately exercisable and may thereafter be exercised during the period ending on the expiration of the stated term of such Stock Option. In the event of termination of employment by reason of Disability, if an Incentive Stock Option is exercised after the expiration of the exercise periods that apply for purposes of Section 422 of the Code, such Stock Option will thereafter be treated as a Non-Qualified Stock Option. (h) Termination by Reason of Retirement. Unless otherwise determined by the Committee, if an optionee's employment with the Company, any Subsidiary and any Affiliate terminates by reason of Normal Retirement, any Stock Option held by such optionee shall become immediately exercisable. A Stock Option held by an optionee whose employment has terminated by reason of Normal Retirement shall expire at the end of the stated term of such Stock Option, unless otherwise determined by the Committee. If an optionee's employment with the Company, any Subsidiary and any Affiliate terminates by reason of Early Retirement, any Stock Option shall terminate three years from the date of such Early Retirement or upon the expiration of the stated term of the Stock Option, whichever is shorter, unless otherwise determined by the Committee. In the event of Early Retirement, there shall be no acceleration of vesting of the Stock Option unless otherwise determined by the Committee at or after grant, and said Stock Option may only be exercised to the extent it is or has become exercisable prior to termination of the Stock Option. In the event of termination of employment by reason of Retirement, if an Incentive Stock Option is exercised after the exercise periods that apply for purposes of Section 422 of the Code, such Stock Option will thereafter be treated as a Non-Qualified Stock Option. (i) Termination for Cause. If the optionee's employment with the Company, any Subsidiary and any Affiliate is terminated for Cause, the Stock Option shall immediately be forfeited to the Company upon the giving of notice of termination of employment. (j) Other Termination. If the optionee's employment with the Company, any Subsidiary and any Affiliate is involuntarily terminated by the optionee's employer without Cause, the Stock Option shall terminate three months from the date of termination of employment or upon the expiration of the stated term of the Stock Option, whichever is shorter, unless otherwise determined by the Committee. If an optionee's employment with the Company, any Subsidiary and any Affiliate is voluntarily terminated for any reason, the Stock Option shall terminate one month from the date of termination of employment or upon the expiration of the stated term of the Stock Option, whichever is shorter. In the event of involuntary termination without Cause or voluntary termination for any reason, there shall be no acceleration of vesting of the Stock Option unless otherwise determined by the Committee and said Stock Option may only be exercised to the extent it is or has become exercisable prior to termination of the Stock Option. (k) Termination upon Change of Control. Notwithstanding the provisions of Section 5(j) or the stated term of the Stock Option, if the optionee's employment with the Company, any Subsidiary and any Affiliate is involuntarily terminated by the optionee's employer without Cause by reason of or within three months after a merger or other business combination resulting in a "Change of Control" as defined in Section 13 of this Plan, the Stock Option shall terminate upon the later of six months and one day after such merger or business combination or ten business days following the expiration of the period during which publication of financial results covering at least thirty days of post-merger combined operations has occurred. (l) Limit on Value of Incentive Stock Option First Exercisable Annually. The aggregate Fair Market Value (determined at the time of grant) of the Stock for which "incentive stock options" within the meaning of Section 422 of the Code are exercisable for the first time by an optionee during any calendar year under the Plan (and/or any other stock option plans of the Company, any Subsidiary and any Affiliate) shall not exceed $100,000. Notwithstanding the preceding sentence, the exercisability of such Stock Options may be accelerated by the Committee and shall be accelerated as provided in Sections 5(f), 5(g), 5(h), and 13, in which case Stock Options which exceed such $100,000 limit shall be treated as Non-Qualified Stock Options. For this purpose, options granted earliest shall be applied first to the $100,000 limit. In the event that only a portion of the options granted at the same time can be applied to the $100,000 limit, the Company shall issue separate share certificates for such number of shares as does not exceed the $100,000 limit, and shall designate such shares as ISO stock in its share transfer records. SECTION 6. DIRECTOR STOCK OPTIONS. Director Stock Options granted under the Plan shall be Non-Qualified Stock Options. Such Director Stock Options may be granted pursuant to a pre- established formula contained in the Plan or may, in the sole discretion of the entire Board of Directors, be granted as to such number of shares and upon such terms and conditions as shall be determined by said Board of Directors. Director Stock Options granted under the Plan shall be evidenced by a written agreement in such form as the Committee shall from time to time approve, which agreements shall comply with and be subject to the following terms and conditions: (a) Formula-based Director Stock Options. For 1998, 6,000 Director Stock Options shall be granted automatically to each member of the Board who is not an employee of the Company, its Subsidiaries or Affiliates ("Outside Director"). For each calendar year thereafter, 3,000 Director Stock Options shall be granted automatically on the first day of each calendar year on which Stock is publicly traded on the New York Stock Exchange to each Outside Director. The option price per share of Stock purchasable under such Director Stock Option shall be 100% of the Fair Market Value of the Stock on the date of the grant of the Director Stock Option. Except as provided in Section 13, said Director Stock Options shall become exercisable in full six months from the date of the grant of the option and shall remain exercisable for a term of ten years and two days from the date such Director Stock Option is granted. (b) Non-Formula Based Director Stock Options. Within its sole discretion, the entire Board may award Director Stock Options on a non-formula basis to all or such individual Outside Directors as it shall select. Such Director Stock Options may be awarded at such times and for such number of shares as the Board in its discretion determines. The price of such Director Stock Options may be fixed by the Board at a discount not to exceed 25% of the fair market value of the Stock on the date of grant or may be the fair market value of the Stock on the grant date. Such Director Stock Options shall become first exercisable and have an option term as determined by the Board in its discretion, provided however, that except as described in Section 13 and in paragraph (e) of this section, no such Director Stock Option shall be first exercisable until six months from the date of grant. All other terms and conditions of such Director Stock Options shall be as established by the Board in its sole discretion. (c) Method of Exercise. Any Director Stock Option granted pursuant to the Plan may be exercised in whole or in part at any time during the option 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 purchase 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 Stock already owned by the optionee (based on the Fair Market Value of the Stock on the date the option is exercised). No shares of unrestricted Stock shall be issued until full payment therefor has been made. An optionee shall have the rights to dividends or other rights of a stockholder with respect to shares subject to the option when the optionee has given written notice of exercise and has paid in full for such shares. (d) Transferability of Options. No Director Stock Option shall be transferable by the optionee otherwise than by will or by the laws of descent and distribution, and all Director Stock Options shall be exercisable, during the optionee's lifetime, only by the optionee; provided, however, that the Committee may (but need not) permit other transfers where the Committee concludes that such transferability (i) does not result in accelerated taxation, and (ii) is otherwise appropriate and desirable, taking into account any state or federal securities laws applicable to transferable options. (e) Termination of Service. Upon an optionee's termination of status as an Outside Director with the Company for any reason, any Director Stock Options held by such optionee shall become immediately exercisable and may thereafter be exercised during the period ending on the expiration of the stated term of such Director Stock Options or the first anniversary of the optionee's death, whichever is later. Notwithstanding the foregoing sentence, if the optionee's status as an Outside Director terminates by reason of or within three months after a merger or other business combination resulting in a "Change of Control" as defined in Section 13 of this Plan, the Director Stock Option shall terminate upon the latest of (i) six months and one day after the merger or business combination, (ii) ten business days following the expiration of the period during which publication of financial results covering at least thirty days of post-merger combined operations has occurred, and (iii) the expiration of the stated term of such Director Stock Option. SECTION 7. STOCK APPRECIATION RIGHTS. (a) Grant and Exercise. Stock Appreciation Rights may be granted in conjunction with all or part of any Stock Option granted under the Plan. In the case of a Non-Qualified Stock Option, such rights may be granted either at or after the time of the grant of such Non-Qualified Stock Option. In the case of an Incentive Stock Option, such rights may be granted only at the time of the grant of such Incentive Stock Option. A Stock Appreciation Right or applicable portion thereof granted with respect to a given Stock Option shall terminate and no longer be exercisable upon the termination or exercise of the related Stock Option, except that, unless otherwise provided by the Committee at the time of grant, a Stock Appreciation Right granted with respect to less than the full number of shares covered by a related Stock Option shall only be reduced if and to the extent that the number of shares covered by the exercise or termination of the related Stock Option exceeds the number of shares not covered by the Stock Appreciation Right. A Stock Appreciation Right may be exercised by an optionee, in accordance with paragraph (b) of this Section 7, by surrendering the applicable portion of the related Stock Option. Upon such exercise and surrender, the optionee shall be entitled to receive an amount determined in the manner prescribed in paragraph (b) of this Section 7. Stock Options which have been so surrendered, in whole or in part, shall no longer be exercisable to the extent the related Stock Appreciation Rights have been exercised. (b) Terms and Conditions. Stock Appreciation Rights shall be subject to such terms and conditions, not inconsistent with the provisions of the Plan, as shall be determined from time to time by the Committee, including the following: (i) Stock Appreciation Rights shall be exercisable only at such time or times and to the extent that the Stock Options to which they relate shall be exercisable in accordance with the provisions of Section 5 and this Section 7 of the Plan; provided, however, that any Stock Appreciation Right granted subsequent to the grant of the related Stock Option shall not be exercisable during the first six months of the term of the Stock Appreciation Right, except that this additional limitation shall not apply in the event of death or Disability of the optionee prior to the expiration of the six-month period. (ii) Upon the exercise of a Stock Appreciation Right, an optionee shall be entitled to receive up to, but not more than, an amount in cash or shares of Stock equal in value to the excess of the Fair Market Value of one share of Stock over the option price per share specified in the related Stock Option multiplied by the number of shares in respect of which the Stock Appreciation Right shall have been exercised, with the Committee having the right to determine the form of payment. (iii) Stock Appreciation Rights shall be transferable only when and to the extent that the underlying Stock Option would be transferable under paragraph (e) of Section 5 of the Plan. (iv) Upon the exercise of a Stock Appreciation Right, the Stock Option or part thereof to which such Stock Appreciation Right is related shall be deemed to have been exercised for the purpose of the limitation set forth in Section 3 of the Plan on the number of shares of Stock to be issued under the Plan. (v) A Stock Appreciation Right granted in connection with an Incentive Stock Option may be exercised only if and when the market price of the Stock subject to the Incentive Stock Option exceeds the exercise price of such Stock Option. (vi) In its sole discretion, the Committee may provide, at the time of grant of a Stock Appreciation Right under this Section 7, that such Stock Appreciation Right can be exercised only in the event of a "Change of Control" and/or a "Potential Change of Control" (as defined in Section 13 below). (vii) The Committee, in its sole discretion, may also provide that in the event of a "Change of Control" and/or a "Potential Change of Control" (as defined in Section 13 below) the amount to be paid upon the exercise of a Stock Appreciation Right shall be based on the "Change of Control Price" (as defined in Section 13 below). SECTION 8. RESTRICTED STOCK. (a) Administration. Shares of Restricted Stock may be issued either alone or in addition to other awards granted under the Plan. The Committee shall determine the officers and key employees of the Company and its Subsidiaries and Affiliates to whom, and the time or times at which, grants of Restricted Stock will be made, the number of shares to be awarded, the price, if any, to be paid by the recipient of Restricted Stock (subject to Section 8(b) hereof), the time or times within which such awards may be subject to forfeiture, and all other conditions of the awards. The Committee may also condition the grant and/or vesting of Restricted Stock upon the attainment of specified performance goals, or such other criteria as the Committee may determine, in its sole discretion. The provisions of Restricted Stock awards need not be the same with respect to each recipient. (b) Awards and Certificates. The prospective recipient of an award of shares of Restricted Stock shall not have any rights with respect to such award, unless and until such recipient has executed an agreement evidencing the award (a "Restricted Stock Award Agreement"), has delivered a fully executed copy thereof to the Company, and has otherwise complied with the then applicable terms and conditions. Awards of Restricted Stock must be accepted within a period of 60 days (or such shorter period as the Committee may specify) after the award date by executing a Restricted Stock Award Agreement and paying the price specified in the Restricted Stock Award Agreement. Each participant who is awarded Restricted Stock shall be issued a stock certificate registered in the name of the participant in respect of such shares of Restricted Stock. The Committee shall specify that the certificate shall bear a legend, as provided in clause (i) below, and/or be held in custody by the Company, as provided in clause (ii) below. (i) The certificate shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such award, substantially in the following form: "The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the Waddell & Reed Financial, Inc. 1998 Stock Incentive Plan and a Restricted Stock Award Agreement entered into between the registered owner and Waddell & Reed Financial, Inc. Copies of such Plan and Agreement are on file in the offices of Waddell & Reed Financial, Inc., 6300 Lamar Avenue, Overland Park, Kansas 66202." (ii) The Committee shall require that the stock certificates evidencing such shares be held in custody by the Company until the restrictions thereon shall have lapsed, and that, as a condition of any Restricted Stock award, the participant shall have delivered a stock power, endorsed in blank, relating to the Stock covered by such award. (c) Restrictions and Conditions. The shares of Restricted Stock awarded pursuant to this Section 8 shall be subject to the following restrictions and conditions: (i) Subject to the provisions of this Plan and the Restricted Stock Award Agreements, during such period as may be set by the Committee commencing on the grant date (the "Restriction Period"), the participant shall not be permitted to sell, transfer, pledge or assign shares of Restricted Stock awarded under the Plan. The Committee may, in its sole discretion, provide for the lapse of such restrictions in installments and may accelerate or waive such restrictions in whole or in part, before or after the participant's termination of employment, based on performance and/or such other factors as the Committee may determine, in its sole discretion. (ii) Except as provided in paragraph (c)(i) of this Section 8, the participant shall have, with respect to the shares of Restricted Stock, all of the rights of a stockholder of the Company, including the right to receive any dividends. Dividends paid in stock of the Company or stock received in connection with a stock split with respect to Restricted Stock shall be subject to the same restrictions as on such Restricted Stock. Certificates for shares of unrestricted Stock shall be delivered to the participant promptly after, and only after, the period of forfeiture shall expire without forfeiture in respect of such shares of Restricted Stock. (iii) Subject to the provisions of the Restricted Stock Award Agreement and this Section 8, upon termination of employment for any reason other than Normal Retirement or death during the Restriction Period, all shares still subject to restriction shall be forfeited by the participant, and the participant shall only receive the amount, if any, paid by the participant for such forfeited Restricted Stock. SECTION 9. DEFERRED STOCK AWARDS. (a) Administration. Deferred Stock may be awarded either alone or in addition to other awards granted under the Plan. The Committee shall determine the officers and key employees of the Company, its Subsidiaries and Affiliates to whom, and the time or times at which, Deferred Stock shall be awarded, the number of shares of Deferred Stock to be awarded to any participant, the duration of the period (the "Deferral Period") during which, and the conditions under which, receipt of the Stock will be deferred, and the terms and conditions of the award in addition to those set forth in paragraph (b) of this Section 9. The Committee may also condition the grant and/or vesting of Deferred Stock upon the attainment of specified performance goals, or such other criteria as the Committee shall determine, in its sole discretion. The provisions of Deferred Stock awards need not be the same with respect to each recipient. (b) Terms and Conditions. The shares of Deferred Stock awarded pursuant to this Section 9 shall be subject to the following terms and conditions: (i) Subject to the provisions of this Plan and the award agreement, Deferred Stock awards may not be sold, assigned, transferred, pledged or otherwise encumbered during the Deferral Period. At the expiration of the Deferral Period (or Elective Deferral Period, (as defined below) where applicable), share certificates shall be delivered to the participant, or his legal representative, in a number equal to the shares covered by the Deferred Stock award. (ii) At the time of the award, the Committee may, in its sole discretion, determine that amounts equal to any dividends declared during the Deferral Period (or Elective Deferral Period) with respect to the number of shares covered by a Deferred Stock award will be: (a) paid to the participant currently; (b) deferred and deemed to be reinvested; or (c) that such participant has no rights with respect thereto. (iii) Subject to the provisions of the award agreement and this Section 9, upon termination of employment for any reason during the Deferral Period for a given award, the Deferred Stock in question shall be forfeited by the participant. (iv) Based on performance and/or such other criteria as the Committee may determine, the Committee may, at or after grant (including after the participant's termination of employment), accelerate the vesting of all or any part of any Deferred Stock award and/or waive the deferral limitations for all or any part of such award. (v) A participant may elect to defer further receipt of the award for a specified period or until a specified event (the "Elective Deferral Period"), subject in each case to the Committee's approval and to such terms as are determined by the Committee, all in its sole discretion. Subject to any exceptions adopted by the Committee, such election must generally be made at least six months prior to completion of the Deferral Period for a Deferred Stock award (or for an installment of such an award). (vi) Each award shall be confirmed by, and subject to the terms of, a Deferred Stock award agreement executed by the Company and the participant. SECTION 10. LOAN PROVISIONS. With the consent of the Committee, the Company may make, or arrange for, a loan or loans to an employee with respect to the exercise of any Stock Option granted under the Plan and/or with respect to the payment of the purchase price, if any, of any Restricted Stock awarded hereunder. The Committee shall have full authority to decide whether to make a loan or loans hereunder and to determine the amount, term and provisions of any such loan or loans, including the interest rate to be charged in respect of any such loan or loans, whether the loan or loans are to be with or without recourse against the borrower, the terms on which the loan is to be repaid and the conditions, if any, under which the loan or loans may be forgiven. SECTION 11. AMENDMENTS AND TERMINATION. The Board may amend, alter, or discontinue the Plan, but no amendment, alteration, or discontinuation shall be made which would impair the right of an optionee or participant under a Stock Option, Director Stock Option, Stock Appreciation Right, Restricted Stock or Deferred Stock award theretofore granted, without the optionee's or participant's consent. Amendments may be made without stockholder approval except as required to satisfy Rule 16b-3 under the Exchange Act, Section 162(m) of the Code, stock exchange listing requirements, or other regulatory requirements. The Committee may amend the terms of any award or option (other than Director Stock Options) theretofore granted, prospectively or retroactively, but no such amendment shall impair the rights of any holder without his consent. The Committee may also substitute new Stock Options for previously granted Stock Options including options granted under other plans applicable to the participant and previously granted Stock Options having higher option prices. SECTION 12. UNFUNDED STATUS OF PLAN. The Plan is intended to constitute an "unfunded" plan for incentive and deferred compensation. With respect to any payments not yet made to a participant or optionee by the Company, nothing set forth herein shall give any such participant or optionee any rights that are greater than those of a general creditor of the Company. In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver Stock or payments in lieu of or with respect to awards hereunder, provided, however, that the existence of such trusts or other arrangements is consistent with the unfunded status of the Plan. SECTION 13. CHANGE OF CONTROL. The following acceleration and valuation provisions shall apply in the event of a "Change of Control" or "Potential Change of Control," as defined in this Section 13, that occurs more than twelve months after the date of the Company's initial public offering: (a) In the event of a "Change of Control" as defined in paragraph (b) of this Section 13, unless otherwise determined by the Committee in writing at or after grant, but prior to the occurrence of such Change of 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) in the event of a "Potential Change of Control," as defined in paragraph (c) of this Section 13: (i) any Stock Appreciation Rights and any Stock Options awarded under the Plan not previously exercisable and vested shall become fully exercisable and vested; (ii) the restrictions and deferral limitations applicable to any Restricted Stock and Deferred Stock awards under the Plan shall lapse and such shares and awards shall be deemed fully vested; and (iii) the value of all outstanding Stock Options, Director Stock Options, Stock Appreciation Rights, Restricted Stock and Deferred Stock Awards, shall, to the extent determined by the Committee at or after grant, be settled on the basis of the "Change of Control Price" (as defined in paragraph (d) of this Section 13) as of the date the Change of Control occurs or Potential Change of Control is determined to have occurred, or such other date as the Committee may determine prior to the Change of Control or Potential Change of Control. In the sole discretion of the Committee, such settlements may be made in cash or in stock, as shall be necessary to effect the desired accounting treatment for the transaction resulting in the Change of Control. In addition, any Stock Option, Director Stock Option, and Stock Appreciation Right which has been outstanding for less than six months shall be settled solely in stock. (b) For purposes of paragraph (a) of this Section 13, a "Change of Control" means the happening of any of the following: (i) when any "person", as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than the Company or a Subsidiary or any Company employee benefit plan), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly of securities of the Company representing 20 percent or more of the combined voting power of the Company's then outstanding securities; (ii) the occurrence of any transaction or event relating to the Company required to be described pursuant to the requirements of 6(e) of Schedule 14A of Regulation 14A of the Commission under the Exchange Act; (iii) when, during any period of two consecutive years during the existence of the Plan, the individuals who, at the beginning of such period, constitute the Board cease, for any reason other than death, to constitute at least a majority thereof, unless each director who was not a director at the beginning of such period was elected by, or on the recommendation of, at least two-thirds of the directors at the beginning of such period; or (iv) the occurrence of a transaction requiring stockholder approval for the acquisition of the Company by an entity other than the Company or a Subsidiary through purchase of assets, or by merger, or otherwise. (c) For purposes of paragraph (a) of this Section 13, a "Potential Change of Control" means the happening of any of the following: (i) the entering into an agreement by the Company, the consummation of which would result in a Change of Control of the Company as defined in paragraph (b) of this Section 13; or (ii) the acquisition of beneficial ownership, directly or indirectly, by any entity, person or group (other than the Company or a Subsidiary or any Company employee benefit plan) of securities of the Company representing 5 percent or more of the combined voting power of the Company's outstanding securities and the adoption by the Board of Directors of a resolution to the effect that a Potential Change of Control of the Company has occurred for purposes of this Plan. (d) For purposes of this Section 13, "Change of Control Price" means the highest price per share paid in any transaction reported on the New York Stock Exchange Composite Tape, or paid or offered in any transaction related to a potential or actual Change of Control of the Company at any time during the preceding sixty day period as determined by the Committee, except that (i) in the case of Incentive Stock Options and Stock Appreciation Rights relating to Incentive Stock Options, such price shall be based only on transactions reported for the date on which the Committee decides to cashout such options, and (ii) in the case of Director Stock Options, the sixty day period shall be the period immediately prior to the Change of Control. SECTION 14. LIMITATIONS ON PAYMENTS. (a) Notwithstanding Section 13 above or any other provision of this Plan or any other agreement, arrangement or plan, in no event shall the Company pay or be obligated to pay any Plan participant an amount which would be an Excess Parachute Payment except as provided in Section 14(f) below and except as the Committee specifically provides otherwise in the participant's grant agreement. For purposes of this Agreement, 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 13 above were made (when added to any other payments or benefits contingent on a change of control under any other agreement, arrangement or plan), the payments due under Section 13(a) shall be reduced to the minimum extent necessary to prevent an Excess Parachute Payment; then, if necessary to prevent an Excess Parachute Payment, benefits or payments under any other plan, agreement or arrangement shall be reduced. If it is established pursuant to a final determination of a court or an Internal Revenue Service administrative appeals proceeding that, notwithstanding the good faith of the participant and the Company in applying the terms of this Section 14(a), 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 he would have received as if Sections 280G and 4999 of the Code had not been enacted. (b) Subject to the provisions of Section 14(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 14(a), shall be paid by the Company to the participant within five (5) days after the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and participant. (c) Participant shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by Company of a Gross-Up Payment. Such notification shall be given no later than ten (10) business days after 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. Participant shall not pay the claim prior to the expiration of the thirty (30) day period following the date on which it gives notice to the Company. If the Company notifies participant in writing prior to the expiration of the period that it desires to contest such claim, participant shall: (i) give the Company 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 participant; (iii) cooperate with the Company in good faith in order to effectively contest such claim; and (iv) permit the Company to participate in any proceedings relating to such claim. Without limitation on the foregoing provisions of this Section 14(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 participant to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and participant agrees to prosecute such contest to a determination before any administration tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold 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 participant to pay any claim and sue for a refund, the Company shall advance the amount of the payment to participant, on an interest-free basis, and shall indemnify and hold participant harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to the advance or with respect to any imputed income with respect to the advance. (d) In the event that the Company exhausts its remedies pursuant to Section 14(c) and 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 participant. (e) If, after the receipt of participant of an amount advanced by the Company pursuant to Section 14(c), participant becomes entitled to receive any refund with respect to such claim, 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 participant of an amount advanced by the Company pursuant to Section 14(c), a determination is made that participant shall not be entitled to any refund with respect to such claim and the Company does not notify participant in writing of its intent to contest such denial of refund prior to the expiration of thirty (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) Notwithstanding the foregoing, the limitation set forth in Section 14(a) shall not apply to a participant if in the opinion of Tax Counsel or the Accounting Firm (i) 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 14(a)), reduced by the amount of excise tax imposed on the participant under Code Section 4999 with respect to all such amounts and reduced by the state and federal income taxes on amounts paid in excess of the limitation set forth in Section 14(a), would exceed (ii) such total amounts payable after application of the limitation of Section 14(a). No Gross-Up Payment shall be made in such case. SECTION 15. General Provisions. (a) All certificates for shares of Stock delivered under the Plan shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the Commission, any stock exchange upon which the Stock is then listed, and any applicable Federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. (b) Nothing set forth in this Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases. The adoption of the Plan shall not confer upon any employee or director of the Company, any Subsidiary or any Affiliate, any right to continued employment (or, in the case of a director, continued retention as a director) with the Company, a Subsidiary or an Affiliate, as the case may be, nor shall it interfere in any way with the right of the Company, a Subsidiary or an Affiliate to terminate the employment of any of its employees at any time. (c) Each participant shall, no later than the date as of which the value of an award first becomes includible in the gross income of the participant for Federal income tax purposes, pay to the Company, or make arrangements satisfactory to the Committee, in its sole discretion, regarding payment of, any Federal, FICA, state, or local taxes of any kind required by law to be withheld with respect to the award. The obligations of the Company under the Plan shall be conditional on such payment or arrangements. The Committee may permit or require, in its sole discretion, participants to elect to satisfy their Federal, and where applicable, FICA, state and local tax withholding obligations with respect to all awards other than Stock Options which have related Stock Appreciation Rights by the reduction, in an amount necessary to pay all said withholding tax obligations, of the number of shares of Stock or amount of cash otherwise issuable or payable to said participants in respect of an award. The Company and, where applicable, its Subsidiaries and Affiliates shall, to the extent permitted by law, have the right to deduct any such taxes owed hereunder by a participant from any payment of any kind otherwise due to said participant. (d) At the time of grant or purchase, the Committee may provide in connection with any grant or purchase made under this Plan that the shares of Stock received as a result of such grant or purchase shall be subject to a right of first refusal, pursuant to which the participant shall be required to offer to the Company any shares that the participant wishes to sell, with the price being the then Fair Market Value of the Stock, subject to the provisions of Section 13 hereof and to such other terms and conditions as the Committee may specify at the time of grant. (e) No member of the Board or the Committee, nor any officer or employee of the Company acting on behalf of the Board or the Committee, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Board or the Committee and each and any officer or employee of the Company acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination or interpretation. SECTION 16. EFFECTIVE DATE OF PLAN. The Plan shall be effective on the date it is approved by a majority vote of the Company's stockholders. SECTION 17. TERM OF PLAN. No Stock Option, Director Stock Option, Stock Appreciation Right, Restricted Stock award or Deferred Stock award shall be granted pursuant to the Plan on or after March 2, 2008, but awards theretofore granted may extend beyond that date. EX-4.6 3 FIRST AMENDMENT TO 98 EXECUTIVE STOCK OPTION PLAN EXHIBIT 4.6 FIRST AMENDMENT TO WADDELL & REED FINANCIAL, INC. 1998 EXECUTIVE DEFERRED COMPENSATION STOCK OPTION PLAN WHEREAS, the Company adopted and implemented the Waddell & Reed Financial, Inc. Executive Deferred Compensation Stock Option Plan as of March 3, 1998 (the "Executive Plan"); WHEREAS, the Company desires to amend certain provisions of the Executive Plan; WHEREAS, on October 21, 1998, the Compensation Committee of the Board of Directors of the Company adopted a resolution authorizing the amendment of the Executive Plan in accordance with the authority granted to them pursuant to the Executive Plan. NOW, THEREFORE, the Executive Plan is hereby amended as follows: Section 6.1.(a) of the Executive Plan is hereby modified, altered, amended and replaced in the following respect: 1. Section 6.1.(a) "Options Converted from Deferred Salary". During the twelve-month period following the end of a calendar year with respect to which a Participant deferred Salary into the Plan, the Participant shall have the right to convert some or all of his or her Interest Account for Salary for such previous year into Options pursuant to this Article 6 on a quarterly basis. To make such election, the Participant must file with the plan administrator a written irrevocable Secondary Election form for Salary to receive Options as of the date of the filing of such Secondary Election Form (the "Option Grant Date"). 2. Exhibit C "Secondary Election Form for Salary". Exhibit C of the Executive Plan is hereby replaced and superceded by the revised Exhibit C attached hereto as Attachment "1". 3. Other Provisions and Terms. Except as expressly provided for herein, all other terms, conditions, rights, powers and responsibilities contained in the Executive Plan shall remain in full force and effect as the same are prescribed for and provided by the terms and conditions of said Executive Plan. Capitalized terms used but not defined herein shall have the meaning given them in the Executive Plan. EX-23.2 4 CONSENT OF KPMG PEAT MARWICK LLP EXHIBIT 23.2 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The Board of Directors Waddell & Reed Financial, Inc. We consent to the use of our reports incorporated herein by reference and to the reference to our firm under the heading "Experts" in the Post-Effective Amendment No. 1 to the Registration Statement on Form S-8. KPMG PEAT MARWICK LLP Kansas City, Missouri December 15, 1998 -----END PRIVACY-ENHANCED MESSAGE-----