EXHIBIT 10.28
WADDELL & REED FINANCIAL, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
PURPOSE
The purpose of the Waddell & Reed Financial, Inc. Supplemental Executive
Retirement Plan (the "PLAN") is to provide deferred compensation that
otherwise would be paid currently to select employees of Waddell & Reed
Financial, Inc., a Delaware corporation (the "COMPANY"), and any subsidiaries
or affiliates of the Company that may adopt this Plan with the consent of the
Board of Directors of the Company. This Plan is designed to constitute a
nonqualified deferred compensation arrangement.
ARTICLE I
DEFINITION OF TERMS
Certain words and phrases are defined when first used in later
paragraphs of this Plan. In addition, the following words and phrases when
used herein, unless the context clearly requires otherwise, will have the
following respective meanings:
1.1 "AGGREGATE CONTRIBUTION AMOUNT" means the amount determined by the
Compensation Committee to be allocated among Participants' Deferred
Compensation Accounts for a Plan Year.
1.2 "BASE PAY" means a Participant's base rate of compensation for a
Plan Year as designated by the Compensation Committee.
1.3 "CODE" means the Internal Revenue Code of 1986, as amended.
1.4 "DEFERRED COMPENSATION ACCOUNT" is defined in Section 4.1.
1.5 "EFFECTIVE DATE" means December 10, 1998.
1.6 "EMPLOYEE" means a common-law employee of the Company or a
Participating Employer.
1.7 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
1.8 "401(k) PLAN" means the Waddell & Reed Financial, Inc. 401(k) and
Thrift Plan, as such plan may be amended from time to time, or any similar
plan in which a Participating Employer participates.
1.9 "PARTICIPANT" means an Employee who has satisfied the requirements
for eligibility under Article III and is participating in the Plan.
1.10 "PARTICIPATING EMPLOYER" means a subsidiary or affiliate of the
Company that adopts this Plan by a properly executed document evidencing such
intent with the consent of the Board of Directors of the Company.
1.11 "PLAN YEAR" means the period commencing January 1 and ending
December 31.
1.12 "TOTAL DISABILITY" means a Participant has satisfied the
requirements to receive long-term disability benefits under the Company's (or
his or her Participating Employer's) long-term disability insurance plan.
1.13 "VALUATION DATE" means December 31 and such other or additional
dates as provided herein or otherwise designated by the Administrator as
Valuation Dates for the purpose of making valuation adjustments to the
Deferred Compensation Accounts in accordance with Section 4.2.
ARTICLE II
ADMINISTRATION
This Plan will be administered by the Company's Compensation Committee,
which will be the "ADMINISTRATOR" of the Plan. The decision of a majority of
the members of the Compensation Committee will control; provided, however,
that a member will not be entitled to participate in discretionary decisions
directly related to such person's own participation in the Plan.
The Administrator will have full power and authority to adopt rules,
regulations, and practices governing the administration of the Plan, to
interpret and apply the provisions of this Plan in its sole discretion, to
alter, amend, or revoke any rules and regulations so adopted, to enter into
contracts on behalf of the Company with respect to the Plan, and to make
discretionary decisions under the Plan, except where that authority is
retained by the Company under this Plan. The Administrator will administer
the Plan and render decisions in a uniform and consistent manner so that all
Participants in similar circumstances are generally treated similarly. The
Administrator's decision as to all aspects of Plan operations, including but
not limited to, the eligibility of persons to participate in the Plan, the
benefits payable under the
Plan, and the interpretation of the Plan, cannot be overturned unless it is
arbitrary and capricious. The term "ARBITRARY AND CAPRICIOUS" will mean
having no foundation.
ARTICLE III
ELIGIBILITY
An Employee who has been designated by the Administrator as eligible for
participation in the Plan, will be eligible for participation beginning in
the Plan Year with respect to which the designation is made. A Participant
will continue to participate in the Plan until he or she ceases to be a
member of a select group of management or highly compensated employees, or
until the Administrator in its sole discretion determines otherwise.
ARTICLE IV
DEFERRED COMPENSATION ACCOUNTS
4.1 ESTABLISHMENT OF DEFERRED COMPENSATION ACCOUNTS. At the time an
Employee becomes a Participant in the Plan, the Company will establish a
memorandum account (a "DEFERRED COMPENSATION ACCOUNT") for the Participant on
its books.
4.2 ADDITIONS TO DEFERRED COMPENSATION ACCOUNTS.
(a) 401(k) PLAN BENEFIT RESTORATION -- For each Plan Year, the
Administrator will credit the Deferred Compensation Account of each
Participant with an amount equal to four percent (4%) of his or her Base
Pay, less the amount of any employer matching contribution made or to be
made on the Participant's behalf under the 401(k) Plan with respect to the
Plan Year.
(b) SUPPLEMENTAL EXECUTIVE RETIREMENT BENEFIT -- For each Plan Year,
the Compensation Committee will allocate the Aggregate Contribution Amount
among the Deferred Compensation Accounts of Participants in proportion to
their Base Pay for the Plan Year.
(c) SPECIAL DEFERRAL ELECTION -- With prior approval of the
Administrator, a Participant who receives a distribution from a
nonqualified deferred compensation plan sponsored by Torchmark Corporation
may make a one-time special deferral election to have an amount deferred
from his future compensation from the Company (or his or her Participating
Employer), such amount not to exceed the amount of any such distribution
from a nonqualified deferred compensation plan sponsored by Torchmark
Corporation. The
amount of any such special deferral election will be credited to the
Participant's Deferred Compensation Account.
(d) VALUATION ADJUSTMENTS -- As of each Valuation Date, the
Administrator will also credit (or charge) the Participant's Deferred
Compensation Account with valuation adjustments determined in accordance
with this Section 4.2(d). The valuation adjustment to be credited (or
charged) to the Participant's Deferred Compensation Account as of any
Valuation Date (the "CURRENT VALUATION DATE") will be an amount equal to
the performance of certain hypothetical investments or investment vehicles
since the last preceding Valuation Date (the "PRECEDING VALUATION DATE") as
described below. The value of the Participant's Deferred Compensation
Account as of the current Valuation Date will be determined as if the
balance of the Deferred Compensation Account as of the preceding Valuation
Date, together with any amounts subsequently credited to such Deferred
Compensation Account, had been invested since the preceding Valuation Date
or the date credited to the Deferred Compensation Account, as the case may
be, in the investments or investment vehicles specified by the
Administrator or its designee.
For purposes of this Section 4.2(d), "PERFORMANCE" will include, but
not be limited to, in the sole discretion of the Administrator, interest,
expenses, and realized and unrealized gains and losses. The crediting (or
charging) of amounts under this Section 4.2(d) will occur so long as there
is a balance in the Participant's Deferred Compensation Account; provided,
however, the crediting (or charging) of amounts under this Section 4.2(d)
will cease at a reasonable time (as determined by the Administrator in its
sole discretion) prior to the date a complete distribution of a
Participant's benefit under this Plan is made.
4.3 FORFEITURE.
(a) All amounts credited to, and not withdrawn from, a Participant's
Deferred Compensation Account will be nonforfeitable, except as provided
below.
(b) Notwithstanding any other provision of this Plan, a Participant's
Deferred Compensation Account will be forfeited in its entirety if the
Administrator determines that the Participant has engaged in any activity
that is (1) illegal and involves fraud, dishonesty, or theft; or (2)
intentionally detrimental to the Company, a Participating Employer, or any
subsidiary or affiliate thereof.
ARTICLE V
DISTRIBUTION OF BENEFITS
5.1 DISTRIBUTION ON TERMINATION OF EMPLOYMENT. Unless otherwise
elected pursuant to Section 5.4, amounts credited to, and not withdrawn from,
a Participant's Deferred Compensation Account (less applicable tax and other
withholdings) will be paid in a single lump sum payment, in cash or other
property at the Administrator's election, within 90 days after the
Participant's termination of employment with the Company or, if applicable,
Participating Employer.
5.2 DISTRIBUTION ON TOTAL DISABILITY. Unless otherwise elected
pursuant to Section 5.4, amounts credited to, and not withdrawn from, a
Participant's Deferred Compensation Account (less applicable tax and other
withholdings) as of the date the Administrator determines that the
Participant has sustained a Total Disability will be paid in a single lump
sum payment, in cash or other property at the Administrator's election,
within 90 days after such determination.
5.3 DISTRIBUTION ON DEATH. Unless otherwise elected pursuant to
Section 5.4, payment of the amounts credited to, and not withdrawn from, his
or her Deferred Compensation Account (less applicable tax and other
withholdings) as of the date of the Participant's death will be made in a
single lump sum payment, in cash or other property at the Administrator's
election, within 90 days after the Participant's death, to the Participant's
designated beneficiary in accordance with the last such designation received
by the Administrator, or if none, to the Participant's surviving spouse, or
if there is no surviving spouse, to the personal representative of the
Participant's estate.
A Participant will have the right, at any time, to submit, on a form
prescribed by the Administrator, a written designation of primary and
secondary beneficiaries to whom payment under this Plan will be made in the
event of his or her death prior to complete distribution of the benefits due
and payable to the Participant under this Plan. Each beneficiary designation
will become effective only when receipt thereof is acknowledged in writing by
the Administrator.
5.4 FORM OF BENEFIT DISTRIBUTION. A Participant or Beneficiary may
elect the form and timing, subject to the Administrator's approval, of
distribution of his or her benefits and may revoke that election (with or
without a new election) at any time at least 30 days before his or her
payments begin or are scheduled to begin, by notifying the Administrator in
writing of his or her election.
A Participant or Beneficiary may elect distributions of benefits in one
of the following forms:
(a) LUMP SUM -- a single payment of the entire balance in the
Participant's Deferred Compensation Account, payable as of a date specified
in the election, which date may not be later than the date the Participant
attains (or would have attained) age 65.
(b) INSTALLMENTS -- Period payments over a specified period of time,
beginning as of a date specified in the election, which date may not be
later than the date the Participant attains (or would have attained) age
65, and which time period may not extend beyond the life expectancy of the
Participant or Beneficiary.
5.5 INCAPACITY. In the event of the Participant's incapacity (as
determined by the Administrator), payment pursuant to Sections 5.1 through
5.3, above, will be made to the Participant or to the legal guardian or
conservator of the Participant or to an adult with whom the Participant
maintains his or her residence, as the Administrator in its sole and absolute
discretion will determine. Such a payment to a legal guardian, conservator,
or adult will fully discharge the Administrator, the Company, each
Participating Employer, and the Plan from further liability on account
thereof.
ARTICLE VI
GENERAL PROVISIONS
6.1 NON-TRANSFERABILITY OF INTERESTS. Notwithstanding any other
provision of this Plan, all Deferred Compensation Accounts maintained by the
Company will be general assets of the Company and will be subject to the
claims of such Employer's general creditors.
Except as provided in Section 6.2 below, benefits payable to
Participants and their beneficiaries under this Plan may not in any manner be
anticipated, assigned (either at law or in equity), alienated, sold,
transferred, pledged, encumbered or subjected to attachment, garnishment,
levy, execution, or other legal or equitable process by creditors of the
Participant or the Participant's beneficiaries.
6.2 DOMESTIC RELATIONS ORDERS
(a) To the extent required under a final judgment, decree, or order
(including approval of a property settlement agreement) made pursuant to
a state domestic relations law (a "DOMESTIC RELATIONS ORDER"), any portion
of a
Participant's Deferred Compensation Account may be paid or set aside for
payment to a spouse, former spouse, or child of the Participant. The
Administrator shall establish written procedures for determining whether a
Domestic Relations Order directed to the Program is a "PLAN-APPROVED
DOMESTIC RELATIONS ORDER" in compliance with Code Section 414(p)(1)(A)(i)
and such procedures.
(b) Where necessary to carry out the terms of a Domestic Relations
Order, a separate account shall be established with respect to the spouse,
former spouse, or child. Any amount so set aside for a spouse, former
spouse, or child shall be paid out in a lump sum at the earliest date that
benefits may be paid to the Participant, unless the judgment, decree, or
order directs a different form of payment. Nothing in this Section shall
be construed to authorize any amount to be distributed under the Plan at a
time or in a form that is not permitted under ERISA or the Code.
(c) A Participant's right to receive benefits under the Plan will be
reduced to the extent that any portion of a Participant's Deferred
Compensation Account has been paid or set side for payment to a spouse,
former spouse, or child pursuant to a Plan-Approved Domestic Relations
Order or to the extent that the Company, a Participating Employer, or the
Plan is otherwise subject to a binding judgment, decree, or order for the
attachment, garnishment, or execution or any portion of the Participant's
Deferred Compensation Account or of any distributions therefrom. The
Participant shall be deemed to have released the Company, each
Participating Employer, and the Program from any claim with respect to such
amounts in any case in which -- (1) the Company, a Participating Employer,
the Plan, or any Plan representative has been served with legal process or
otherwise joined in a proceeding relating to such amounts, (2) the
Participant has been notified of the pendency of such proceeding in the
manner prescribed by the law of the jurisdiction in which the proceeding is
pending for service of process or by mail from the Company, a Participating
Employer, or a Plan representative to the Participant's last known mailing
address, and (3) the Participant fails to obtain an order of the court in
the proceeding relieving the Company, Participating Employer, and the Plan
from the obligation to comply with the judgment, decree, or order.
(d) Neither the Company, any Participating Employer, nor any Plan
representative will be obligated to incur any cost to defend against or set
aside any judgment, decree, or order relating to the division, attachment,
garnishment, or execution of the Participant's Deferred Compensation
Account or of any distribution therefrom. Notwithstanding the foregoing,
if the Company, a Participating Employer, the Plan, or a Plan
representative is joined in any
such proceeding, a Plan representative will take such steps as it deems
necessary and appropriate to protect the terms of the Plan.
6.3 AMENDMENT, SUSPENSION, AND TERMINATION. The Company, in its sole
and absolute discretion, at any time may amend, suspend, or terminate the
Plan or any portion thereof in any manner and to any extent. Such amendment,
suspension, or termination of the Plan will be final and binding on each
Participating Employer unless objected to in writing by such Participating
Employer within 30 days after written notice is received of such amendment,
suspension, or termination. No amendment, suspension, or termination will
alter or impair any then existing Deferred Compensation Accounts. Upon
termination of the Plan, amounts credited to each Participant's Deferred
Compensation Account will be paid at the Administrator's election (provided
such election applies uniformly to all such Participants) in a single lump
sum benefit (in cash or other property at the Administrator's election)
either (a) at any time after 30 days following the termination of the Plan;
or (b) at such time and in such event as are otherwise provided under this
Plan.
6.4 UNFUNDED OBLIGATION. The Plan is intended to be, and will be
operated and administered so as to be, a plan that is unfunded and maintained
primarily for the purpose of providing deferred compensation for a select
group of management or highly compensated employees. Neither the Company nor
any Participating Employer will make any provision for funding or insuring
the Deferred Compensation Accounts that would cause the Plan to be (a) a
"funded" plan for purposes of Section 404(a)(5) of the Code or Title I of
ERISA, or (b) other than an "unfunded and unsecured promise to pay money or
property in the future" under Treasury Regulations Section 1.83-3(e). A
Participant and his or her beneficiary will be treated as general, unsecured
creditors of the Company and, if applicable, his or her Participating
Employer at all times under the Plan. The Plan constitutes a mere promise by
the Company to make the benefit payments as provided in the future. It is
the intention of the Company that the Deferred Compensation Accounts be
unfunded for tax purposes and for purposes of Title I of ERISA.
The foregoing notwithstanding, the Company may establish a grantor trust
described in Treasury Regulation Section 1.677(a)-(d) to accumulate funds to
pay the Deferred Compensation Accounts, provided that the trust assets will
be subject to the claims of the Company's general creditors and will be
required to be used to satisfy the claims of the Company's general creditors
in the event the Company or a Participating Employer is "insolvent" under the
terms of such trust.
6.5 NO RIGHT TO EMPLOYMENT OR OTHER BENEFITS. Nothing contained herein
will be construed as conferring upon any Participant the right to continue in
the employ of the Company or any Participating Employer. Any compensation
deferred and any
benefits paid under this Plan will be disregarded in computing benefits under
any employee benefit plan of the Company or any Participating Employer.
6.6 CLAIMS PROCEDURES.
(a) (1) In the event benefits provided under this Plan are not
timely paid, any Participant or, if the Participant is deceased, the
Participant's designated beneficiary (the "CLAIMANT," which term will
include the duly authorized representative of claimant) may file a
claim requesting benefits under the Plan by submitting to the
Administrator (or such officer or agent of the Company as the
Administrator may designate for such purpose) a written statement
setting out the general nature of the claim.
(2) If a duly submitted claim is wholly or partly denied, notice
of the denial will be furnished to the claimant within 60 days after
receipt of the claim by the Administrator. Such notice will be given
as provided in subparagraph 6.6(a)(3) hereunder, and if the claim has
not been granted within 60 days of the submission of the claim, the
claim will be deemed denied for the purposes hereof.
(3) The Administrator will provide to every claimant whose duly
submitted claim for benefits is denied, written notice setting forth
in a manner calculated to be understood by the claimant:
(A) The specific reason or reasons for the denial;
(B) Specific reference to pertinent Plan provisions on
which the denial is based;
(C) A description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation of why such material or information is necessary;
(D) An explanation of the Plan's claim review procedure.
Such notice will be sent by certified mail, return receipt
requested, to the claimant's last known address.
(b) (1) The Administrator will appoint a Claims Review Committee
which will consist of any number of officers of the Company (other
than the claimant), as the Administrator in its discretion will
determine, to review and make decisions on claim denials. All
decisions of the Claims Review Committee will be by majority vote.
(2) Within 60 days after denial of a claim as herein provided,
the claimant may request review of the denied claim by submitting a
written request therefor to the Claims Review Committee, in the care
of the Administrator.
(3) After the request for a review of the claim denial has been
submitted, and before issuance of the decision on review, the claimant
may upon reasonable advance written notice review pertinent Plan
documents during regular business hours at the Company's office;
provided, however, that such Plan documents will not be considered to
include any documents such as correspondence or memoranda between any
agents or employees of the Company and any other persons or government
agencies. At the option of the Claims Review Committee, the claimant
may be given photocopies of pertinent Plan documents in lieu of a
review of such documents at the Company's offices.
(4) Within 30 days after the request for a review of the claim
denial has been submitted, the claimant may submit issues and comments
in writing to the Compensation Committee.
(5) Upon request of the Claimant, or upon its own motion, the
Compensation Committee may, but will not be required to, provide the
claimant an opportunity for a hearing before the Compensation
Committee.
(6) Within 60 days after receipt of a request for review, the
Compensation Committee will render its decision unless special
circumstances (such as the need to hold a hearing) require an
extension of time for processing the request for review, in which case
a decision will be rendered as soon as possible, but in no event later
than 120 days after receipt of the request for review.
(7) The decision on review will be in writing and will include
specific reasons for the decision, written in a manner calculated to
be understood by the claimant, and specifically referencing pertinent
Plan provisions on which the decision is based.
6.7 INUREMENT. This Plan will be binding upon and inure to the benefit
of the Company, each Participating Employer, their successors and assigns,
the Participant, and his or her successors, heirs, executors, personal
representatives, administrators and beneficiaries.
6.8 NOTICE. Any notice, consent or demand required or permitted to be
given under the provisions of this Plan will be in writing, and will be
signed by the party giving or making the same. If such notice, consent or
demand is mailed to a party hereto, it will be sent by United States
certified mail, postage prepaid, addressed to such party's last known address
as shown on the records of the Company. The date of such mailing will be
deemed the date of notice, consent or demand. Either party may change the
address to which notice is to be sent by giving notice of change of address
in the manner aforesaid.
6.9 GOVERNING LAW. This Plan, and the rights of the parties hereunder,
will be governed by and construed in accordance with the laws of the State of
Kansas, without reference to the principles of conflict of laws.
IN WITNESS WHEREOF, WADDELL & REED FINANCIAL, INC. has caused this Plan
to be executed by its duly authorized officer, on the 31st day of December,
1998.
WADDELL & REED FINANCIAL, INC.
By: /s/ Keith A. Tucker
------------------------------
Keith A. Tucker,
Chairman of the Board and
Chief Executive Officer