SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-12
WADDELL & REED FINANCIAL, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction
applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
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(4) Proposed maximum aggregate value of transaction:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
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Schedule and the date of its filing.
(1) Amount Previously Paid:
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[LOGO]
March , 2001
TO THE STOCKHOLDERS OF
Waddell & Reed Financial, Inc.:
Waddell & Reed Financial, Inc.'s 2001 Annual Meeting of Stockholders will be
held in the William T. Morgan Auditorium at the executive offices of the
Company, 6300 Lamar Avenue, Overland Park, Kansas 66202 at 10:00 a.m., local
time, on Wednesday, April 25, 2001.
At the annual meeting, we will ask you to (1) approve the election of the
nominees shown in the accompanying Proxy Statement as directors, (2) approve a
merger of the Company with a wholly-owned subsidiary of the Company that will
have the effect of combining our two classes of common stock into a single class
of common stock by converting our Class B common stock into Class A common stock
on a one-for-one basis and effecting certain changes to our Certificate of
Incorporation and Bylaws, and (3) ratify the appointment of KPMG LLP as our
independent auditors for the 2001 fiscal year.
The accompanying formal notice and Proxy Statement discuss matters which
will be presented for a stockholder vote. If you have any questions or comments
about the matters discussed in the Proxy Statement or about the operations of
the Company, we will be pleased to hear from you.
We have also enclosed our 2000 Annual Report. As you will see in our Annual
Report, we believe that we are making some significant and positive changes in
our business.
It is important that your shares be voted at this meeting. If you are unable
to attend the meeting in person and wish to have your shares voted, you may vote
by telephone, Internet or by filling in, signing and dating the enclosed proxy
and returning it in the accompanying envelope as promptly as possible.
We hope that you will take this opportunity to meet with us to discuss the
results and operations of the Company during 2000.
Sincerely,
/s/ Keith A. Tucker
Keith A. Tucker
CHAIRMAN OF THE BOARD
& CHIEF EXECUTIVE OFFICER
/s/ Henry J. Herrmann
Henry J. Herrmann
PRESIDENT & CHIEF INVESTMENT OFFICER
WADDELL & REED FINANCIAL, INC.
6300 Lamar Avenue
Overland Park, Kansas 66202
(913) 236-2000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 25, 2001
TO THE STOCKHOLDERS OF
Waddell & Reed Financial, Inc.:
I am pleased to give you notice that the 2001 Annual Meeting of Stockholders
of Waddell & Reed Financial, Inc. will be held in the William T. Morgan
Auditorium at our executive offices located at 6300 Lamar Avenue, Overland Park,
Kansas 66202 on Wednesday, April 25, 2001, at 10:00 a.m., local time.
At the annual meeting, you will be asked to:
1. Elect the nominees shown in the accompanying Proxy Statement as
directors to hold office until the 2004 Annual Meeting of Stockholders or
until their respective successors are duly elected and qualified.
2. Consider and approve the combination of our two classes of common stock
into a single class of common stock by converting our Class B common
stock into Class A common stock on a one-for-one basis. The combination
of our two classes of common stock will be effected by a wholly-owned
subsidiary of the Company being merged with and into the Company with the
Company being the surviving corporation, pursuant to an Agreement and
Plan of Merger, dated February 14, 2001, between the Company and the
subsidiary. Each existing share of Class A common stock will remain
outstanding. The terms of the Class A common stock will not be affected
by the transaction.
Approval of the merger agreement by our stockholders will also result in
the amendment of our Certificate of Incorporation to eliminate references
to the Class B common stock as well as our former majority stockholder
and to increase our authorized shares of Class A common stock from
150,000,000 to 250,000,000 to account for the elimination of the
authorized Class B shares. Our Bylaws will also be amended by the merger
to eliminate references to the Class B common stock and our former
majority stockholder and to facilitate the use of electronic
communication technology for stockholder meetings.
The merger is subject to the approval of both a majority of the combined
voting power of our outstanding shares of Class A and Class B common
stock, voting together as a single class, and a majority of our
outstanding shares of Class B common stock, voting as a separate class.
3. Ratify the appointment of KPMG LLP as our independent auditors for the
fiscal year ending December 31, 2001.
4. Transact such other business as may properly come before the annual
meeting or any adjournments thereof.
These matters are more fully discussed in the accompanying Proxy Statement.
Only our common stockholders of record at the close of business on
February 27, 2001 are entitled to notice of, and to vote at, the annual meeting.
All stockholders are cordially invited to attend the annual meeting in
person. However, if you are unable to attend in person and wish to have your
shares voted, YOU MAY VOTE BY TELEPHONE, INTERNET OR BY FILLING IN, SIGNING AND
DATING THE ENCLOSED PROXY AND RETURNING IT IN THE ACCOMPANYING ENVELOPE AS
PROMPTLY AS POSSIBLE. Regardless of how you deliver your proxy, you may revoke
your proxy at any time before it is voted by submitting to the Secretary of the
Company a written revocation or a proxy bearing a later date, or by attending
the annual meeting and giving oral notice of your intention to vote in person.
The annual meeting for which this notice is given may be adjourned from time
to time without further notice other than announcement at the meeting or any
adjournment thereof. Any business for which notice is hereby given may be
terminated at any such adjourned meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Daniel C. Schulte
Daniel C. Schulte
VICE PRESIDENT, GENERAL COUNSEL &
SECRETARY
This Proxy Statement is dated March , 2001 and is first being mailed to
stockholders on or about this date.
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WADDELL & REED FINANCIAL, INC.
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PROXY STATEMENT
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SUMMARY TERM SHEET
This summary highlights selected information from this Proxy Statement and
may not contain all of the information that is important to you. To better
understand the nominees being solicited for director, the appointment of KPMG
LLP as our independent auditors, and the merger and consequent combination of
our two classes of common stock and for a more complete description of the terms
and conditions of the merger, as well as the consequent amendments to our
Certificate of Incorporation and Bylaws, you should carefully read this entire
document, its attachments and the other documents to which we refer. The actual
terms of the merger are contained in the merger agreement, which is included in
this Proxy Statement as Appendix A.
WHEN AND WHERE IS THE ANNUAL MEETING?
The annual meeting will take place on Wednesday, April 25, 2001, at
10:00 a.m., local time, in the William T. Morgan Auditorium at our executive
offices located at 6300 Lamar Avenue, Overland Park, Kansas 66202. See
"Information Concerning the Annual Meeting--Date and Time."
WHAT MATTERS WILL BE VOTED UPON AT THE ANNUAL MEETING?
At the annual meeting:
- The holders of our Class A and Class B common stock will consider and vote
upon a proposal to elect Henry J. Herrmann, James M. Raines and William L.
Rogers as directors to hold office for a term of three years, expiring at
the close of the annual meeting of stockholders in 2004.
- The holders of our Class A and Class B common stock will consider and vote
upon a proposal to merge the Company and a wholly-owned subsidiary that
will effect the combination of our two classes of common stock into a
single class of common stock. The combination will be effected by
converting our Class B common stock into Class A common stock on a
one-for-one basis pursuant to the merger.
As a result of the merger, our Certificate of Incorporation and Bylaws
will be amended to (1) eliminate all references to, and the authorized
shares of, the Class B common stock as well as all provisions relating to
our former majority stockholder, (2) increase our authorized shares of
Class A common stock from 150,000,000 to 250,000,000 to account for the
elimination of the authorized Class B shares, and (3) facilitate the use
of electronic communication technology for stockholder meetings.
- The holders of our Class A and Class B common stock will consider and vote
upon a proposal to ratify the appointment of KPMG LLP as our independent
auditors for the fiscal year ending December 31, 2001.
- The holders of our Class A and Class B common stock will transact such
other business as may properly come before the annual meeting or any
adjournments thereof.
WHO IS ENTITLED TO VOTE?
Only stockholders of record at the close of business on February 27, 2001,
which is the "record date," are entitled to notice of, and to vote at, the
annual meeting.
IF MY BROKER HOLDS MY SHARES IN "STREET NAME," WILL MY BROKER VOTE MY SHARES FOR
ME?
Your broker has the discretion to vote your shares without any instructions
from you on the approval of the nominees for director and the ratification of
KPMG LLP as the Company's independent auditor for fiscal year 2001. However,
your broker will vote your shares on the approval of the merger only if you
provide written instructions on how to vote. You should follow the directions
provided by your broker regarding how to instruct your broker to vote your
shares. See "Information Concerning the Annual Meeting--Voting of Proxies."
MAY I CHANGE MY VOTE AFTER I HAVE SUBMITTED MY PROXY?
Yes. To change your vote you can do any of the following:
- Give notice of your changed vote to us in writing mailed to Daniel C.
Schulte, Secretary, at our executive offices.
- Execute and deliver to us a subsequent proxy.
- Attend the annual meeting and give oral notice of your intention to vote
in person.
You should be aware that simply attending the annual meeting would not in
and of itself constitute a revocation of your proxy. See "Information Concerning
the Annual Meeting--Revocability of Proxies."
DO I HAVE APPRAISAL RIGHTS?
Under the General Corporation Law of Delaware, our State of incorporation,
neither the holders of Class A common stock nor the holders of Class B common
stock have appraisal rights.
HOW WILL THE MERGER AFFECT THE COMPANY'S STOCK REPURCHASE PROGRAM?
After the merger, the Company may continue acquiring shares of its common
stock from time to time when management deems market conditions to be favorable
to the Company. During 2000, the Company repurchased 3,322,840 Class A and
1,822,252 Class B shares at an aggregate cost, including commissions, of
$108,416,459 for the year. The average price per share of these repurchases was
$21.05.
WHAT IS THE PROPOSED MERGER?
We currently have two publicly traded classes of common stock.
- Our Class A common stock is traded on the New York Stock Exchange (the
"NYSE") under the symbol "WDR." As of the record date, there were
43,384,911 shares of Class A common stock issued and outstanding.
- Our Class B common stock is traded on the NYSE under the symbol "WDR.B."
As of the record date, there were 40,139,617 shares of Class B common
stock issued and outstanding.
- On December 7, 2000, the last trading day prior to the public announcement
that the Company intended to proceed with a transaction to combine the two
classes, the closing price per share of the Class A common stock and the
Class B common stock on the NYSE was $33.25 and $32.375, respectively.
The Class A and Class B common stock have the same rights, powers and
preferences, except that the Class A common stock is entitled to one vote per
share and the Class B common stock is entitled to five votes per share.
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The merger will have the following effects:
- The merger will eliminate our Class B common stock. The merger agreement
provides that a wholly-owned subsidiary will merge with and into us and,
as a result, our issued shares of Class B common stock will be converted
into issued shares of our Class A common stock on a one-for-one basis. The
Class A common stock will continue to trade on the NYSE.
- The merger will amend our Certificate of Incorporation in the form
attached as Exhibit A to the merger agreement. The amendments to our
Certificate of Incorporation will (1) eliminate all references to our
Class B common stock, (2) eliminate all provisions relating to our former
majority stockholder, and (3) increase our authorized shares of Class A
common stock from 150,000,000 to 250,000,000. Currently we have authorized
150,000,000 shares and 100,000,000 shares of Class A common stock and
Class B common stock, respectively. The amendment will eliminate the
authorized Class B shares and increase the authorized Class A shares by
the current amount of authorized Class B shares.
- The merger will amend our Bylaws in the form attached as Exhibit B to the
merger agreement. The amendments to our Bylaws will (1) eliminate all
references to our Class B common stock, (2) eliminate all provisions
relating to our former majority stockholder, and (3) facilitate the use of
electronic communication technology for stockholder meetings.
WHAT IS THE REASON FOR THE MERGER?
Our Board of Directors believes that the existence of two publicly traded
classes of common stock confuses investors and analysts interested in the
Company and has reduced liquidity in the divided markets. The Board recommends
the merger because it believes that a more simplified capital structure will
focus interest in one market, which should result in increased trading volume
and liquidity. However, we cannot guarantee that the benefits of a simplified
capital structure will be accomplished as rapidly as currently expected, or at
all. See "Proposal No. 2--Merger--Background and Reasons for the Proposal."
WHAT EFFECTS WILL RESULT FROM THE MERGER?
As a result of the merger:
- The Class A common stock will continue to be listed and traded on the NYSE
and will continue to be registered under the Securities Exchange Act of
1934, as amended (the "Exchange Act").
- Although the merger does not affect the total number of our authorized
shares of common stock, our authorized shares of Class A common stock will
increase from 150,000,000 to 250,000,000 to account for the elimination of
the authorized Class B shares.
- Although the relative ownership interest of each holder of common stock
will be the same immediately after the merger as it was prior thereto, the
relative voting power of the holders of the Class B common stock will
decrease from approximately 82% to approximately 48%.
- The Class B common stock will cease to be listed on the NYSE and there
will be no public market for the Class B common stock.
- The Company will terminate registration of the Class B common stock under
the Exchange Act.
WHAT WILL I RECEIVE IN THE MERGER?
Each holder of Class B common stock will receive one share of Class A common
stock, having the same rights and preferences and identical in all other
respects as our currently outstanding Class A common stock. The holders of
Class A common stock outstanding immediately before the merger will
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continue to hold their shares of Class A common stock with the same terms that
existed prior to the merger.
HAS THE BOARD OF DIRECTORS RECOMMENDED THAT I VOTE FOR THE MERGER?
Your Board of Directors believes that the merger is fair to, and in the best
interests of, the Company and the holders of both the Class A common stock and
the Class B common stock. The Board of Directors unanimously approved the
merger. See "Proposal No. 2--Merger--Required Vote; Recommendation of the
Board."
WHAT STOCKHOLDER VOTE IS REQUIRED TO APPROVE THE MERGER?
The merger is subject to the approval of both:
- a majority of the combined voting power of outstanding shares of the
Class A common stock and Class B common stock, voting together as a single
class; and
- a majority of the outstanding shares of Class B common stock, voting as a
separate class.
The Class A common stock is entitled to one vote per share and the Class B
common stock is entitled to five votes per share.
WHEN IS THE MERGER EXPECTED TO BE COMPLETED?
If stockholders approve the merger at the annual meeting, we currently
expect the transaction to be completed on or shortly after the date of the
annual meeting.
SHOULD I SEND IN MY CLASS B STOCK CERTIFICATES NOW?
No. If the merger is completed, you will receive written instructions on how
to exchange your Class B common stock certificate for an equal number of shares
of Class A common stock. Holders of Class A common stock will not need to
exchange their stock certificates as a result of the merger. See "Proposal
No. 2--Merger--Description of the Merger."
WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER?
The Company has received an opinion from Hughes & Luce LLP, the Company's
special counsel, to the effect that on the basis of the facts, representations
and assumptions set forth in the opinion, for U.S. federal income purposes
(1) neither the Company nor its stockholders will recognize taxable gain or loss
upon the conversion of the shares of Class B common stock into shares of
Class A common stock, (2) each stockholder's aggregate tax basis in the newly
issued shares of Class A common stock will be the same as the aggregate tax
basis of the shares of Class B common stock exchanged, and (3) the holding
period of the newly issued shares of Class A common stock will include the
holding period of the shares of Class B common stock exchanged. This opinion
represents the counsel's best legal judgment. Legal opinions are not binding on
the Internal Revenue Service (the "IRS") or the courts, and there can be no
assurance that the IRS or the courts will not take one or more contrary
positions. You should consult your tax advisor for a full understanding of the
tax consequences of the merger. See "Proposal No. 2--Merger--Certain Effects of
the Merger."
WHAT WILL HAPPEN TO THE COMPANY'S STOCK OPTIONS AND RIGHTS AGREEMENT?
Outstanding options to purchase Class A common stock will not be affected.
The options will remain exercisable for the same number of shares of Class A
common stock of the Company, for the same exercise price and upon the same terms
as in effect before the merger. There are no outstanding options to purchase
Class B common stock.
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The terms and conditions of the Company's rights agreement will remain
unchanged after the merger, except for technical amendments to the agreement to
delete references to the Class B common stock. See "Proposal
No. 2--Merger--Certain Effects of the Merger."
WHAT DO I NEED TO DO NOW?
First, read this Proxy Statement carefully. Then, you should, as soon as
possible, submit your proxy by either executing and returning the paper proxy
card or by voting electronically via the Internet or by telephone. Your shares
represented by proxy will be voted in accordance with your directions specified.
If you submit a proxy, but have not specified any directions, your shares will
be voted for approval of the merger. See "Information Concerning the Annual
Meeting."
WHO CAN HELP ANSWER YOUR QUESTIONS?
If you have any questions concerning the merger, any other proposal or the
annual meeting, if you would like additional copies of the Proxy Statement or if
you will need special assistance at the meeting, please call our Investor
Relation's office at (800) 532-2757. In addition, information regarding the
annual meeting is available via the Internet at our website (WWW.WADDELL.COM).
The summary information provided above in "question and answer" format is for
your convenience only and is merely a brief description of material information
contained in this Proxy Statement.
YOU SHOULD CAREFULLY READ THIS PROXY STATEMENT (INCLUDING THE ATTACHMENTS)
IN ITS ENTIRETY.
FORWARD-LOOKING STATEMENTS
This Proxy Statement contains forward-looking statements. Additional written
or oral forward-looking statements may be made by us from time to time in
filings with the Securities and Exchange Commission (the "SEC") or otherwise.
The words "believe," "expect," "anticipate," "estimate," "project," and similar
expressions identify forward-looking statements, which speak only as of the date
the statement was made. Forward-looking statements are inherently subject to
risks and uncertainties, some of which cannot be predicted or quantified. Future
events and actual results could differ materially from those set forth in,
contemplated by, or underlying the forward-looking statements. Statements in
this Proxy Statement describe factors that could contribute to or cause such
differences.
We caution you not to place undue reliance on any forward-looking statements
made by, or on behalf of, the Company in this Proxy Statement or in any of our
filings with the SEC or otherwise. Additional information with respect to
factors that may cause the results to differ materially from those contemplated
by forward-looking statements is included in our current and subsequent filings
with the SEC. See "Where You Can Find More Information."
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INFORMATION CONCERNING THE ANNUAL MEETING
DATE AND TIME
This Proxy Statement is being delivered to the Company's stockholders on or
about March , 2001, in connection with the solicitation of proxies to be voted
at the annual meeting to be held on Wednesday, April 25, 2001.
MATTERS TO BE VOTED UPON AT THE ANNUAL MEETING
At the annual meeting:
(1) The holders of the Company's Class A and Class B common stock, voting
together as a single class, will consider and vote upon a proposal to
elect Henry J. Herrmann, James M. Raines, and William L. Rogers as
directors to hold office for a term of three years, expiring at the close
of the annual meeting of stockholders in 2004;
(2) The holders of the Company's Class A and Class B common stock, voting
together as a single class, and the holders of the Class B common stock,
voting as a separate class, will consider and vote upon a proposal to
approve the merger;
(3) The holders of the Company's Class A and Class B common stock, voting
together as a single class, will consider and vote upon a proposal to
ratify the appointment of KPMG LLP as the Company's independent auditors
for the fiscal year ending December 31, 2001; and
(4) The holders of the Company's Class A and Class B common stock will
transact such other business as may properly come before the annual
meeting or any adjournments thereof.
RECORD DATE; SHARES ENTITLED TO VOTE
The Board of Directors has set the close of business on February 27, 2001 as
the record date for the determination of stockholders entitled to notice of, and
to vote, at the annual meeting. Each share of Class A common stock outstanding
on the record date will be entitled to one vote on all matters submitted for
vote at the annual meeting and each share of Class B common stock will be
entitled to five votes on all matters submitted for vote at the annual meeting.
As of the record date, there were approximately 43,384,911 shares of
Class A common stock issued and outstanding and 40,139,617 shares of Class B
common stock issued and outstanding to be voted at the annual meeting.
QUORUM; ADJOURNMENT
The presence, either in person or by proxy, of the holders of at least a
majority of the voting power of our issued and outstanding shares of common
stock is required to constitute a quorum for the transaction of business at the
annual meeting; in addition, the presence, either in person or by proxy of the
holders of a majority of the issued and outstanding shares of Class B common
stock is also required to act with respect to approval of the merger.
Abstentions are counted for purposes of determining whether a quorum exists for
the transaction of business. Broker non-votes, which are described in more
detail below, are also counted as shares present or represented at the annual
meeting for purposes of determining whether a quorum exists.
VOTE REQUIRED FOR APPROVAL
- Election of Directors
To approve the nomination of Henry J. Herrmann, James M. Raines, and
William L. Rogers for director requires the affirmative vote of a plurality
of the votes cast at the annual meeting.
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- Approval of the Merger
The merger is subject to the approval of both (1) a majority of the
voting power represented by all shares of Class A common stock and Class B
common stock outstanding and entitled to be voted on the merger, and (2) a
majority of all shares of Class B common stock outstanding and entitled to
be voted on the merger. As of the record date, the Class B shares
represented approximately 82% of the combined voting power. For the purposes
of this vote, a failure to vote, a vote to abstain, withholding your vote
(or a direction to your broker to do so) and a broker non-vote will each
have the same legal effect as a vote cast AGAINST approval of the merger.
- Ratification of the Appointment of Independent Auditors
To ratify the Board's appointment of KPMG LLP as the Company's
independent auditors requires the affirmative vote of a majority of the
votes cast at the annual meeting.
As of March 6, directors and executive officers of the Company beneficially
owned (excluding currently exercisable options), an aggregate of approximately
2,595,572 shares of Class A common stock and 35,400 shares of Class B common
stock, representing 6.0% of the Class A common stock and 0.09% of the Class B
common stock issued and outstanding and 1.23% of the combined voting power. The
Company believes that the directors and executive officers of the Company
currently intend to vote their shares in favor of the election of the nominees
for director, in favor of the merger and in favor of the ratification of KPMG
LLP as the Company's independent auditors.
VOTING OF PROXIES
Shares represented by a properly executed proxy (in paper form, by Internet
or by telephone) that is received on or before the time of the annual meeting,
and not subsequently revoked, will be voted at the annual meeting or any
adjournment or postponement in the manner directed on the proxy. Keith A. Tucker
and Henry J. Herrmann are named as proxies in the proxy and have been designated
as directors' proxies by the Board to represent you and vote your shares at the
meeting. All shares represented by a properly executed proxy on which no choice
is specified will be voted, to the extent applicable (1) FOR the election of the
nominees named in this Proxy Statement, (2) FOR approval of the merger
agreement, (3) FOR the ratification of the appointment of KPMG LLP as the
Company's independent auditors for fiscal year 2001, and (4) in accordance with
the proxy holder's best judgment as to any other business as may properly come
before the annual meeting. Shares represented by proxies voting for the approval
of a specific proposal will be voted for adjourning the annual meeting for the
purpose of soliciting additional proxies for the approval of that proposal.
Shares represented by proxies voting against the approval of a particular
proposal will be voted against adjourning the annual meeting for the purpose of
soliciting additional proxies for the approval of that proposal.
The Proxy Statement is considered to be voting instructions for the trustees
of the Waddell & Reed Financial, Inc. 401(k) and Thrift Plan, the Torchmark
Corporation Savings and Investment Plan, the Liberty National Life Insurance
Company 401(k) Plan and the Profit Sharing and Retirement Plan of Liberty
National Life Insurance Company for our common stock allocated to individual
accounts under those plans. If account information is the same, participants in
the plan (who are also stockholders of record) will receive a single proxy
representing all of their shares. If a plan participant does not submit a proxy
to us, the trustees of the plan in which shares are allocated to his or her
individual account will vote such shares in the same proportion as the total
shares in such plan for which directions have been received.
Brokers who hold shares in "street name" for customers are precluded from
exercising voting discretion with respect to the approval of non-routine matters
such as the proposal to approve the merger agreement (so called "broker
non-votes"). Accordingly, absent specific instructions from the beneficial owner
of such shares, brokers are not empowered to vote the shares with respect to the
approval of the merger agreement. Since the merger is subject to the affirmative
vote of both a majority of the voting
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power represented by shares of the Class A and Class B common stock, voting
together as a single class, and a majority of the shares of Class B common stock
voting as a separate class, a "broker non-vote" will have the same effect as a
vote against the merger. With respect to the election of directors and the
ratification of the appointment of the independent auditors and other routine
matters, a broker will have discretionary authority to vote the common shares if
the beneficial owner has not given instructions.
Other than the election of directors, the merger, and the ratification of
the appointment of the Company's independent auditors, the Company's management
is not aware of any matters which may come before the annual meeting. If any
other matters are properly presented at the annual meeting for action,
Mr. Tucker and Mr. Herrmann will vote in accordance with their best judgment on
such matters.
REVOCABILITY OF PROXIES
Any stockholder of record who has given a proxy may revoke it by attending
the annual meeting and giving oral notice of his or her intention to vote in
person. In addition, any proxy may be revoked at any time prior to the annual
meeting by delivering to the Secretary of the Company a written statement
revoking it or by delivering a duly executed proxy bearing a later date.
Attendance at the annual meeting by a stockholder who has executed and delivered
a proxy to the Company will not in and of itself constitute a revocation of that
proxy. No Class A or Class B stockholder will have the right to dissent from and
seek an appraisal of his or her shares of Class A or Class B common stock.
SOLICITATION OF PROXIES
Proxies will be solicited initially by mail. Further solicitation may be
made in person, by telephone or by fax. Upon request, the Company will reimburse
brokers, dealers, banks or similar entities acting as nominees for reasonable
expenses incurred in forwarding copies of the proxy materials relating to the
annual meeting to the beneficial owners of shares of common stock.
The Company has retained Corporate Investors Communications, Inc., an
independent proxy solicitation firm ("CIC"), to assist in soliciting proxies
from stockholders. CIC will receive a retainer fee of approximately $8,000 as
compensation for its services and will be reimbursed for its out-of-pocket
expenses. The fee amount is not contingent on the number of stockholder votes in
favor of the merger or any of the other proposals. CIC will not make any
recommendation to our stockholders to either accept or reject the proposed
merger or any other proposal or otherwise express an opinion concerning a
proposal.
YOUR VOTE IS IMPORTANT. YOU MAY VOTE BY TELEPHONE, INTERNET OR BY FILLING
IN, SIGNING AND DATING THE ENCLOSED PROXY AND RETURNING IT IN THE ACCOMPANYING
ENVELOPE AS PROMPTLY AS POSSIBLE.
HOLDERS OF CLASS B COMMON STOCK SHOULD NOT SEND ANY CERTIFICATES
REPRESENTING CLASS B COMMON STOCK WITH THEIR PROXY CARD. IF THE MERGER IS
CONSUMMATED, HOLDERS OF CLASS B COMMON STOCK WILL RECEIVE WRITTEN INSTRUCTIONS
ON HOW TO EXCHANGE THEIR CLASS B COMMON STOCK CERTIFICATES FOR CLASS A COMMON
STOCK CERTIFICATES.
8
PROPOSAL NO. 1--ELECTION OF DIRECTORS
Our Bylaws provide that the number of directors shall be not less than seven
nor more than fifteen with the exact number to be fixed by the Board of
Directors. Our Certificate of Incorporation divides our Board into three
categories, with the term of each category expiring in consecutive years.
Our Board of Directors proposes the election of Henry J. Herrmann, James M.
Raines, and William L. Rogers as Class III directors, to hold office for a term
of three years, expiring at the close of the annual meeting of stockholders to
be held in 2004 or until their successors are elected and qualified. It is the
Board's opinion that these candidates are sufficiently familiar with the Company
and its business to be able to competently direct and manage the Company's
business affairs. Biographical information on each of these nominees is set
forth below in "Directors and Executive Officers of the Company."
If any of the nominees becomes unavailable for election, which is not
anticipated, the directors' proxies will vote for the election of such other
person as the Board may recommend unless the Board reduces the number of
directors to be elected at the annual meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR EACH OF THE
NOMINEES LISTED HEREIN.
9
OTHER INFORMATION YOU NEED TO MAKE AN INFORMED DECISION
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
NUMBER AND TERM OF DIRECTORS
The Company's Certificate of Incorporation divides the Board into three
categories of as equal size as possible, with the terms of each category
expiring in consecutive years so that only one category is elected in any given
year. The stockholders of the Company elect successors to directors whose terms
have expired. The Board fills vacancies in unexpired terms and additional
membership positions created by the Board. As a matter of general policy,
non-employee directors must retire from the Board at the close of the annual
meeting of stockholders following their 73rd birthday.
DIRECTORS AND EXECUTIVE OFFICERS
The names of the directors and executive officers of the Company and their
respective ages and positions are as follows:
NAME AGE POSITION
---- -------- --------------------------------------------------------
Thomas W. Butch...................... 44 Senior Vice President and Chief Marketing Officer
Robert L. Hechler.................... 64 Executive Vice President and Director
Henry J. Herrmann.................... 58 President, Chief Investment Officer, Director
James M. Raines...................... 61 Director
Ronald C. Reimer..................... 66 Director
William L. Rogers.................... 54 Director
Michael D. Strohm.................... 49 Senior Vice President and Chief Operations Officer
John E. Sundeen, Jr.................. 40 Senior Vice President, Chief Financial Officer,
Treasurer
Keith A. Tucker...................... 56 Chairman of the Board, Chief Executive Officer, Director
Jerry W. Walton...................... 54 Director
Robert J. Williams, Jr............... 56 Senior Vice President and National Sales Manager
Set forth below is a description of the backgrounds of the executive
officers, directors and nominees for director.
THOMAS W. BUTCH has been Senior Vice President and Chief Marketing Officer
of the Company since November 1999. Previously, he was associated with Stein
Roe & Farnham, Inc., Chicago, Illinois, where he served in various positions,
including President of Mutual Funds, Senior Vice President of Marketing, Head of
Marketing and Director of Public Relations from 1994-1999.
ROBERT L. HECHLER has been Director and Executive Vice President of the
Company since March 1998. In addition, he has been President, Chief Executive
Officer, and Treasurer of Waddell & Reed, Inc. since April 1993. He is also a
Director of Waddell & Reed Advisors Group of Mutual Funds, Inc., W&R
Funds, Inc. and W&R Target Funds, Inc. Mr. Hechler's term on the Board expires
in 2003.
HENRY J. HERRMANN has been Director, President and Chief Investment Officer
of the Company since March 1998. Prior thereto he was Vice President and Chief
Investment Officer of the Company beginning in March 1987. He is also a Director
of Waddell & Reed Advisors Group of Mutual Funds, Inc., W&R Funds, Inc. and W&R
Target Funds, Inc. MR. HERRMANN IS A NOMINEE FOR DIRECTOR.
JAMES M. RAINES has served as President of James M. Raines and Company, San
Antonio, Texas, an investment banking firm, since September 1988. Mr. Raines is
a director of Hispanic Broadcasting Corporation. MR. RAINES IS A NOMINEE FOR
DIRECTOR.
RONALD C. REIMER has been a Director and Chairman of Network Rehabilitative
Services, Kansas City, Missouri since 1996. In addition, he is the co-founder
of, and has been a teacher at, Servant Leadership
10
School of Kansas City since 1993. Previously, he served as co-founder and
President of Reimer and Koger Associates, an investment counseling firm in
Merriam, Kansas from 1973-1988. Mr. Reimer was elected as a director at a
regular meeting of the Board on March 6, 2001 to fill the vacancy left by the
resignation of Mr. Farley. Mr. Reimer's term on the Board expires in 2003.
WILLIAM L. ROGERS is currently a Managing Director of The Halifax Group, Los
Angeles, California, an investment partnership. In addition, he has been a
Principal of Colony Capital, Inc., Los Angeles, California, a real
estate-related investment company, since 1992. MR. ROGERS IS A NOMINEE FOR
DIRECTOR.
MICHAEL D. STROHM has been Senior Vice President of the Company since
January 1999 and Chief Operations Officer of the Company since March 2001. In
addition, he has been Senior Vice President of Waddell & Reed, Inc. since 1994
and President of Waddell & Reed Services Company since 1999.
JOHN E. SUNDEEN JR. has been Senior Vice President, Chief Financial Officer
and Treasurer of the Company since July 1999. From 1994 to June 1999 he was head
of all fixed income portfolios for the Company, Waddell & Reed Advisors Group of
Mutual Funds, Inc., W&R Funds, Inc. and W&R Target Funds, Inc. He has been
Senior Vice President of Waddell & Reed Investment Management Company since
1995.
KEITH A. TUCKER has been Chairman of the Board and Chief Executive Officer
of the Company since March 1998. Previously, he was a Director and Vice Chairman
of Torchmark Corporation. He is also a Director of Waddell & Reed Advisors Group
of Mutual Funds, Inc., W&R Funds, Inc. and W&R Target Funds, Inc. Mr. Tucker's
term on the Board expires in 2002.
JERRY W. WALTON has been Executive Vice President, Finance and
Administration and Chief Financial Officer of J.B. Hunt Transport
Services, Inc. since 1991. Prior thereto, Mr. Walton served as a tax partner
with KPMG LLP, with whom he had been employed since 1968. Mr. Walton was elected
as a director at the annual meeting of the Board on April 26, 2000 to fill the
vacancy left by the retirement of Mr. Richey. Mr. Walton's term on the Board
expires in 2002.
ROBERT J. WILLIAMS, JR. has been Senior Vice President of the Company since
April 1999. Additionally, he has been Executive Vice President and National
Sales Manager of Waddell & Reed, Inc. since July 1996. Previously, he was
associated with the Charles Schwab & Co. institutional organization where he
served as Vice President of Sales and Vice President of Support Services from
1991 to 1995.
R.K. Richey, Louis T. Hagopian and Harold T. McCormick retired from the
Board during 2000. Mr. Richey's term on the Board would have expired in 2002; he
retired from the Board at the close of the annual stockholders meeting on
April 26, 2000. The Board elected Mr. Walton to serve for the remainder of
Mr. Richey's term. Mr. Hagopian's and Mr. McCormick's terms on the Board would
have expired in 2002 and 2003, respectively. Both Mr. Hagopian and
Mr. McCormick retired from the Board effective May 4, 2000. In connection with
the completion of the Company's spin-off from its former majority stockholder,
culminating with the merger proposal, four directors, Messrs. David L. Boren,
Joseph M. Farley, Joseph L. Lanier, Jr. and George J. Records, Sr. resigned from
the Board effective March 1, 2001. The Board elected Mr. Ronald C. Reimer to
serve for the remainder of Mr. Farley's term effective March 6, 2001. At the
time of the spin-off of the Company, these directors remained on the Board of
both companies in order to ensure that the Company retained continuity in its
corporate governance structure. On the third anniversary of the Company's
initial public offering, these directors felt that sufficient time had passed
and that the Company had clearly established itself in the public marketplace to
a degree that their service was no longer required.
There are no family relationships among any of the executive officers or
directors of the Company. Executive officers of the Company are elected or
appointed by the Board and hold office until their successors are elected and
qualified or until the earlier of their death, retirement, resignation or
removal. The Company's Bylaws provide that the number of directors shall not be
less than seven nor more than fifteen with the exact number to be fixed by the
Board of Directors.
11
BOARD MEETINGS
The Board held six meetings during the 2000 fiscal year. All directors
attended at least 75% of the Board meetings. The Board did not act by unanimous
consent in 2000.
BOARD COMMITTEES
For the fiscal year ending December 31, 2000, the Board of Directors had the
following committees:
- Audit, comprised of William L. Rogers, Joseph M. Farley and Jerry W.
Walton;
- Compensation, comprised of Joseph L. Lanier, Jr., Joseph M. Farley and
James M. Raines;
- Nominating, comprised of David L. Boren, Joseph M. Farley, Joseph L.
Lanier, Jr., James M. Raines, George J. Records, Sr., William L. Rogers
and Jerry W. Walton;
Members of the committees are appointed annually by the Board and serve
until their successors are appointed or their earlier resignation or removal.
The Audit Committee (1) recommends the independent auditors to be appointed
by the Board; (2) discusses the scope of the proposed audit with the independent
auditors and considers the audit reports; (3) discusses the auditors'
recommendations with management; (4) reviews the fees of the independent
auditors; (5) reviews the adequacy of the Company's system of internal
accounting controls; (6) reviews the quarterly and annual financial statements
and (7) meets with the Company's independent accountants and internal auditors.
All members of the Audit Committee satisfy the requirements of independence as
set forth in the Audit Committee Policy of the NYSE. The Audit Committee met six
times in 2000. All of the members attended at least 75% of the meetings of this
committee. For additional information concerning the Audit Committee, see
"Report of the Audit Committee."
The Compensation Committee determines the compensation of senior management
of the Company and its subsidiaries. Additionally, the Compensation Committee
administers the compensation, stock incentive and benefit plans of the Company.
None of the individuals serving on the Compensation Committee has ever been an
officer or employee of the Company. The Compensation Committee met three times
in 2000. All of the members attended at least 75% of the meetings of this
committee.
The Nominating Committee reviews the qualifications of potential Board
candidates, from whatever source received, and proposes nominations for Board
membership. Nomination of potential Board candidates may be directed to the
Nominating Committee, in care of the Secretary of the Company at the address
stated herein. The Nominating Committee met once in 2000 with all members in
attendance.
COMPENSATION OF DIRECTORS
Directors of the Company are currently compensated on the following basis:
Directors who are not officers or employees of the Company or its
subsidiaries ("Outside Directors") receive a fee of $1,000 for each Board
meeting, a fee of $500 for each Compensation Committee meeting, a fee of $1,500
for each Audit Committee meeting, a fee of $500 for each Nominating Committee
meeting and an annual retainer of $40,000. Outside Directors are not compensated
for the execution of written consents in lieu of Board meetings and committee
meetings. They are reimbursed for travel and lodging expenses incurred in
attending the meetings.
Outside Directors may annually elect to defer their compensation into an
interest-bearing account in the Company's Non-Employee Director Stock Option
Plan, which can subsequently be converted into options for Class A common stock
exercisable at market value or at a discounted price. In 2000, Messrs. Farley,
Hagopian, Lanier, McCormick, Raines, Records, Richey, Rogers and Walton chose to
make such deferrals of compensation, which were converted into options for
9,657, 13,998, 12,072, 13,998,
12
12,072, 12,072, 11,558, 13,998 and 5,556 shares, respectively. All options were
granted at the fair market value of the Class A common stock on the grant date.
Outside Directors are automatically awarded annual non-qualified stock
options of 4,500 shares of Class A common stock. The Board may award
non-qualified stock options on a non-formula basis at such times as it
determines appropriate. Options are priced at the fair market value of the
Class A common stock on the grant date or at a discounted rate not to exceed 25%
of fair market value on the grant date. To date, no discounted stock options
have been granted.
Directors who are officers or employees of the Company or its subsidiaries
waive receipt of all fees, including the annual retainer, for attending Board
meetings and committee meetings. Such directors are reimbursed for travel and
lodging expenses incurred in attending the meetings.
In consideration of services to the Company, upon their retirement, the
Company granted Messrs. Hagopian and McCormick options for 25,000 shares of
Class A common stock each. These options are exercisable at the fair market
value of the Class A common stock on the grant date.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires each director, officer or
individual beneficially owning more than 10% of a registered security of the
Company, to file with the SEC reports of security ownership and reports on
subsequent changes in its ownership of the Company's securities. Reporting
persons are required to furnish the Company with copies of all Section 16(a)
forms filed with the SEC.
Based upon the Company's review of the reports furnished to the Company
pursuant to Section 16 of the Exchange Act, to the best of the Company's
knowledge, all required Section 16(a) filings were timely and correctly made by
reporting persons.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In January 2000, the Company committed to invest up to $5,000,000 in a
limited partnership interest in Halifax Capital Partners, L.P., an investment
partnership. As of Mach 6, 2001, the Company has invested $1,379,089. William L.
Rogers, a current director of the Company, is a general partner in Halifax
Genpar, L.P., the managing director of Halifax Capital Partners, L.P. and has
investment participation in Halifax Capital Partners, L.P. The Company believes
its investment in Halifax Capital Partners, L.P. is carried on in the ordinary
course of business on an arms-length basis.
Effective December 29, 1999, the Company entered into a contractual
relationship with MidFirst Bank whereby the Company will sell financial products
to the customers of MidFirst Bank at certain bank locations in Oklahoma in
exchange for rental payments to MidFirst Bank. As of December 31, 2000, the
Company had offices in 29 branches of MidFirst Bank and had made payments to
MidFirst Bank in the amount of $327,091. George J. Records, Sr., a former
director of the Company, is Chairman of the Board and a stockholder of Midland
Financial Co., the parent holding company of MidFirst Bank. The Company believes
that this relationship was fairly negotiated and will be carried on in the
ordinary course of business on an arms-length basis.
On January 21, 2000 the Company loaned Thomas W. Butch, Senior Vice
President and Chief Marketing Officer, $169,020. The loan proceeds were used for
the exercise of vested stock options of his previous employer. This loan was
part of Mr. Butch's compensation package upon joining the Company in 1999 and is
to be repaid in three equal annual installments beginning January 24, 2001.
Interest on the outstanding balance is due annually and calculated at the
one-month LIBOR rate as fixed by the British Banker's Association. As of
January 3, 2001, Mr. Butch had paid $56,340 of the principal amount of the loan,
in accordance with its terms, with a remaining balance of $112,680.
13
PRINCIPAL STOCKHOLDERS OF THE COMPANY
The following table lists all persons known to be the beneficial owner of
more than five percent of the Company's Class A and Class B common stock as of
March 6, 2001, unless otherwise indicated.
CLASS A CLASS B CLASS A CLASS B
NAME AND ADDRESS (#) (#) % %
---------------- --------- --------- -------- --------
T. Rowe Price Associates, Inc.(1)...................... 3,686,673 5,015,157 8.49% 13.88%
100 E. Pratt Street
Baltimore, MD 21202
Highfields Capital Management LP(2).................... 0 3,973,413 0% 10.99%
200 Clarendon Street,
51st Floor
Boston, MA 02117
Keith A. Tucker(3)..................................... 2,856,732 35,400 6.58% 0.09%
6300 Lamar Avenue
Overland Park, KS 66202
------------------------
(1) These securities are owned by various individuals and institutional
investors [including T. Rowe Price Mid-Cap Growth Fund, Inc. (which owns
2,173,350 shares of Class B common stock, representing 5.4% of the Class B
shares outstanding)] for which T. Rowe Price Associates, Inc. ("Price
Associates") serves as investment adviser with sole power to direct
investments and/or sole power to vote the Class A and Class B shares. For
purposes of the reporting requirements of the Exchange Act, Price Associates
is deemed to be the beneficial owner of such securities; however, Price
Associates expressly disclaims beneficial ownership of such securities.
Information relating to this stockholder is based on the stockholder's
Schedule 13G, Amendment No. 3, dated December 31, 2000 for the Class A
shares and on the stockholder's Schedule 13G, Amendment No. 3, dated
December 31, 2000 for the Class B shares as filed on February 13, 2001.
(2) These shares are owned by (i) Highfields Capital Ltd., Highfields Capital I
LP and Highfields Capital II LP (collectively, the "Funds") (ii) Highfields
Capital Management LP, which serves as investment advisor to the Funds, with
respect to the shares owned by the Funds; (iii) Highfields GP LLC, which
serves as the general partner to Highfields Capital Management LP; and
(iv) Messrs. Richard L. Grubman and Jonathon S. Jacobson who serve as
Managing Members of Highfields GP LLC. Highfields Capital Ltd. has sole
voting and investment discretion with regard to 2,768,397 Class B shares.
Highfields Capital Management LP, Highfields GP LLC, and Messrs. Jacobson
and Grubman, collectively, have sole voting and investment power with
respect to 3,973,413 Class B shares. Information relating to the reporting
persons is based on their Schedule 13G, Amendment No. 2 and Form 13F-HR,
dated as of December 31, 2000 and filed on February 14, 2001.
(3) Includes 1,298,084 shares owned by Mr. Tucker's personal trust that are
subject to presently exercisable Class A stock options, 135,482 shares owned
by Mr. Tucker's children's trust that are subject to presently exercisable
Class A stock options, 36,438 shares of restricted Class A common stock
owned by Mr. Tucker's personal trust and 1,386,728 shares owned by a
personal corporation. Mr. Tucker has sole voting and investment power with
respect to the Class A and Class B shares. Excludes 12,651 Class A shares
and 1,897 Class B shares held in the Company's 401(k) and Thrift Plan as of
January 5, 2001.
14
EXECUTIVE COMPENSATION
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
THE EXCHANGE ACT THAT MIGHT INCORPORATE FUTURE FILINGS BY REFERENCE, INCLUDING
THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING REPORT OF THE
COMPENSATION COMMITTEE SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH
FILINGS, AND SHALL NOT BE DEEMED SOLICITING MATERIAL AS FILED UNDER THE
SECURITIES ACT OR THE EXCHANGE ACT.
REPORT OF THE COMPENSATION COMMITTEE
THE COMPENSATION COMMITTEE
Compensation of officers and senior executives of the Company and its
subsidiaries and affiliates is determined by the Compensation Committee of the
Board of Directors (the "Committee"). The Committee, comprised entirely of
Outside Directors, meets (1) to set annual salaries in advance and bonuses for
the current year of officers and senior executives earning more than $150,000,
(2) to review annual goals and reward outstanding annual performance of
executives, (3) to grant stock options pursuant to the Company's stock option
plans, (4) to establish and certify the achievement of performance goals under
the Company's Management Incentive Plan, (5) to determine the senior executives
eligible to participate in the Company Executive Deferred Compensation Stock
Option Plan and the Supplemental Executive Retirement Plan (the "SERP") and
(6) administer the Company's benefit plans.
In November 2000, the Committee retained William M. Mercer, Inc. to review
certain of its executive compensation policies and practices. The Committee met
on several occasions in 2000 to discuss the salaries, bonuses and other
compensation of the officers and senior executives of the Company, including the
Chairman and Chief Executive Officer.
GENERAL COMPENSATION POLICY
The Company's executive compensation program is designed to: (1) provide
fair compensation to executives based on their performance and contributions to
the Company; (2) provide incentives to attract and retain key executives; and
(3) instill a long-term commitment to the Company through a sense of Company
ownership, all in a manner consistent with stockholder interests.
The executive compensation package has three main components: (1) base
salary, which is reviewed annually, (2) equity compensation consisting of stock
options, and (3) incentive payments under the Company's Management Incentive
Plan, which may be earned annually depending on the Company's achievement of
pre-established performance goals. The Company has an Executive Deferred
Compensation Stock Option Plan and SERP pursuant to which the Committee
designated Messrs. Tucker, Herrmann and Hechler eligible to participate in 2000.
The Executive Deferred Compensation Stock Option Plan permits eligible
executives to defer salary and/or bonus on an annual or quarterly basis into an
interest-bearing account and to subsequently, within a limited time period,
elect to convert all or a portion of their deferred compensation into Company
stock options, exercisable at market value of the common stock on the grant date
or at a discount not to exceed 25%. In addition, this Plan also allows the
Committee, in its sole discretion, to direct that all or any portion of the
incentive payments payable under the Company's Management Incentive Plan be
converted and paid in Class A stock options in lieu of cash. To date, no
discounted stock option awards have been granted.
The Committee set the salary of Keith A. Tucker, Chairman of the Board and
Chief Executive Officer, and approved the salaries of Henry J. Herrmann and
Robert L. Hechler, Company executives who served on the Board of Directors
during the fiscal year. As part of its oversight of the Company's compensation
programs, the Committee also reviewed the salaries paid to certain other
officers of the Company and its subsidiaries.
15
The Committee acknowledges, and has since its inception, that the investment
management and securities industries are highly competitive and that experienced
professionals have significant career mobility. Its members believe that the
ability to attract, retain and provide appropriate incentives for the highest
quality professional personnel is essential to maintain the Company's
competitive position in the investment management and financial services
industries, and thereby provide for the long-term success of the Company.
The Committee believes that competitive levels of cash compensation,
together with equity and other incentive programs are necessary for the
motivation and retention of the Company's executives. During fiscal year 2000,
base salaries for Messrs. Tucker and Hechler were unchanged from the prior year;
Mr. Herrmann's base salary increased by $100,000. Consistent with compensation
practices generally applied in the investment management and financial services
industries with which the Company competes for employees, base salaries for the
senior executives are intended to form a low percentage of total cash
compensation with the major portion of cash compensation intended to be derived
from payments made under the Company Management Incentive Plan, provided, of
course, that the performance goals established under that plan are met.
BASE SALARY
Executive base salaries are based on the Company's performance for the prior
fiscal year and upon a subjective evaluation of each executive's contribution to
that performance. In evaluating overall Company performance, the primary focus
is on the Company's financial performance for the year as measured by net
income, earnings per share and return on assets and stockholders' equity.
EQUITY PARTICIPATION
Stock options are generally granted annually in an effort to link
executives' future compensation to the long-term financial success of the
Company, as measured by stock performance. Options are priced at 100% of the
stock market value on the date of grant. They typically vest in three equal
annual increments, beginning two years from the date of grant. The total number
of options awarded to each executive is discretionary with the Committee but is
generally based on the Company's performance and the executive's salary level.
In addition to stock options, certain executives may, from time to time, be
granted restricted stock under the Company's 1998 Stock Incentive Plan. Any
award of restricted stock will be made by the Committee, which will set the
vesting criteria. Awards are intended to provide incentives to enhance job
performance of certain executives or to induce them to remain with or to become
associated with the Company. During the past fiscal year, no grants of
restricted stock were made to the Company executives. Mr. Tucker had 36,441
shares of restricted stock vest in 2000 which were part of a restricted stock
grant received in 1998. Messrs. Herrmann, Hechler and Butch had 36,667, 30,000
and 2,500 shares of restricted stock vest in 2000, respectively.
INCENTIVE PAYMENTS
Incentive payments for the three senior executives are made under the
Company's Management Incentive Plan upon achievement of pre-established
performance criteria. For the 2000 fiscal year, the Committee set three levels
of overall performance objectives for the Company: threshold, target and
superior.
Corresponding incentive levels for the 2000 fiscal year were assigned to
participants in the plan by the Committee as percentages of base salary. These
incentive levels are tied directly to the achievement of specific levels of
performance objectives. Incentive percentages ranging from a low of 150% of base
salary (the threshold level) to a high of 200% (the superior level) were payable
under the plan to an executive group including the Chief Executive Officer,
Chief Investment Officer and Executive Vice President.
16
However, the Committee reserves the right, in its sole discretion, to reduce
these incentive percentages in an amount ranging from 66% of the applicable
incentive percentage at the threshold level to 25% of the applicable incentive
percentage at the superior level. For the fiscal year ended December 31, 2000,
corporate earnings per share, as measured, exceeded the superior level set by
the Committee. As a result, incentive payments were made under the Management
Incentive Plan in the fourth quarter of 2000 and the first quarter of 2001 for
performance in the fiscal year ended December 31, 2000.
STOCK OPTION PROGRAM
The 1998 Stock Incentive Plan under which options for Company Class A stock
are currently awarded has as its stated purpose attracting and retaining
employees who contribute to the Company's, its subsidiaries' and affiliates'
success and enabling those persons to participate in the long-term success and
growth through an equity interest in the Company. To this end, the Committee
grants non-qualified stock options to officers and key employees at the market
value of the Company's Class A common stock on the date of grant, the size of
the grant being based generally on the current compensation of such officers or
key employees. Decisions regarding stock options are made annually and the
number of options previously awarded to an individual executive officer is not a
substantial consideration in determining the amount of options granted to that
officer in the future. Once an officer has been awarded options and becomes a
part of the stock option program, he or she will typically continue to receive
from year to year stock options related to salary. Stock options may be
exercised using cash or previously-owned stock for payment or through a
simultaneous exercise and sale program. Generally, such stock options first
become exercisable to the extent of one-third of the shares on the second
anniversary of the option grant date and the remaining two-thirds on the third
and fourth anniversary, respectively, of the option grant date.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
During the 2000 fiscal year, Keith A. Tucker, the Company's Chief Executive
Officer, received a base salary of $800,016 which remained unchanged from the
previous year. He was also granted an option to purchase 222,000 shares in
December 2000 as part of the normal compensation awards for the Company's
officers and senior executives. This option grant has an exercise price equal to
the fair market value at the date of grant and vests over a four year period.
Mr. Tucker also received an incentive award of $1,300,000 under the Company's
Management Incentive Plan. This bonus was based on the Company's achievement of
the performance goals established and certified by the Committee. The Committee
awarded $300,000 of this bonus in Class A stock options to Mr. Tucker pursuant
to the Company Executive Deferred Compensation Stock Option Plan.
Mr. Tucker's base salary is not directly related to specific measures of
corporate performance. His base salary is determined by his tenure of service
and his current job responsibilities as well as the relative salaries of his
peers in the investment management and securities industries. In November 2000
the Committee retained William M. Mercer, Inc. to review Mr. Tucker's salary as
compared to his peers in the industry. Any stock options awarded to Mr. Tucker
are also not directly tied to specific measures of corporate performance. Such
awards are generally based on his current compensation and the Company's
performance. As previously mentioned, Mr. Tucker's annual incentive payment is
tied to pre-established performance criteria under the Company's Management
Incentive Plan.
DEDUCTIBILITY OF COMPENSATION
Internal Revenue Code Section 162(m) provides that executive compensation in
excess of $1 million is not deductible unless it is performance based. Base
salary does not qualify as performance-based compensation under Section 162(m).
To the extent readily determinable and as one of the factors in its
consideration of compensation matters, the Committee considers the anticipated
tax treatment to the Company and to the executives of various payments and
benefits. Some types of compensation payments and their deductibility depend
upon the timing of an executive's vesting or exercise of previously granted
17
rights. Further, interpretations and changes in the tax laws and other factors
beyond the Committee's control also affect the deductibility of compensation.
For these and other reasons, the Committee will not necessarily or in all
circumstances limit executive compensation to that deductible under
Section 162(m). The Committee will consider various alternatives to preserving
the deductibility of compensation payments and benefits to the extent reasonably
practicable and to the extent consistent with its other compensation objectives.
To this end, the Committee annually establishes performance criteria under the
Company's Management Incentive Plan which was adopted by the stockholders in
1999 to help ensure the deductibility of incentive compensation.
SUMMARY
The Committee has compared the Company's compensation levels to relevant
publicly available data for the investment management and securities industry
and has found the Company's compensation levels to be competitive. Certain of
these companies are included in the SNL Investment Adviser Index shown in the
Stock Performance Graph which follows. The Company believes it competes for
executive talent with a large number of investment management, securities and
other financial services companies, some of which are privately owned and others
of which have significantly larger market capitalization than the Company. The
Committee's goal is to maintain compensation programs which are competitive
within the investment management and financial services industries. The
Committee believes that the 2000 compensation levels disclosed in this Proxy
Statement are reasonable and appropriate in light of the Company's performance
and believes that the compensation programs of the Company well serve the
interests of the Company's stockholders. The Committee intends to continue to
emphasize programs that it believes positively affect stockholder value.
WADDELL & REED FINANCIAL, INC., COMPENSATION COMMITTEE
2001 Members
James M. Raines, Chairman
Jerry W. Walton
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ending December 31, 2000, none of the Company's
executive officers served on the board of any entities whose directors or
officers serve on the Company's Compensation Committee. No current or past
executive officers of the Company serve on the Committee.
18
REPORT OF THE AUDIT COMMITTEE
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
FILINGS UNDER THE SECURITIES ACT OR THE EXCHANGE ACT THAT MIGHT INCORPORATE
FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE
FOLLOWING REPORT OF THE AUDIT COMMITTEE SHALL NOT BE INCORPORATED BY REFERENCE
INTO ANY SUCH FILINGS, AND SHALL NOT BE DEEMED SOLICITING MATERIAL AS FILED
UNDER THE SECURITIES ACT OR THE EXCHANGE ACT.
On April 26, 2000, the Board initially adopted an Audit Committee Charter
setting out the audit related functions the Audit Committee (the "Committee") is
to perform. A copy of the Charter, as amended on March 6, 2001, is attached to
this Proxy Statement as Appendix B. The functions of the Committee are focused
primarily on three areas:
- The scope and adequacy of the Company's internal controls and financial
reporting processes and the reliability of the Company's financial
statements;
- The independence and performance of the Company's internal and independent
auditors; and
- The Company's compliance with legal and regulatory requirements related to
the filing and disclosure of quarterly and annual financial statements of
the Company.
The directors who serve on the Committee are all "independent" for purposes
of the NYSE listing standards. That is, the Board has determined that no members
on the Committee have a relationship to the Company that may interfere with the
Committee's independence from the Company and its management.
Management is responsible for the adequacy of the Company's financial
statements, internal controls and financial reporting processes. The independent
auditors perform an independent audit of the Company's consolidated financial
statements, express an opinion as to whether those financial statements fairly
present the financial position, results of operations and cash flows of the
Company in accordance with generally accepted auditing standards and issue a
report thereon.
The Audit Committee is responsible for monitoring and overseeing these
processes. The Committee meets with management periodically to consider the
scope and adequacy of the Company's internal controls and the objectivity of its
financial reporting and discusses these matters with the Company's independent
auditors, appropriate Company financial personnel and the internal auditors. The
Committee regularly meets privately with both the independent and internal
auditors, each of which has unrestricted access to the Committee. The Committee
also recommends to the Board the appointment of the independent auditors and
reviews periodically their performance and independence from management. In
addition, the Committee reviews the Company's financial statements and reports
recommendations to the full Board for approval and to authorize action.
In this context, the Committee reviewed the audited consolidated financial
statements and met and held discussions with management and KPMG LLP, the
Company's independent auditors to discuss those financial statements and the
audit related thereto. Management has represented to the Committee that the
Company's consolidated financial statements were prepared in accordance with
generally accepted accounting principles.
The independent auditors also provided the Committee with written
disclosures and the letter required by Independence Standards Board Standard
No. 1, as may be modified or supplemented, which relates to the auditor's
independence from the Company and its related entities, and the Committee
discussed with the independent auditors their independence. The Committee also
discussed with the independent auditors matters required to be discussed by
Statement on Auditing Standards No. 61, as may be modified or supplemented,
which includes among other items, matters related to the conduct of the audit of
the Company's financial statements.
19
Based on the Committee's discussions with management and the independent
auditors, as described above, and upon its review of the representations of
management and the report of the independent auditors, the Committee recommended
to the Board that the Company's audited consolidated financial statements be
included in the annual report on Form 10-K for the fiscal year ended
December 31, 2000, as filed with the SEC.
The Committee also recommended to the Board and the Board has selected KPMG
LLP, subject to stockholder approval, to be employed as the Company's
independent auditors to make the annual audit and to report on, as may be
required, the consolidated financial statements which may be filed by the
Company with the SEC during the ensuing year.
WADDELL & REED FINANCIAL, INC., AUDIT COMMITTEE
2001 Members
William L. Rogers, Chairman,
Jerry W. Walton, Ronald C. Reimer
20
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid to the Chief Executive
Officer and the other four most highly compensated executive officers of the
Company for the three most recent fiscal years.
ANNUAL COMPENSATION LONG TERM COMPENSATION
--------------------------------- -------------------------
SECURITIES
UNDERLYING
RESTRICTED OPTIONS/ ALL OTHER
BONUS STOCK AWARDS SAR COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) ($)(2) $(3) (#) $(4)
--------------------------- -------- --------- ---------- ------------ ---------- ------------
Keith A. Tucker,(1).................. 2000 $800,016 $1,000,000 -- 1,271,995 $383,061
Chairman & Chief 1999 $800,016 $ 400,000 -- 873,186 $351,895
Executive Officer 1998 $800,016 $ 400,000 -- 853,254 $184,082
Henry J. Herrmann,................... 2000 $700,000 $1,150,000 -- 701,648 $292,767
President & Chief 1999 $600,000 $ 300,000 -- 620,435 $273,870
Investment Officer 1998 $600,000 $ 0 $2,530,000 960,201 $141,217
Robert L. Hechler,................... 2000 $500,000 $ 575,000 -- 481,160 $375,940
Executive Vice President 1999 $500,000 $ 250,000 -- 449,114 $238,336
1998 $500,000 $ 100,000 $2,070,000 781,101 $118,924
Robert J. Williams, Jr.,............. 2000 $300,000 $ 247,500 -- 94,743 $ 14,282
Senior Vice President 1999 $300,000 $ 250,000 -- 41,645 $ 12,064
1998 $275,000 $ 125,000 -- 133,200 $ 6,168
Thomas W. Butch,..................... 2000 $320,000 $ 225,000 -- 58,686 $139,093
Senior Vice President 1999 $320,000 $ 250,000 $ 123,750 15,000 $ 118
& Chief Marketing Officer 1998 -- -- -- -- --
------------------------
(1) At year end 2000, Mr. Tucker held 36,438 restricted Class A shares valued at
$1,370,980 (based on a year end closing price of $37.625 per share).
Restrictions on the 145,761 restricted shares, received by Mr. Tucker at the
time of the Company's initial public offering, expire over a four-year
period and 25% of the shares vest annually commencing May 1, 1998. On each
of May 1, 1998, May 1, 1999 and May 1, 2000, 36,441 shares vested. Dividends
on the restricted shares are paid directly to Mr. Tucker at the same rate
dividends are paid on unrestricted shares.
(2) Messrs. Tucker, Herrmann, Hechler, Williams and Butch received $300,000,
$250,000 $202,500 and $75,000, respectively, of their 2000 bonuses in
Class A stock options pursuant to the Company Executive Deferred
Compensation Stock Option Plan. Messrs. Tucker, Herrmann and Hechler
received $400,000, $300,000 and $250,000, respectively, of their 1999
bonuses in Class A stock options pursuant to the Stock Incentive Plan and
$400,000, $600,000 and $400,000, respectively, of their 1998 bonuses in
Class A stock options pursuant to the Executive Deferred Compensation Stock
Option Plan.
(3) The values of the Class A restricted stock awards, made pursuant to the
Stock Incentive Plan, are based on the initial offering price of the
Class A stock on the date of grant for Messrs. Herrmann and Hechler and on
the closing market price of the Class A stock on November 15, 1999 for
Mr. Butch. As of December 31, 2000, Mr. Herrmann held 109,999 shares of
restricted Class A stock, valued at $4,138,712 (based on a year end closing
price of $37.625 per share), Mr. Hechler held 90,000 shares of restricted
Class A stock, valued at $3,386,250 and Mr. Butch held 5,000 shares of
restricted Class A stock, valued at $188,125. The restrictions on the stock
awards granted to Messrs. Herrmann, Hechler and Butch lapse in 33 1/3%
annual increments beginning on March 4, 2000 for Messrs. Herrmann and
Hechler and on November 15, 2000 for Mr. Butch. Dividends on the restricted
shares are paid directly to these individuals at the same rate dividends are
paid on unrestricted shares.
21
(4) Included in the balance are (1) Company contributions to the Company 401(k)
and Thrift Plan, as amended, a funded qualified contribution plan for
Messrs. Tucker, Herrmann, Hechler, Williams and Butch of $6,800 for 2000,
$6,400 for 1999, and $4,800 for 1998; (2) Company contributions to the
Company SERP for Messrs. Tucker, Herrmann and Hechler of $361,201, $277,867
and $358,200, respectively for 2000, $336,846, $252,629 and $210,525,
respectively for 1999, and $174,737, $131,053 and $109,210, respectively for
1998; (3) additional premiums paid on life insurance policies for
Messrs. Tucker, Herrmann, Hechler, Williams and Butch of $2,560, $3,100,
$4,440, $7,482 and $1,308, respectively for 2000, $8,136, $14,841, $21,411,
$118 and $5,664, respectively for 1999, and $2,880, $5,364, $4,914, $0 and
$1,368, respectively, for 1998; (4) payments for estate planning purposes
for Messrs. Tucker, Herrmann and Hechler of $12,500, $5,000 and $6,500,
respectively for 2000; and (5) payment of moving and relocation expenses of
$130,985 in 2000 for Mr. Butch. Additionally, Mr. Tucker's balance includes
interest on prior contributions to the Torchmark Corporation Supplemental
Savings and Investment Plan, an unfunded deferred contribution plan, of $513
for 1999 and $1,665 for 1998.
22
STOCK OPTION GRANT TABLE
The following table sets forth certain information concerning Class A common
stock options granted to the Named Executive Officers during the fiscal year
ending December 31, 2000.
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK
PRICE APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM (1)
------------------------------------------------------------------------------------- -----------------------------
% OF
TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED EXERCISE
UNDERLYING TO OR
OPTIONS EMPLOYEES BASE
GRANTED IN PRICE EXPIRATION
NAME (2)(#) FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
---- ---------- ----------- --------- ---------- ------------- -------------
Keith A. Tucker................... 995,251(3) 16.7% $34.1875 08/02/10 $21,435,816 $54,099,953
222,000(4) 3.7% $ 32.50 12/07/10 $ 4,545,450 $11,471,850
54,744(5) 0.9% $ 32.50 12/05/11 $ 1,263,218 $ 3,291,483
Henry J. Herrmann................. 506,648(3) 8.5% $34.1875 08/02/10 $10,912,235 $27,540,423
195,000(4) 3.3% $ 32.50 12/07/10 $ 3,992,625 $10,076,625
Robert L. Hechler................. 296,540(3) 5.0% $34.1875 08/02/10 $ 6,386,908 $16,119,351
139,000(4) 2.3% $ 32.50 12/07/10 $ 2,846,025 $ 7,182,825
45,620(5) 0.8% $ 32.50 12/05/11 $ 1,052,681 $ 2,742,902
Robert J. Williams, Jr............ 12,791(3) 0.2% $34.1875 08/02/10 $ 275,494 $ 695,294
45,000(4) 0.8% $ 32.50 12/07/10 $ 921,375 $ 2,325,375
36,952(5) 0.6% $ 32.50 12/05/11 $ 852,667 $ 2,221,739
Thomas W. Butch................... 45,000(4) 0.8% $ 32.50 12/07/10 $ 921,375 $ 2,325,375
13,686(5) 0.2% $ 32.50 12/05/11 $ 315,804 $ 822,871
------------------------
(1) Caution is recommended in interpreting the financial significance of these
figures. Potential values are based on the assumption that the Company's
Class A common stock will appreciate 5% or 10% each year, compounded
annually, from the grant date of the option to the end of the option term,
and therefore, the figures are not intended to forecast possible future
appreciation, if any, of the price of the Class A common stock or establish
a present value of the options.
(2) All options granted are exercisable for Class A common stock, and are
non-qualified stock options.
(3) This option is a restoration option granted on August 1, 2000. A restoration
option is an option granted when an optionee exercises a stock option by
making payment with previously owned Company stock. The restoration option
is granted for the number of shares exchanged for payment of the option,
including any tax withholdings. The exercise price for a restoration option
is equal to the market price of the common stock on the date the restoration
option is granted. A restoration option becomes exercisable six months from
the date the original option was exercised and has the same restoration
feature. The restoration option expires ten years and two days from the
grant date of the option.
(4) These options were granted on December 6, 2000 pursuant to the Stock
Incentive Plan with an exercise price equal to the closing price of the
Class A common stock on the grant date. Such options are not exercisable
during the first two years after the grant date and then vest annually in
one-third increments thereafter. These options contain a restoration feature
as described above in footnote 3.
(5) These options were granted on December 6, 2000 pursuant to the Executive
Deferred Compensation Stock Option Plan with an exercise price equal to the
closing price of the Class A common stock on the grant date. Under this
plan, the Compensation Committee has discretion to pay performance-based and
bonus compensation in Company stock options in lieu of cash. These options
vest 10% annually, commencing on the first anniversary of the grant date.
These options contain a restoration feature as described above in footnote
3.
23
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
TABLE
The following table sets forth information concerning Class A common stock
acquired on exercise of stock options during fiscal 2000, any value realized
therein, the number of unexercised options at the end of fiscal 2000
(exercisable and unexercisable) and the value of Class A stock options held at
the end of 2000 by the Named Executive Officers. The "Value Realized" column
reflects the difference between the market price on the date of exercise and the
market price on the date of grant (which establishes the exercise price for the
option) for all options exercised, even though the executive may have actually
received fewer shares as a result of the surrender of shares to pay the exercise
price, or the withholding of shares to cover the tax liability associated with
the option exercise. Accordingly, the "Value Realized" numbers do not
necessarily reflect what the executive might receive, should he choose to sell
the shares acquired by the option exercise, since the market price of the shares
so acquired may at any time be higher or lower than the price on the exercise
date of the option.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR IN-THE-MONEY OPTIONS
END (#) AT FISCAL YEAR END ($)(2)
SHARES --------------------------- ---------------------------
ACQUIRED
ON VALUE
EXERCISE REALIZED
NAME (#)(1) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------- ----------- ----------- ------------- ----------- -------------
Keith A. Tucker............. 1,776,654 $38,799,168 141,951 2,280,001 $3,165,924 $34,311,789
Henry J. Herrmann........... 793,310 $15,289,354 90,569 1,416,108 $2,065,213 $21,868,513
Robert L. Hechler........... 455,219 $ 8,463,310 71,995 1,038,161 $1,640,990 $17,409,515
Robert J. Williams, Jr...... 23,949 $ 624,435 45,030 142,091 $1,011,722 $ 2,884,660
Thomas W. Butch............. 0 $ 0 0 15,000 $ 0 $ 311,876
------------------------
(1) This column reflects the number of shares underlying options exercised in
fiscal year 2000. The actual number of shares received by each executive
after taking into account the shares surrendered to cover the exercise price
and tax liability, if any, were: 781,403 shares by Mr. Tucker, 286,662
shares by Mr. Herrmann, 158,679 shares by Mr. Hechler, and 11,158 shares by
Mr. Williams.
(2) The value of unexercised in-the-money options equals the difference between
the closing price of the Class A common stock at fiscal year end and the
option's exercise price, multiplied by the number of shares underlying the
options. The closing price of the Class A common stock on December 29, 2000
was $37.625.
24
PENSION PLANS
WADDELL & REED FINANCIAL, INC. RETIREMENT INCOME PLAN. This plan is a
tax-qualified, non-contributory pension plan that covers all eligible employees
of the Company who are 21 years of age or older and have one or more years of
credited service. Benefits under the plan are determined by multiplying the
participant's highest earning average in any five consecutive years during the
last ten years of service before retirement, by a percentage equal to 2% for
each year of credited service up to 30 years and by 1% for each additional year
of service in excess of 30 years, for a maximum of 10 additional years, and then
reducing that result by a Social Security offset. Earnings for purposes of the
plan do not include bonuses, commissions (other than for Regional Vice
Presidents, and Division/District Managers), directors' fees, expense
reimbursements, employer contributions to retirement plans, deferred
compensation or any amounts in excess of $170,000 per year (as adjusted).
Benefits under the plan vest 100% after five years. Upon the participant's
retirement, benefits under the plan are payable as an annuity or in a lump sum.
In fiscal year 2000, covered compensation was $170,000 for Messrs. Tucker,
Herrmann, Hechler and Williams. Messrs. Tucker, Herrmann, Hechler and Williams
have 9, 27, 27 and 5 years of service, respectively, under the Company
Retirement Income Plan.
The following table shows the estimated annual retirement benefits that
would be payable to participants in 2000 with varying salary ranges and years of
service. The benefits shown are offset for Social Security deductions and
calculated on the basis of payments for the life of a participant who is
65 years of age.
WADDELL & REED FINANCIAL, INC. RETIREMENT INCOME PLAN*
YEARS OF CREDITED SERVICE
----------------------------------------------------
REMUNERATION 15 20 25 30 35
------------ -------- -------- -------- -------- --------
200,000........................................ $43,000 $57,000 $72,000 $86,000 $93,000
250,000........................................ $43,000 $57,000 $72,000 $86,000 $93,000
300,000........................................ $43,000 $57,000 $72,000 $86,000 $93,000
350,000........................................ $43,000 $57,000 $72,000 $86,000 $93,000
400,000........................................ $43,000 $57,000 $72,000 $86,000 $93,000
500,000........................................ $43,000 $57,000 $72,000 $86,000 $93,000
------------------------
* Benefits paid under a qualified deferred benefit plan which does not operate
in conjunction with a defined benefit supplementary or excess pension award
plan were limited by law in 2000 to $130,000 per year.
25
PERFORMANCE GRAPH
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OR THE EXCHANGE ACT THAT MIGHT
INCORPORATE FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART,
THIS SECTION ENTITLED "PERFORMANCE GRAPH" SHALL NOT BE INCORPORATED BY REFERENCE
INTO ANY FUTURE FILINGS, AND SHALL NOT BE DEEMED SOLICITING MATERIAL OR FILED
UNDER THE SECURITIES ACT OR EXCHANGE ACT.
The following graph compares the cumulative total stockholder return on the
Company's Class A common stock from March 5, 1998 (the date the Company became a
public company) through December 31, 2000, with the cumulative total return of
the Standard & Poor's 500 Stock Index ("S&P 500") and the SNL Investment Adviser
Index. The SNL Investment Adviser Index is a composite of twenty-six publicly
traded asset management companies. The graph assumes the investment of $100 in
the Class A common stock and in each of the two indices on March 5, 1998, with
all dividends being reinvested. The initial public offering price of the
Company's Class A common stock was $15.3333 per share (as adjusted for stock
splits). The stock price performance on the graph is not necessarily an
indication of future price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN FOR THE PERIOD ENDED DECEMBER 31, 2000*
WADDELL & REED FINANCIAL, INC.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
WADDELL & REED SNL INVESTMENT
INDEX VALUE FINANCIAL, INC. S&P 500 ADVISER INDEX
3/5/98 $100.00 $100.00 $100.00
12/31/98 $91.19 $120.18 $87.02
6/30/99 $107.43 $135.05 $100.64
12/31/99 $106.91 $145.47 $95.11
6/30/00 $195.62 $144.85 $123.87
12/31/00 $225.53 $132.22 $151.86
------------------------
* Cumulative Total Return assumes an initial investment of $100 on March 5,
1998 and the reinvestment of all dividends. Fiscal year ended December 31,
2000.
** SNL Investment Adviser Index is prepared by SNL Securities LC,
Charlottesville, Virginia, 804-977-1600.
26
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
COMPANY COMMON STOCK OR OPTIONS BENEFICIALLY OWNED AS OF MARCH 6, 2000(1)
The following table shows certain information about stock ownership of the
directors, director nominees and executive officers of the Company as of
March 6, 2001. As used in this Proxy Statement, "beneficially owned" means the
sole or shared power to vote or direct the voting of a security and/or the sole
or shared power to dispose or direct the disposition of a security.
CLASS A CLASS A CLASS B CLASS B
NAME OF BENEFICIAL OWNER DIRECTLY(2)(5) INDIRECTLY(3)(6) DIRECTLY INDIRECTLY(3)
------------------------ -------------- ---------------- -------- -------------
Thomas W. Butch................................. 7,521 0 0 0
Robert L. Hechler............................... 930,533 0 0 0
Henry J. Herrmann............................... 1,449,136 135,482 0 0
James M. Raines................................. 12,532 0 0 0
Ronald C. Reimer................................ 0 0 0 0
William L. Rogers............................... 34,074 0 0 0
Michael D. Strohm............................... 54,915 0 0 0
John E. Sundeen, Jr............................. 146,721 0 0 0
Keith A. Tucker................................. 0 2,856,732 0 35,400
Jerry W. Walton................................. 4,500 0 0 0
Robert J. Williams, Jr.......................... 105,564 0 0 0
**All Directors, Nominees and Executive Officers
as a group (11 persons)(4).................... 2,745,496 2,992,214 0 35,400
------------------------
(1) No directors, director nominees or executive officers other than Keith A.
Tucker (6.37%), Henry J. Herrmann (3.27%), and Robert L. Hechler (2.12%)
beneficially own 1% or more of the Company's Class A common stock. No
directors, director nominees or executive officers beneficially own 1% or
more of the Company's Class B common stock.
(2) Includes for Thomas W. Butch, 0 shares; for Robert L. Hechler, 519,575
shares; for Henry J. Herrmann, 774,457 shares; for James M. Raines, 9,882
shares; for Ronald C. Reimer, 0 shares; for William L. Rogers, 22,553
shares; for Michael D. Strohm, 50,154 shares; for John E. Sundeen, Jr.,
107,748 shares; for Keith A. Tucker, 0 shares; for Robert J. Williams, Jr.,
88,721 shares; for Jerry W. Walton, 0 shares and for all directors,
executive officers and nominees as a group, 3,006,656 shares, that are
subject to presently exercisable Class A stock options and options
exercisable within 60 days.
(3) Indirect beneficial ownership includes shares (a) owned by the director,
executive officer or spouse as trustee of a trust or executor of an estate,
(b) held in a trust in which the director, executive officer or a family
member living in his home has a beneficial interest, (c) owned by the spouse
or a family member living in a director, executive officer or nominee's
home, or (d) owned by the director or executive officer in a personal
corporation. Indirect beneficial ownership excludes 12,651 Class A shares
and 1,897 Class B shares held for the account of Keith A. Tucker and 96
Class B shares held for the account of Thomas W. Butch in the Company 401(k)
and Thrift Plan as of January 5, 2001.
(4) All directors, nominees and executive officers as a group, beneficially own
12.08% of the Class A common stock and 0.09% of the Class B common stock of
the Company.
(5) Includes unvested shares of restricted Class A common stock granted under
the 1998 Stock Incentive Plan of 36,438 shares for Keith A. Tucker, 109,999
shares for Henry J. Herrmann, 90,000 shares for Robert L. Hechler, and 5,000
shares for Thomas W. Butch.
(6) For Henry J. Herrmann, indirect beneficial ownership includes 135,482 shares
subject to currently exercisable options owned by Mr. Tucker's children's
trust for which Mr. Herrmann serves as a co-trustee. Mr. Herrmann disclaims
beneficial ownership of these shares. For Keith A. Tucker, indirect
beneficial ownership includes 1,298,084 shares owned by a personal trust
that are subject to currently exercisable options and 135,482 shares subject
to currently exercisable options owned by Mr. Tucker's children's trust for
which Mr. Tucker's wife serves as co-trustee. Mr. Tucker disclaims
beneficial ownership as to the shares owned by the children's trust.
27
PROPOSAL NO. 2--MERGER
DESCRIPTION OF THE MERGER
The Board of Directors has determined that it is in the best interests of
the Company and its stockholders to effect the merger which will combine its two
classes of common stock into a single class of common stock with each share
having one vote, and recommends the approval of the merger. The following is a
summary of the material provisions of the merger; it should, however, be read in
conjunction with, and is qualified in its entirety by reference to, the complete
text of the merger agreement which is attached to this Proxy Statement as
Appendix A.
At the annual meeting, the stockholders of the Company will be asked to
consider and act upon a proposal to approve the merger, which would:
- Combine our two classes of common stock into a single class of common
stock by converting all issued shares of our Class B common stock into
shares of our Class A common stock on a one-for-one basis.
- Amend our Certificate of Incorporation to eliminate all references to
Class B common stock as well as provisions relating to our former majority
stockholder, and increase the authorized shares of Class A common stock
from 150,000,000 to 250,000,000 to account for the elimination of the
Class B authorized shares.
- Amend our Bylaws to eliminate all references to Class B common stock as
well as provisions relating to our former majority stockholder, and
facilitate the use of electronic communication technology in stockholder
meetings.
If the merger is approved, each issued share of Class B common stock will be
converted into one share of our Class A common stock without any action on the
part of the holders of Class B common stock. The Class A common stock will
continue to trade on the NYSE under the symbol "WDR."
The merger is subject to the approval of both (1) a majority of the voting
power of the outstanding Class A and Class B common stock as of the record date
voting together as a single class and (2) a majority of the shares of the
Class B common stock as of the record date voting as a separate class.
If the stockholders approve the merger, the Board of Directors currently
intends to file the certificate of merger with the Secretary of State of the
State of Delaware as soon as practicable following approval. The merger will be
effective immediately upon acceptance of the filing by the Delaware Secretary of
State. Although the Board of Directors currently intends to file the certificate
of merger if the stockholders approve the merger at the annual meeting, the
Board of Directors reserves the right to abandon the merger and not file the
certificate of merger even if stockholders approve the merger. Although the
Board does not currently anticipate exercising its right to abandon the merger
nor does it contemplate any specific events that would trigger the abandonment
of the merger, the Board will defer or abandon the merger if, in its business
judgment, adverse market conditions, general economic conditions or other
developments affecting the Company or its securities are such as to make the
conversion of the Class B common stock into Class A common stock and the merger
no longer in the best interests of the Company or its stockholders.
Upon the acceptance of the filing of the certificate of merger, the merger
will become effective, and thereupon each issued share of the Class B common
stock will automatically be reclassified, changed and converted into one share
of Class A common stock. Dissenters' rights of appraisal will not be available
to any stockholder with respect to the merger.
As soon as practicable after the effectiveness of the merger, the Company's
stock transfer agent, EquiServe, will mail to each record holder of Class B
common stock on the effective date a letter of transmittal for use in exchanging
old share certificates for new share certificates. New certificates
28
representing Class A common stock will be issued to record holders of Class B
common stock who deliver properly executed transmittal letters accompanied by
certificates formerly representing shares of Class B common stock.
HOLDERS OF CLASS B COMMON STOCK SHOULD SURRENDER CERTIFICATES PREVIOUSLY
REPRESENTING CLASS B COMMON STOCK ONLY AFTER THEY HAVE RECEIVED A TRANSMITTAL
LETTER, AND THEN ONLY IN ACCORDANCE WITH THE INSTRUCTIONS CONTAINED IN THE
TRANSMITTAL LETTER. Although the Class B common stock certificates will no
longer specify the correct designation of shares after the effective date of the
merger, these certificates may be delivered in connection with a sale of the
shares of Class A common stock represented by the certificates.
HOLDERS OF CLASS A COMMON STOCK DO NOT NEED TO EXCHANGE THEIR STOCK
CERTIFICATES. After the merger, these certificates will continue to represent
the same number of shares of Class A common stock.
29
BACKGROUND AND REASONS FOR THE PROPOSAL
When the existing two-class capital structure was established in
March 1998, the Company believed that the two classes of stock should trade at
approximately the same price and should not cause any particular problems.
However, the Class B common stock has been trading at a discount to the Class A
common stock, even though the Class B common stock has more votes per share. The
average discount for the first three months prior to the public announcement on
December 8, 2000 that the Company intended to proceed with a transaction to
combine the two classes was 4.4%. The Company believes the discount was caused
in part from lower trading volume in the Class B common stock (compared to the
Class A common stock) and the lack of a more active market for both classes led
to irrational price differentials. The Company believes this, in turn, led to a
relatively large short position in the Class A common stock as part of a
sophisticated arbitrage strategy generally involving shorting the Class A common
stock and going long on the Class B common stock in the expectation that the
price gap would eventually close. Despite a logical explanation for the large
short position, it created confusion for investors who thought others were
positioned for the Company's stock to decline (not realizing that the shorts
were also long in the Class B common stock). This led to doubts and therefore
less investors in both classes of the Company's common stock. The average
discount for the two months since the announcement on December 8, 2000 to
February 8, 2001 narrowed to 1.1%.
The table below sets forth, for the periods indicated, the reported high and
low close sale prices of the Company's Class A and Class B common stock, as
reported on the NYSE. On December 8, 2000, the Company announced that it
intended to proceed with the merger transaction and on January 25, 2001, the
Company announced the one-for-one exchange ratio.
CLASS A
MARKET PRICE
2000 1999
----------------------- -----------------------
QUARTER HIGH LOW HIGH LOW
--------------------- -------- -------- -------- --------
1 28.2083 16.6250 15.9167 12.5417
2 34.8125 23.3750 18.2917 13.2500
3 40.0000 29.6250 18.6250 14.7917
4 38.8750 29.9372 18.1250 13.6250
CLASS B
MARKET PRICE
2000 1999
----------------------- -----------------------
QUARTER HIGH LOW HIGH LOW
--------------------- -------- -------- -------- --------
1 26.0000 15.3750 15.6667 12.3750
2 31.7500 21.3750 18.0000 13.2500
3 38.1250 26.9375 18.2083 14.2500
4 37.5000 28.9375 16.7500 13.3333
The Company detected significant confusion among its stockholders, analysts,
broker-dealers, the financial media and other members of the financial community
with respect to the two-class capital structure. The use of different trading
symbols ("WDR" and "WDR.B") for the two classes confused some prospective
investors, as well as broker-dealers executing trades in the common stock. This
confusion was especially prevalent when trading or accessing data electronically
because of the many ways the trading symbols may be depicted. In addition,
analysts often erroneously report the Company's market capitalization for
failure to properly analyze both classes of common stock, and the Company is
spending time and energy correcting information. Establishing a single class of
common stock will allow for easier analysis and
30
valuation of the rights to which stockholders are entitled and may enhance
investor interest in the Company by eliminating investor confusion caused by the
dual-class structure.
The Company also believes that the current two-class capital structure may
have an adverse effect on trading markets for its common stock mainly through
its impact on liquidity. Average daily trading volume for the Class A common
stock and the Class B common stock for the 12 month period ended February 28,
2001 was approximately 288,897 and 55,232 shares, respectively. In addition, the
combination would better align the voting rights of stockholders with the
stockholders' economic interests. Combining the common stock into a single class
should increase liquidity in the trading market for the common stock and will
help voting control reflect the risk of ownership.
The overall result in the Company's view is that the price of both classes
of common stock is depressed. This is harmful to the Company because it inhibits
the Company's ability to make acquisitions using its stock, it inhibits the
Company's ability to retain key employees since options are a significant
portion of compensation, and it inhibits the Company's ability to raise capital
(or raises the cost of that capital). The simplified capital structure should
benefit the Company and its stockholders by improving the market liquidity for
the Company's common stock, increasing appeal to investors and eliminating
confusion within the financial community regarding the current two-class capital
structure. However, we cannot guarantee that the benefits of a simplified
capital structure will be accomplished as rapidly as currently expected, or at
all.
The Board, after considering the potential benefits that it believes will
accrue as a result of implementation of the merger, determined that adoption of
the merger agreement would be in the best interests of the Company and its
stockholders.
BOARD CONSIDERATIONS
The Board evaluated the advantages and opportunities of the merger in light
of certain risks and other considerations associated with the merger, including
the following:
SIMPLIFICATION OF THE CAPITAL STRUCTURE. The Board of Directors believes
that the Company's dual classes of common stock have had negative consequences
on its stock prices and its ability to pursue its long-term business plans. The
existence of the two classes has reduced the Company's flexibility to structure
potential acquisitions and other transactions using common stock. The Board of
Directors believes that the simplification of the capital structure will help to
eliminate these negative effects, better align voting control with the risk of
ownership and make the Company's common stock a more attractive investment.
POTENTIAL IMPROVEMENT OF LIQUIDITY AND INCREASED APPEAL TO INVESTORS. In
establishing a single class of common stock, the Board believes that the merger
may increase the liquidity of the traded shares. In particular, by allowing for
easier analysis and valuation of the rights to which stockholders are entitled,
the Board believes that a larger group of investors may be encouraged to invest
in the Company's stock. The Board believes that the merger may further
potentially enhance investor interest in the Company's common stock by
eliminating possible investor confusion caused by the dual-class structure.
Additionally, the Board believes that the uniform structure of voting rights
after the merger may potentially appeal more to institutional investors. While
the Board believes the merger may increase investor interest in the Company's
stock and therefore improve liquidity, there can be no assurance that this will
occur.
ALIGNMENT OF VOTING RIGHTS WITH EQUITY INTERESTS. The Board believes that
the merger would fully align the voting rights of stockholders with the
stockholders' economic interests. The conversion of Class B common stock, with
five votes per share, into Class A common stock, with one vote per share, will
help voting control reflect the risk of ownership.
31
MARKET PRICE. The average closing market price of the Class A common stock
for the seven trading days before the public announcement that the Company
intended to proceed with the merger represented a premium of 3.0% over the
average closing market price of the Class B common stock for the same period.
CERTAIN EFFECTS OF THE MERGER
As a result of the merger:
BUSINESS AND OPERATIONS. The merger will have no effect on the business or
operations of the Company and its subsidiaries. Immediately following the
merger, the business and operations of the Company, as currently conducted, will
be continued by the Company as the surviving corporation in the merger.
STOCK REPURCHASE PROGRAM. After the merger, the Company may continue
acquiring shares of its common stock from time to time when management deems
market conditions to be favorable to the Company. During 2000, the Company
repurchased 3,322,840 Class A and 1,822,252 Class B shares at an aggregate cost,
including commissions, of $108,416,459 for the year. The average price per share
of these repurchases was $21.05.
EFFECTS ON RELATIVE OWNERSHIP INTEREST AND VOTING POWER. The relative
ownership interest of each holder of common stock will be the same immediately
after the merger as it was immediately prior thereto. The relative voting power
of the holders of Class B common stock will be diluted by 80%.
STOCK OPTION PLANS. The merger will not have a material impact on the
Company's stock option plans or other benefit plans. Outstanding options to
purchase Class A common stock will remain exercisable for the same number of
shares, for the same exercise price and upon the same terms as in effect before
the merger.
RIGHTS AGREEMENT. The merger will not have any impact on the Company's
rights agreement, except for technical amendments to the agreement to eliminate
any references to the Class B common stock.
ACCOUNTING CONSEQUENCES. The merger will not have any effect on earnings
per share or book value per share.
MATERIAL TAX CONSEQUENCES. The Company has received an opinion from
Hughes & Luce LLP, the Company's special counsel, to the effect that on the
basis of the facts, representations and assumptions set forth in the opinion,
for U.S. federal income purposes (1) neither the Company nor its stockholders
will recognize taxable gain or loss upon the conversion of the shares of
Class B common stock into shares of Class A common stock, (2) each stockholder's
aggregate tax basis in the newly issued shares of Class A common stock will be
the same as the aggregate tax basis of the shares of Class B common stock
exchanged, and (3) the holding period of the newly issued shares of Class A
common stock will include the holding period of the shares of Class B common
stock exchanged. This opinion represents the counsel's best legal judgment.
Legal opinions are not binding on the Internal Revenue Service (the "IRS") or
the courts, and there can be no assurance that the IRS or the courts will not
take one or more contrary positions.
The Company believes that the foregoing discussion is a fair and accurate
summary of the material federal income tax consequences to the Company's
stockholders with respect to the merger, based on the current provisions of the
Internal Revenue Code, applicable Treasury Regulations, judicial authority and
administrative rulings and practice. This discussion, however, does not consider
any aspects of state, local or foreign taxation. Legislative, judicial or
administrative changes or interpretations may be forthcoming that could alter or
modify the statements and conclusions set forth herein. Any such changes or
32
interpretations may or may not be retroactive. Stockholders, therefore, are
urged to seek the advice of their own tax counsel on these matters.
TRADING MARKET. Currently, the shares of Class A and Class B common stock
are traded separately on the NYSE. Following the merger, only the Class A common
stock will trade on the NYSE under the symbol "WDR." For the twelve month period
ended February 28, 2001, the average daily trading volume of the Class A common
stock was approximately 288,897 shares and the average daily trading volume for
the Class B common stock was approximately 55,232 shares. Although one of the
reasons underlying the Company's desire for a single class of common stock is
increasing the liquidity and trading efficiency of the Company's common stock,
the Company cannot assure that the liquidity and trading efficiency of the
single class of common stock will increase as a result of the conversion.
EFFECT ON MARKET PRICE. The market price of shares of Class A common stock
following the conversion of the Class B common stock will depend on many
factors, including, among others, the future performance of the Company, general
market conditions and conditions relating to companies in industries similar to
that of the Company. Accordingly, the Company cannot predict the prices at which
the Class A common stock will trade following the adoption of the merger, just
as the Company could not predict the price at which the Class A common stock and
Class B common stock currently trade. On December 7, 2000, the last trading day
prior to the public announcement that the Company intended to proceed with a
transaction, the closing price of the Class A common stock and the Class B
common stock was $33.25 per share and $32.375 per share, respectively, as
reported on the NYSE. On January 24, 2001, the last trading day prior to the
public announcement of the one-for-one exchange ratio, the closing price of the
Class A common stock and the Class B common stock was $34.1875 per share and
$33.875 per share, respectively, as reported on the NYSE.
SECURITIES ACT OF 1933. The conversion of the Class B common stock into
Class A common stock is being made pursuant to an exemption from registration
under Section 3(a)(9) of the Securities Act. Shares of Class A common stock
issued upon effectiveness of the merger, other than any such shares held by
affiliates of the Company within the meaning of the Securities Act, and other
than shares received in respect of restricted shares, may be offered for sale
and sold in the same manner as the existing Class A and Class B common stock
without additional registration under the Securities Act. Affiliates of the
Company and holders of restricted shares will continue to be subject to the
restrictions specified in Rule 144 under the Securities Act.
DESCRIPTION OF THE CLASS A COMMON STOCK
As indicated, the merger will automatically convert each share of Class B
common stock outstanding on the effective date into one share of Class A common
stock. The merger will not alter the terms of the Class A common stock. The
terms of the Class A common stock are set forth in full in the Certificate of
Incorporation attached as Exhibit A to the merger agreement. The following
summary, therefore, should be read in conjunction with, and is qualified in its
entirety by reference to, the full text of the proposed Certificate of
Incorporation.
VOTING. As is currently the case with the Class A common stock, after the
merger each share of Class A common stock will entitle its holder to one vote on
all matters submitted to a vote of the stockholders following the 2001 annual
meeting. The merger will dilute the relative voting power of the holders of the
Class B common stock, because the holders of the Class B common stock currently
have five votes per share. Please read "Proposal No. 2--Merger--Certain Effects
of the Merger--Effects on Relative Ownership Interest and Voting Power."
CONVERTIBILITY. Like the current Class A common stock, after the conversion
the Class A common stock will not be convertible into another class of common
stock or any other security of the Company. The Class B common stock is not
convertible.
33
PREEMPTIVE RIGHTS. Like the existing two classes of common stock, after the
conversion the Class A common stock will not carry any preemptive rights
entitling a holder to acquire any shares or other securities that the Company
may issue, sell or offer for sale.
TRANSFERABILITY; TRADING MARKET. Like the existing two classes of common
stock, the Class A common stock will be freely transferable after the
conversion. Implementation of the merger will not affect the listing of the
Class A common stock on the NYSE.
INCREASE IN AUTHORIZED CLASS A COMMON STOCK. The Certificate of
Incorporation now authorizes a total of 255,000,000 shares, consisting of
5,000,000 shares of preferred stock, $1.00 par value, 150,000,000 shares of
Class A common stock and 100,000,000 shares of Class B common stock. The merger
will not alter the authorized preferred stock or increase the total number of
shares of common stock, but will increase the authorized shares of Class A
common stock from 150,000,000 to 250,000,000 and eliminate the Class B common
stock. After implementation of the merger, approximately 79,524,528 shares of
Class A common stock will be issued and outstanding and 34,950,000 additional
shares of Class A common stock will be reserved for issuance under the Company's
various benefit plans. Approximately 135,525,472 shares of Class A common stock
will, therefore, be available for issuance from time to time thereafter for any
proper corporate purpose, including stock splits, stock dividends, acquisitions,
corporate restructurings, financings and benefit programs. No further action or
authorization by the stockholders will be necessary prior to the issuance of the
additional Class A common stock authorized pursuant to the amended Certificate
of Incorporation unless applicable laws or NYSE regulations would require such
approval in a particular case. However, the Company does not have any
agreements, understandings, arrangements or plans that will result in the
issuance of Class A common stock, except in relation to existing benefit plans
and the rights agreement.
STOCKHOLDER INFORMATION. The Company will deliver to the holders of the
Class A common stock after the merger the same proxy statements, annual reports
and other information and reports as it currently delivers to holders of
Class A common stock and to holders of Class B common stock.
REQUIRED VOTE; RECOMMENDATION OF THE BOARD
The merger is subject to the approval of holders of both (1) a majority of
the combined voting power of the outstanding Class A and Class B common stock as
of the record date voting together as a single class, and (2) a majority of the
Class B common stock as of the record date voting as a separate class.
Abstentions and broker non-votes will be counted for the purpose of establishing
a quorum, and will have the same effect as a vote against the merger.
AFTER CAREFUL CONSIDERATION, THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
FOR THE MERGER.
34
PROPOSAL NO. 3--RATIFICATION OF KPMG LLP AS THE COMPANY'S INDEPENDENT AUDITORS
The Board of Directors, on the unanimous recommendation of the Audit
Committee, has selected KPMG LLP to audit the books, records and accounts of the
Company and its subsidiaries for the 2001 fiscal year. KPMG LLP has served as
the Company's independent auditors since its appointment in 1981.
Representatives of KPMG LLP are expected to be present at the annual meeting to
respond to appropriate questions and will have the opportunity to make a
statement if the representatives desire to do so.
The Audit Committee approved all services provided by KPMG LLP for the
fiscal year ended December 31, 2000. These services included the examination of
the Company's consolidated financial statements and other services related to
filings with the SEC. See "Report of the Audit Committee" for a discussion of
auditor independence.
If the stockholders do not approve the appointment of KPMG LLP, the Board of
Directors will reconsider the selection of independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE COMPANY'S INDEPENDENT
AUDITORS FOR THE 2001 FISCAL YEAR.
AUDIT FEES
The aggregate fees billed for professional services rendered in connection
with the audit of the Company's annual financial statements and the reviews of
the financial statements included in the Company's quarterly reports on
Form 10-Q's for the 2000 fiscal year was $204,500.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
There were no fees billed by KPMG LLP for the 2000 fiscal year in connection
with (1) directly or indirectly operating or supervising the operations of the
Company's information system or managing the Company's local area network, or
(2) designing or implementing a hardware or software system that aggregates
source data underlying the financial statements or generates information that is
significant to the Company's financial statements taken as a whole.
ALL OTHER FEES
The aggregate fees billed by KPMG LLP for all other services rendered were
$475,447. The Audit Committee has considered whether KPMG LLP's independence is
compatible with rendering all other non-audit services during fiscal year 2000.
OTHER MATTERS
OTHER BUSINESS PRESENTED AT ANNUAL MEETING
As of the date of this Proxy Statement, the Board knows of no other business
that may properly be and is likely to be brought before the annual meeting. If a
stockholder proposal that was excluded from this Proxy Statement in accordance
with Rule 14a-8 of the Securities Act is properly brought before the meeting, it
is intended that the proxy holders will use their discretionary authority to
vote the proxies against said proposal. If any other matters should arise at the
annual meeting, shares represented by proxies will be voted at the discretion of
the proxy holders.
35
STOCKHOLDER PROPOSALS FOR 2002 ANNUAL MEETING
In order for a proposal by a stockholder to be presented at an annual
meeting of the Company's stockholders, the proposal must be included in the
related proxy statement and proxy form. In order for a stockholder's proposal to
be included in the proxy statement and proxy form for the annual stockholders'
meeting in 2002, the proposal (1) must be received by the Company at its home
office, 6300 Lamar Avenue, Overland Park, Kansas 66202, Attn: Daniel C. Schulte,
Secretary, on or before November 26, 2001 and (2) must concern a matter that may
be properly considered and acted upon at the annual meeting in accordance with
applicable laws and the Company's bylaws.
WHERE YOU CAN FIND MORE INFORMATION
The Company files reports, proxy statements, and other information with the
SEC. You can read and copy these reports, proxy statements, and other
information concerning the Company at the SEC's public reference room at 450
Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the public reference room. The SEC
maintains an Internet site at HTTP://WWW.SEC.GOV/ that contains reports, proxy
and information statements and other information regarding issuers that file
electronically with the SEC, including the Company. The Class A common stock and
the Class B common stock is quoted on the NYSE. These reports, proxy statements
and other information are also available for inspection at the offices of the
New York Stock Exchange, 20 Broad Street, New York City, New York 10005.
In addition, the Company's annual report on Form 10-K (without exhibits) is
available via the Internet at the Company's website (WWW.WADDELL.COM). If you
would like to request documents from the Company, please do so by April 18, 2001
to receive them before the annual meeting.
You may request a copy of these filings (other than exhibits which are not
specifically incorporated by reference herein) at no cost by writing or
telephoning us at the following address:
Waddell & Reed Financial, Inc.
6300 Lamar Avenue
Overland Park, Kansas 66202
(913) 236-2000
You should rely only on the information contained or incorporated by
reference in this Proxy Statement to vote on the merger agreement. The Company
has not authorized anyone else to provide you with different information. You
should not assume that the information in this Proxy Statement is accurate as of
any date other than March , 2001.
By Order of the Board of Directors
/s/ Daniel C. Schulte
Daniel C. Schulte
VICE PRESIDENT, GENERAL COUNSEL &
SECRETARY
36
APPENDIX A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of February 14, 2001 (the
"Agreement"), by and between Waddell and Reed Financial, Inc., a Delaware
corporation (the "Company"), and WDR Sub, Inc., a Delaware corporation
wholly-owned by the Company ("Sub").
WITNESSETH:
WHEREAS, the Board of Directors of the Company has determined that it is in
the best interests of the Company and its stockholders for the Company to enter
into this Agreement and to effect the merger of Sub with and into the Company,
with the Company as the surviving corporation (the "Merger"), pursuant to the
terms and conditions set out in this Agreement, and to recommend and submit this
Agreement for approval by the Company's stockholders;
WHEREAS, the Board of Directors of Sub has unanimously approved this
Agreement and deems the execution of this Agreement and the consummation of the
Merger to be in the best interests of its stockholder;
WHEREAS, as of the date of this Agreement, the authorized and outstanding
capital stock of the Company is as follows: (1) 250,000,000 shares of common
stock, par value $.01 per share (the "Company Common Stock), consisting of
150,000,000 shares designated Class A Common Stock (the "Class A Common Stock"),
of which 43,383,361 shares are issued and outstanding, and 100,000,000 shares
designated Class B Common Stock (the "Class B Common Stock"), of which
40,139,617 shares are issued and outstanding; and (2) 5,000,000 shares of
preferred stock, par value $1.00 per share, of which 750,000 shares are
designated Series A Junior Participating Preferred Stock, none of which are
issued or outstanding.
WHEREAS, the authorized and outstanding capital stock of Sub consists of 100
shares of common stock, par value $.01 per share (the "Sub Common Stock"), all
of which are issued and outstanding and owned by the Company;
WHEREAS, the Company and Sub are entering into this Agreement to set forth
the terms and conditions of the Merger.
NOW, THEREFORE, in consideration of the mutual promises herein contained and
intending to be legally bound, the parties hereto agree as follows:
1. MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 1.3 below),
Sub shall be merged with and into the Company under the terms of this Agreement
and in accordance with the provisions of the Delaware General Corporation Law
("Delaware Law"), and the separate existence of Sub shall cease and the Company
shall continue as the surviving corporation (the "Surviving Corporation").
1.2 EFFECTS OF THE MERGER.
a. GENERALLY. The Merger shall have the effects as provided by
Delaware Law and other applicable law.
b. CERTIFICATE OF INCORPORATION AND BYLAWS. The certificate of
incorporation of the Company as in effect immediately prior to the Effective
Time shall be the certificate of incorporation of the Surviving Corporation,
except that the certificate of incorporation shall, as a result of the
Merger, be amended and restated as set forth in the form amended and
restated certificate of incorporation attached to this Agreement as
EXHIBIT A (the "Charter"). The bylaws of the Company as in effect
immediately prior to the Effective Time shall be the bylaws of the Surviving
Corporation, except that the bylaws shall, as a result of the Merger, be
amended and restated as set forth in the form amended and restated bylaws
attached to this Agreement as EXHIBIT B (the "Bylaws").
c. BOARD OF DIRECTORS; OFFICERS. At the Effective Time, the Board of
Directors of the Surviving Corporation shall be identical to the Board of
Directors of the Company and the officers of the Surviving Corporation shall
be identical to the officers of the Company, in each case until their
respective successors have been duly elected or appointed and qualified and
subject to the Charter and Bylaws.
1.3. EFFECTIVE TIME. As soon as practicable following the satisfaction or
waiver of the conditions set forth in Article 3 of this Agreement, the parties
shall file with the Secretary of State of the State of Delaware a certificate of
merger (the "Certificate of Merger") executed in accordance with the relevant
provisions of Delaware Law. The Merger shall become effective at such time as
the Certificate of Merger is duly filed with the Secretary of State of the State
of Delaware, or at such other time as is permissible in accordance with Delaware
Law and as the Company and Sub shall agree and as specified in the Certificate
of Merger (the time the Merger becomes effective being the "Effective Time").
2. CONVERSION OF STOCK; TERMINATION OF CONVERTIBLE SECURITIES
2.1 CONVERSION OF CLASS A COMMON STOCK. At the Effective Time, each share
of issued Class A Common Stock, along with the right (a "Right") attached to
such share pursuant to that certain Rights Agreement, dated as of April 28,
1999, between the Company and First Chicago Trust Company of New York, a New
York trust company (the "Rights Agent"), as amended by that certain First
Amendment to Rights Agreement, dated as of February 14, 2001, between the
Company and the Rights Agent (the "Rights Agreement"), shall, by virtue of the
Merger and without any action on the part of the holder thereof, remain one
fully paid and validly issued, non-assessable share of Class A Common Stock of
the Surviving Corporation and shall retain the Right attached to such share
pursuant to the Rights Agreement.
2.2 CONVERSION OF CLASS B COMMON STOCK. At the Effective Time, each issued
share of Class B Common Stock shall, by virtue of the Merger and without any
action on the part of the holder thereof, become and be converted into one fully
paid and validly issued, non-assessable share of Class A Common Stock (a
"Converted Share"). Simultaneously, upon the conversion of each share of
Class B Common Stock into a Converted Share, the Right attached to such share of
Class B Common Stock under the Rights Agreement shall be cancelled, and a new
Right shall be issued for each Converted Share in accordance with Section 3(c)
of the Rights Agreement (except that the legend referred to therein shall only
be required to be borne by a new certificate issued for such Converted Share).
2.3 CANCELLATION OF SUB COMMON STOCK. At the Effective Time, each share of
Sub Common Stock issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be canceled and extinguished without any payment or other consideration
made with respect thereto.
2.4 EXCHANGE OF CERTIFICATES.
a. Prior to the Effective Time, the Company shall appoint an exchange
agent (the "Exchange Agent"), which may be the Company's stock transfer
agent, to act as the Company's agent for the issuance of Class A Common
Stock to holders of Class B Common Stock in the Merger.
b. As soon as practicable after the Effective Time, the Exchange Agent
shall mail to each holder of record of a certificate or certificates, which
immediately prior to the Effective Time represented outstanding shares of
Class B Common Stock, a letter of transmittal (which will specify that
delivery will be effected, and risk of loss and title to such certificates
will pass, only upon proper delivery of such certificates to the Exchange
Agent and shall be in such form and have such other provisions as the
Exchange Agent may reasonable specify), and instructions for use in
effecting the surrender of the certificates representing such shares of
Class B Common Stock, in exchange for the shares of Class A Common Stock
payable as a result of the Merger. Upon surrender to the Exchange Agent of a
certificate or certificates formerly representing shares of Class B Common
Stock and acceptance thereof by the Exchange Agent, the holder thereof shall
be entitled to receive either a
2
certificate or certificates representing the shares of Class A Common into
which such shares of Class B Common Stock, formerly represented by such
surrendered certificate or certificates, shall have been converted at the
Effective Time pursuant to the Merger. The Exchange Agent shall accept such
certificates upon compliance with such reasonable terms and conditions as
the Exchange Agent may impose to effect an orderly exchange thereof in
accordance with normal exchange practices. After the Effective Time, there
shall be no further transfer on the records of the Company or its transfer
agent of certificates representing shares of Class B Common Stock and if
such certificates are presented to the Company for transfer, they shall be
canceled against delivery of certificates representing shares of Class A
Common Stock allocable to the shares of Class B Common Stock represented by
such certificate or certificates. If any certificate representing shares of
Class A Common Stock is to be issued to a name other than that in which the
certificate for the Class B Common Stock surrendered for exchange is
registered, it shall be a condition of such exchange that the certificate so
surrendered shall be properly endorsed, with signature guaranteed, or
otherwise in proper form for transfer and that the person requesting such
exchange shall pay to the Company, or its transfer agent, any transfer or
other taxes required by reason of the issuance of certificates in, or
payment of cash to, a name other than that of the registered holder of the
certificate surrendered, or establish to the satisfaction of the Company or
its transfer agent that such tax has been paid or is not applicable.
c. After the Effective Time and until surrendered as set forth in this
Section 2.4, certificates theretofore representing shares of Class B Common
Stock shall be deemed for all purposes as evidencing ownership of the number
of shares of Class A Common Stock into which such shares shall have been
converted by virtue of the Merger and the Rights attaching thereto pursuant
to the Rights Agreement (as described in Section 2.2 of this Agreement).
d. The Company and the Exchange Agent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement
to any holder of shares of Class B Common Stock such amounts as the Company
or the Exchange Agent is required to deduct and withhold with respect to the
making of such payment under the United States Internal Revenue Code of
1986, as amended (the "Code"), or any provision of state, local or foreign
tax law applicable to the making of such payment. To the extent that amounts
are so withheld by the Company or the Exchange Agent, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to
the holders of the shares of Class B Common Stock in respect of which such
deduction and withholding was made by the Company or the Exchange Agent.
e. No party to this Agreement shall be liable to any person or entity
in respect of any shares or amounts paid or delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
f. In the event any certificate or certificates formerly representing
shares of Class B Common Stock shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
certificate or certificates to be lost, stolen or destroyed, and if required
by the Surviving Corporation and the Exchange Agent, the posting by such
person of a bond in such amount as the Surviving Corporation may reasonably
require as indemnity against any claim that may be made against it with
respect to such certificate, the Exchange Agent will issue in exchange for
such lost, stolen or destroyed certificate the consideration deliverable in
respect thereof as determined in accordance with this Article 2.
3
3. CONDITIONS.
The obligations of the parties hereto to consummate the Merger are subject
to the satisfaction of each of the following conditions:
3.1 STOCKHOLDER APPROVAL. This Agreement and the Merger contemplated
hereby shall have been duly approved by a majority of the voting power of the
outstanding shares of Class A Common Stock and Class B Common Stock voting
together as one class and by a majority of the outstanding shares of Class B
Common Stock voting as a separate Class. In addition, this Agreement and the
Merger shall have been duly approved and adopted by the Company, as the sole
holder of Sub Common Stock.
3.2 NO INJUNCTION OR PROCEEDING. No preliminary or permanent injunction,
temporary restraining order or other decree of a court, legislature or other
agency or instrumentality of federal, state or local government (a "Governmental
Entity") shall be in effect, no statute, rule or regulation shall have been
enacted by a Governmental Entity and no action, suit or proceeding by any
Governmental Entity shall have been instituted or threatened, which prohibits or
materially challenges the consummation of the Merger.
3.3 OTHER APPROVALS. All other filings, consents and approvals and the
satisfaction of all other requirements that are necessary, in the opinion of the
Company, for the consummation of the Merger and other transactions contemplated
by this Agreement shall have been obtained.
3.4 APPROVAL OF NYSE. The New York Stock Exchange shall have approved the
listing of the additional shares of Class A Common Stock issuable pursuant to
Section 2.2 of this Agreement.
4. TERMINATION; AMENDMENT
4.1 TERMINATION OF AGREEMENT. This Agreement may be terminated by the
Company at any time before the Effective Time if for any reason consummation of
the Merger is inadvisable in the sole discretion of its Board of Directors. Such
termination shall be effected by written notice by the Company to Sub. Upon the
giving of such notice, this Agreement shall be terminated and there shall be no
liability hereunder or on account of such termination on the part of the Company
or Sub or the directors, officers, employees, agents or stockholders of any of
them.
4.2 AMENDMENT. This Agreement may be amended or modified at any time by
mutual written agreement of the parties (a) in any respect prior to the approval
hereof by the stockholders of the Company entitled to vote hereon, and (b) in
any respect subsequent to such approval, provided that any such amendment or
modification subsequent to such approval shall not (i) change the method of
converting shares of Class B Common Stock into shares of Class A Common Stock,
(ii) alter or change any provision of the Charter or Bylaws of the Surviving
Corporation that would require the approval of stockholders, or (iii) otherwise
materially adversely affect the stockholders of the Company.
5. MISCELLANEOUS
5.1 SUCCESSORS. This Agreement shall be binding on the successors of the
Company and Sub.
5.2 COUNTERPARTS. This Agreement may be executed in one or more
counterparts.
5.3 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to the
conflicts of laws principles thereof.
5.4 NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement is intended to
confer upon any person or entity not a party to this Agreement any rights or
remedies under or by reason of this Agreement.
4
IN WITNESS WHEREOF, the Boards of Directors of the parties hereto have
approved this Agreement and the duly authorized officers of each have executed
this Agreement on their behalf as of the date first above written.
WADDELL & REED FINANCIAL, INC.
By: /s/ KEITH A. TUCKER
-----------------------------------------
Name: Keith A. Tucker
Title: Chairman of the Board and CEO
WDR SUB, INC.
By: /s/ ROBERT L. HECHLER
-----------------------------------------
Name: Robert L. Hechler
Title: President
5
EXHIBIT A
FORM OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
WADDELL & REED FINANCIAL, INC.
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
WADDELL & REED FINANCIAL, INC.
Waddell & Reed Financial, Inc., a corporation incorporated by the filing of
its original Certificate of Incorporation with the Secretary of State of the
State of Delaware on December 24, 1981, under the name of LIBFIN Company
desiring to amend and restate its Certificate of Incorporation, does hereby
certify as follows:
1. Said Certificate of Incorporation is hereby amended and restated so as
to read as follows:
FIRST: NAME.
The name of the corporation (which is hereinafter referred to as the
"CORPORATION") is:
WADDELL & REED FINANCIAL, INC.
SECOND: REGISTERED OFFICE AND AGENT.
The address of the Corporation's registered office in the State of Delaware
is Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware, 19801, in
the County of New Castle. The name of the Corporation's registered agent at such
address is The Corporation Trust Company.
THIRD: PURPOSE.
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware.
FOURTH: CAPITAL STOCK.
4.1 AUTHORIZED SHARES. The total number of shares of all classes of stock
which the Corporation shall have authority to issue shall be two hundred
fifty-five million (255,000,000), of which two hundred fifty million
(250,000,000) shares are to be Class A Common Stock, having a par value of one
cent ($0.01) each; and five million (5,000,000) shares are to be Preferred
Stock, having a par value of one dollar ($1.00) each.
4.2 COMMON STOCK.
4.2.1 As used herein, the term "COMMON STOCK" means the Class A Common
Stock.
4.2.2 The holder of each outstanding share of Common Stock shall be
entitled to one vote in person or by proxy for each share on all matters
upon which the stockholders of the Corporation are entitled to vote.
4.2.3 Authority is hereby expressly granted to the Board of Directors
or any duly authorized committee thereof from time to time to issue any
authorized but unissued shares of Common Stock for such consideration and on
such terms as it may determine.
4.2.4 At any meeting of stockholders, the presence in person or by
proxy of the holders of shares entitled to cast a majority of all the votes
which could be cast at such meeting by the holders of all of the outstanding
shares of stock of the Corporation entitled to vote on every matter that is
to be voted on at such meeting shall constitute a quorum.
4.2.5 At every meeting of stockholders, (i) in all matters other than
the election of directors, a majority of the votes which could be cast at
such meeting upon a given question and (ii) in the case of the election of
directors, a plurality of the votes which could be cast at such meeting upon
such election, by such holders who are present in person or by proxy, shall
be necessary, in addition to any vote or other action that may be expressly
required by the provisions of this Certificate of Incorporation, the Bylaws
of the Corporation, or by the law of the State of Delaware, to decide such
question or election, and shall decide such question or election if no such
additional vote or other action is so required.
4.2.6 Subject to the rights of any holders of Preferred Stock to elect
directors as provided in this Certificate of Incorporation, stockholder
action can be taken only at an annual or special meeting of stockholders and
stockholder action may not be taken by written consent in lieu of a meeting.
4.3 PREFERRED STOCK.
4.3.1 Authority is hereby expressly granted to the Board of Directors
from time to time to issue Preferred Stock, for such consideration and on
such terms as it may determine, as Preferred Stock of one or more series and
in connection with the creation of any such series to fix by the resolution
or resolutions providing for the issue of shares thereof the designation,
powers and relative participating, optional, or other special rights of such
series, and the qualifications, limitations, or restrictions thereof. Such
authority of the Board of Directors with respect to each such series shall
include, but not be limited to, the determination of the following:
(a) the distinctive designation of, and the number of shares comprising,
such series, which number may be (except where otherwise provided by
the Board of Directors in creating such series) increased or
decreased (but not below the number of shares thereof then
outstanding) from time to time by like action of the Board of
Directors;
(b) the dividend rate or amount for such series, the conditions and dates
upon which such dividends shall be payable, the relation which such
dividends bear to the dividends payable on any other class or classes
or any other series of any class or classes of stock, and whether
such dividends shall be cumulative, and if so, from which date or
dates for such series;
(c) whether or not the shares of such series shall be subject to
redemption by the Corporation and the times, prices, and other terms
and conditions of such redemption;
(d) whether or not the shares of such series shall be subject to the
operation of a sinking fund or purchase fund to be applied to the
redemption or purchase of such shares and if such a fund be
established, the amount thereof and the terms and provisions relative
to the application thereof;
(e) whether or not the shares of such series shall be convertible into or
exchangeable for shares of any other class or classes, or of any
other series of any class or classes, of stock of the Corporation and
if provision be made for conversion or exchange, the times, prices,
rates, adjustments, and other terms and conditions of such conversion
or exchange;
(f) whether or not the shares of such series shall have voting rights, in
addition to the voting rights provided by law, and if they are to
have such additional voting rights, the extent thereof;
(g) the rights of the shares of such series in the event of any
liquidation, dissolution, or winding up of the Corporation or upon
any distribution of its assets; and
(h) any other powers, preferences, and relative, participating, optional,
or other special rights of the shares of such series, and the
qualifications, limitations, or restrictions thereof, to the full
extent now or hereafter permitted by law and not inconsistent with
the provisions hereof.
4.3.2 All shares of any one series of Preferred Stock shall be
identical in all respects except as to the dates from which dividends
thereon may be cumulative. All series of the Preferred Stock shall rank
equally and be identical in all respects except as otherwise provided in the
resolution or resolutions providing for the issue of any series of Preferred
Stock.
4.3.3 Except as otherwise required by law, Section 4.3.4 hereof, or
provided by a resolution or resolutions of the Board of Directors creating
any series of Preferred Stock, the holders of Common Stock shall have the
exclusive power to vote; and the holders of Preferred Stock shall have no
voting power whatsoever. Except as otherwise provided in such a resolution
or resolutions or in Section 4.3.4
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hereof, the number of authorized shares of the Preferred Stock may be
increased or decreased by the affirmative vote of a majority of the
outstanding shares of capital stock of the Corporation entitled to vote.
4.3.4 DESIGNATION OF THE RIGHTS AND PREFERENCES OF THE SERIES A JUNIOR
PARTICIPATING PREFERRED STOCK. 750,000 shares of the authorized Preferred
Stock are hereby designated Series A Junior Participating Preferred Stock
("Series A Junior Participating Preferred Stock"). The rights and
preferences of the Series A Junior Participating Preferred Stock are as
follows:
(a) DIVIDENDS.
(1) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and
superior to the shares of Series A Junior Participating Preferred
Stock with respect to dividends, the holders of shares of
Series A Junior Participating Preferred Stock shall be entitled
to receive, when, as and if declared by the Board of Directors
out of funds legally available for the purpose, quarterly
dividends payable in cash on the first day of February, May,
August and November in each year (each such date being referred
to herein as a "Quarterly Dividend Payment Date"), commencing on
the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A Junior
Participating Preferred Stock, in an amount per share (rounded to
the nearest cent) equal to the greater of (a) $1.00 or
(b) subject to the provision for adjustment hereinafter set
forth, 100 times the aggregate per share amount of all cash
dividends, and 100 times the aggregate per share amount (payable
in kind) of all non-cash dividends or other distributions other
than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock
since the immediately preceding Quarterly Dividend Payment Date,
or, with respect to the first Quarterly Dividend Payment Date,
since the first issuance of any share or fraction of a share of
Series A Junior Participating Preferred Stock. In the event the
Corporation shall at any time after April 28, 1999 (the "Rights
Declaration Date") (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into
a smaller number of shares, then in each such case the amount to
which holders of shares of Series A Junior Participating
Preferred Stock were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to
such event.
(2) The Corporation shall declare a dividend or distribution on the
Series A Junior Participating Preferred Stock as provided in
Paragraph 4.3.4(a)(1) above immediately after it declares a
dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that, in
the event no dividend or distribution shall have been declared on
the Common Stock during the period between any Quarterly Dividend
Payment Date and the next subsequent Quarterly Dividend Payment
Date, a dividend of $1.00 per share on the Series A Junior
Participating Preferred Stock shall nevertheless be payable on
such subsequent Quarterly Dividend Payment Date.
(3) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Junior Participating Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue
of such shares of Series A Junior Participating Preferred Stock,
unless the date of issue of such shares is prior to the record
date for the first
A-3
Quarterly Dividend Payment Date, in which case dividends on such
shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the
determination of holders of shares of Series A Junior
Participating Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue and
be cumulative from such Quarterly Dividend Payment Date. Accrued
but unpaid dividends shall not bear interest. Dividends paid on
the shares of Series A Junior Participating Preferred Stock in an
amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on
a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the
determination of holders of shares of Series A Junior
Participating Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date
shall be no more than 30 days prior to the date fixed for the
payment thereof.
(b) VOTING RIGHTS. The holders of shares of Series A Junior Participating
Preferred Stock shall have the following voting rights:
(1) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Junior Participating Preferred Stock shall
entitle the holder thereof to 100 votes on all matters submitted
to a vote of the stockholders of the Corporation. In the event
the Corporation shall at any time after the Rights Declaration
Date (i) declare any dividend on the Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the number of
votes per share to which holders of shares of Series A Junior
Participating Preferred Stock were entitled immediately prior to
such event shall be adjusted by multiplying such number by a
fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(2) Except as otherwise provided herein or by law, the holders of
shares of Series A Junior Participating Preferred Stock and the
holders of shares of Common Stock shall vote together as one
class on all matters submitted to a vote of stockholders of the
Corporation.
(3) If at any time dividends on any Series A Junior Participating
Preferred Stock shall be in arrears in an amount equal to six
(6) quarterly dividends thereon, the occurrence of such
contingency shall mark the beginning of a period (herein called a
"default period") which shall extend until such time when all
accrued and unpaid dividends for all previous quarterly dividend
periods and for the current quarterly dividend period on all
shares of Series A Junior Participating Preferred Stock then
outstanding shall have been declared and paid or set apart for
payment. During each default period, all holders of Preferred
Stock (including holders of the Series A Junior Participating
Preferred Stock) with dividends in arrears in an amount equal to
six (6) quarterly dividends thereon, voting as a class,
irrespective of series, shall have the right to elect two
(2) directors.
(4) During any default period, the voting right described in
section 4.3.4(b)(3) of the holders of Series A Junior
Participating Preferred Stock may be exercised initially at a
special meeting called pursuant to section 4.3.4(b)(5) or at any
annual meeting of stockholders, and thereafter at annual meetings
of stockholders, provided that neither such voting right nor the
right of the holders of any other series of Preferred Stock, if
any, to increase, in certain cases, the authorized number of
directors shall be exercised
A-4
unless the holders of ten percent (10%) in number of shares of
Preferred Stock outstanding shall be present in person or by
proxy. The absence of a quorum of the holders of Common Stock
shall not affect the exercise by the holders of Preferred Stock
of such voting right. At any meeting at which the holders of
Preferred Stock shall exercise such voting right initially during
an existing default period, they shall have the right, voting as
a class, to elect directors to fill such vacancies, if any, in
the Board of Directors as may then exist up to two (2) directors
or, if such right is exercised at an annual meeting, to elect two
(2) directors. If the number which may be so elected at any
special meeting does not amount to the required number, the
holders of the Preferred Stock shall have the right to make such
increase in the number of directors as shall be necessary to
permit the election by them of the required number. After the
holders of the Preferred Stock shall have exercised their right
to elect directors in any default period and during the
continuance of such period, the number of directors shall not be
increased or decreased except by vote of the holders of Preferred
Stock as herein provided or pursuant to the rights of any equity
securities ranking senior to or PARI PASSU with the Series A
Junior Participating Preferred Stock.
(5) Unless the holders of Preferred Stock shall, during an existing
default period, have previously exercised their right to elect
directors, the Board of Directors may order, or any stockholder
or stockholders owning in the aggregate not less than ten percent
(10%) of the total number of shares of Preferred Stock
outstanding, irrespective of series, may request, the calling of
a special meeting of the holders of Preferred Stock, which
meeting shall thereupon be called by the President, a
Vice-President or the Secretary of the Corporation. Notice of
such meeting and of any annual meeting at which holders of
Preferred Stock are entitled to vote pursuant to this
section 4.3.4(b)(5) shall be given to each holder of record of
Preferred Stock by mailing a copy of such notice to him at his
last address as the same appears on the books of the Corporation.
Such meeting shall be called for a time not earlier than 20 days
and not later than 60 days after such order or request or in
default of the calling of such meeting within 60 days after such
order or request, such meeting may be called on similar notice by
any stockholder or stockholders owning in the aggregate not less
than ten percent (10%) of the total number of shares of Preferred
Stock outstanding. Notwithstanding the provisions of this
section 4.3.4(b)(5), no such special meeting shall be called
during the period within 60 days immediately preceding the date
fixed for the next annual meeting of the stockholders.
(6) In any default period, the holders of Common Stock, and other
classes of stock of the Corporation if applicable, shall continue
to be entitled to elect the whole number of directors until the
holders of Preferred Stock shall have exercised their right to
elect two (2) directors voting as a class, after the exercise of
which right (x) the directors so elected by the holders of
Preferred Stock shall continue in office until their successors
shall have been elected by such holders or until the expiration
of the default period, and (y) any vacancy in the Board of
Directors may (except as provided in Section 4.3.4(b)(4)) be
filled by vote of a majority of the remaining directors
theretofore elected by the holders of the class of stock which
elected the director whose office shall have become vacant.
References in this Section 4.3.4(b) to directors elected by the
holders of a particular class of stock shall include directors
elected by such directors to fill vacancies as provided in
clause (y) of the foregoing sentence.
(7) Immediately upon the expiration of a default period, (x) the
right of the holders of Preferred Stock as a class to elect
directors shall cease, (y) the term of any directors elected by
the holders of Preferred Stock as a class shall terminate, and
(z) the number
A-5
of directors shall be such number as may be provided for in the
certificate of incorporation or by-laws irrespective of any
increase made pursuant to the provisions of section 4.3.4(b)(4)
(such number being subject, however, to change thereafter in any
manner provided by law or in the certificate of incorporation or
by-laws). Any vacancies in the Board of Directors effected by the
provisions of clauses (y) and (z) in the preceding sentence may
be filled by a majority of the remaining directors.
(8) Except as set forth herein, holders of Series A Junior
Participating Preferred Stock shall have no special voting rights
and their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Stock as set
forth herein) for taking any corporate action.
(c) CERTAIN RESTRICTIONS.
(1) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Participating Preferred Stock as
provided in Section 4.3.4(a) are in arrears, thereafter and until
all accrued and unpaid dividends and distributions, whether or
not declared, on shares of Series A Junior Participating
Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as
to dividends or upon liquidation, dissolution or winding up)
to the Series A Junior Participating Preferred Stock;
(ii) declare or pay dividends on or make any other distributions
on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up)
with the Series A Junior Participating Preferred Stock,
except dividends paid ratably on the Series A Junior
Participating Preferred Stock and all such parity stock on
which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares
are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up)
with the Series A Junior Participating Preferred Stock,
provided that the Corporation may at any time redeem,
purchase or otherwise acquire shares of any such parity
stock in exchange for shares of any stock of the
Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A
Junior Participating Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares
of Series A Junior Participating Preferred Stock, or any
shares of stock ranking on a parity with the Series A
Junior Participating Preferred Stock, except in accordance
with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of
such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates
and other relative rights and preferences of the respective
series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective
series or classes.
(2) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration
any shares of stock of the Corporation unless the Corporation
could, under Section (1) of this 4.3.4(c), purchase or otherwise
acquire such shares at such time and in such manner.
A-6
(d) REACQUIRED SHARES. Any shares of Series A Junior Participating
Preferred Stock purchased or otherwise acquired by the Corporation in
any manner whatsoever shall be retired and cancelled promptly after
the acquisition thereof. All such shares shall upon their
cancellation become authorized but unissued shares of Preferred Stock
and may be reissued as part of a new series of Preferred Stock to be
created by resolution or resolutions of the Board of Directors,
subject to the conditions and restrictions on issuance set forth
herein.
(e) LIQUIDATION, DISSOLUTION OR WINDING UP.
(1) Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the Corporation, no distribution shall be made to
the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Series A Junior Participating
Preferred Stock shall have received an amount equal to $100 per
share of Series A Junior Participating Preferred Stock, plus an
amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment
(the "Series A Liquidation Preference"). Following the payment of
the full amount of the Series A Liquidation Preference, no
additional distributions shall be made to the holders of shares
of Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Common Stock shall have
received an amount per share (the "Common Adjustment") equal to
the quotient obtained by dividing (i) the Series A Liquidation
Preference by (ii) 100 (as appropriately adjusted as set forth in
subparagraph (3) below to reflect such events as stock splits,
stock dividends and recapitalizations with respect to the Common
Stock) (such number in clause (ii), the "Adjustment Number").
Following the payment of the full amount of the Series A
Liquidation Preference and the Common Adjustment in respect of
all outstanding shares of Series A Junior Participating Preferred
Stock and Common Stock, respectively, holders of Series A Junior
Participating Preferred Stock and holders of shares of Common
Stock shall receive their ratable and proportionate share of the
remaining assets to be distributed in the ratio of the Adjustment
Number to 1 with respect to such Preferred Stock and Common
Stock, on a per share basis, respectively.
(2) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation
Preference and the liquidation preferences of all other series of
preferred stock, if any, which rank on a parity with the
Series A Junior Participating Preferred Stock, then such
remaining assets shall be distributed ratably to the holders of
the Series A Junior Participating Preferred Stock and such parity
shares in proportion to their respective liquidation preferences.
In the event, however, that there are not sufficient assets
available to permit payment in full of the Common Adjustment,
then such remaining assets shall be distributed ratably to the
holders of Common Stock.
(3) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable
in shares of Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the Adjustment
Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
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(f) CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter into
any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other
stock or securities, cash and/or any other property, then in any such
case the shares of Series A Junior Participating Preferred Stock
shall at the same time be similarly exchanged or changed in an amount
per share (subject to the provision for adjustment hereinafter set
forth) equal to 100 times the aggregate amount of stock, securities,
cash and/or any other property (payable in kind), as the case may be,
into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the amount set forth
in the preceding sentence with respect to the exchange or change of
shares of Series A Junior Participating Preferred Stock shall be
adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares
of Common Stock that were outstanding immediately prior to such
event.
(g) NO REDEMPTION. The shares of Series A Junior Participating Preferred
Stock shall not be redeemable.
(h) RANKING. The Series A Junior Participating Preferred Stock shall
rank junior to all other series of the Corporation's Preferred Stock
as to the payment of dividends and the distribution of assets, unless
the terms of any such series shall provide otherwise.
(i) AMENDMENT. At any time when any shares of Series A Junior
Participating Preferred Stock are outstanding, the Amended and
Restated Certificate of Incorporation of the Corporation shall not be
amended in any manner which would materially alter or change the
powers, preferences or special rights of the Series A Junior
Participating Preferred Stock so as to affect them adversely without
the affirmative vote of the holders of a majority or more of the
outstanding shares of Series A Junior Participating Preferred Stock,
voting separately as a class.
(j) FRACTIONAL SHARES. Series A Junior Participating Preferred Stock may
be issued in fractions of a share which shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting
rights, receive dividends, participate in distributions and to have
the benefit of all other rights of holders of Series A Junior
Participating Preferred Stock.
4.4 DIVIDENDS. Whenever dividends upon the Preferred Stock are at the time
outstanding and the dividend preference to which such stock is entitled shall
have been paid in full or declared and set apart for payment for all past
dividend periods, and after the provisions for any sinking or purchase fund or
funds for any series of Preferred Stock shall have been complied with, the Board
of Directors may declare and pay dividends on the Common Stock, payable in cash,
stock or otherwise; and the holders of shares of Preferred Stock shall not be
entitled to share therein, subject to the provisions of Section 4.3.4 hereof and
the provisions of the resolution or resolutions creating any series of Preferred
Stock.
4.5 LIQUIDATION. In the event of any liquidation, dissolution, or winding
up of the Corporation or upon the distribution of the assets of the Corporation
remaining, after the payment to the holders of the Preferred Stock of the full
preferential amounts to which they shall be entitled as provided in the
resolution or resolutions creating any series thereof, the remaining assets of
the Corporation shall be divided and distributed among the holders of the Common
Stock ratably, except as may otherwise be provided in any such resolution or
resolutions. Neither the merger or consolidation of the Corporation with another
corporation nor the sale or lease of all or substantially all the assets of the
Corporation shall be deemed to be a liquidation, dissolution, or winding up of
the Corporation or a distribution of its assets.
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4.6 AMENDMENT OF CERTIFICATE OF INCORPORATION. Except as otherwise
provided by law or by this Certificate of Incorporation, and subject to any
rights of the holders of Preferred Stock, the provisions of this Certificate of
Incorporation shall not be modified, revised, altered or amended, repealed or
rescinded in whole or in part, without the approval of a majority of the shares
of the Common Stock entitled to vote.
FIFTH: DIRECTORS.
5.1 STAGGERED BOARD. The Board of Directors shall consist of not less than
seven nor more than 15 persons. Subject to any rights of holders of Preferred
Stock to elect directors under specified circumstances, the exact number of
directors within the minimum and maximum limitations specified in the preceding
sentence shall be fixed from time to time by the Board of Directors pursuant to
a resolution adopted by a majority of the entire Board of Directors. The Board
of Directors shall be divided into three classes, designated as Class I,
Class II and Class III. Each class shall consist initially of four Class I
directors, four Class II directors and two Class III directors. Class I
directors shall be elected initially for a one-year term, Class II directors
initially for a two-year term and Class III directors initially for a three-year
term. At each succeeding annual meeting of stockholders beginning in 1999,
successors to the class of directors whose term expires at that annual meeting
shall be elected for a three-year term. If the number of directors is changed,
any increase or decrease shall be apportioned among the classes so as to
maintain the number of directors in each class as nearly equal as possible, and
any additional director of any class elected to fill a vacancy resulting from an
increase in such class shall hold office for a term that shall coincide with the
remaining term of that class, but in no case shall a decrease in the number of
directors shorten the term of any incumbent director. A director shall hold
office until the annual meeting for the year in which his or her term expires or
until his or her successor shall be elected and shall qualify, subject, however,
to prior death, resignation, retirement, disqualification or removal from
office. Any vacancy on the Board of Directors that results from an increase in
the number of directors shall be filled by a majority of the Board of Directors
then in office, provided that a quorum is present, and any other vacancy
occurring in the Board of Directors shall be filled by a majority of the Board
of Directors then in office, even if less than a quorum or a sole remaining
director. Any director elected to fill a vacancy not resulting from an increase
in the number of directors shall have the same remaining term as that of his or
her predecessor. Notwithstanding the foregoing, whenever the holders of any one
or more classes or series of Preferred Stock issued by the Corporation shall
have the right, voting separately by class or series, to elect directors at an
annual or special meeting of stockholders, the election, term of office, filling
of vacancies and other features of such directorships shall be governed by the
terms of this Certificate of Incorporation applicable thereto, and such
directors so elected shall not be divided into classes pursuant to this Article
Fifth unless expressly provided by such terms.
5.2 ELECTION. No holder of Common Stock shall have the right to exercise
cumulative voting rights. Unless and except to the extent that the Bylaws of the
Corporation shall so require, the election of directors of the Corporation need
not be by written ballot.
5.3 REMOVAL. Subject to the rights of holders of Preferred Stock to elect
directors under specified circumstances, directors may be removed only for cause
and only upon the affirmative vote of holders of at least 80% of the outstanding
shares of stock entitled to vote generally in the election of directors, voting
together as a single class.
SIXTH: BYLAWS.
The Board of Directors is expressly authorized and empowered to make, alter
and repeal the Bylaws of the Corporation, subject to the power of the
stockholders of the Corporation to alter or repeal any Bylaws made by the Board
of Directors.
SEVENTH: PREEMPTIVE RIGHTS.
No holder of Preferred Stock or Common Stock of the Corporation shall have
any preemptive right as such holder (other than such right, if any, as the Board
of Directors in its discretion may by resolution
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determine pursuant to this Article Seventh) to purchase, subscribe for or
otherwise acquire any shares of stock of the Corporation of any class now or
hereafter authorized, or any securities convertible into or exchangeable for any
such shares, or any warrants or any instruments evidencing rights or options to
subscribe for, purchase or otherwise acquire any such shares, whether such
shares, securities, warrants or other instruments are now, or shall hereafter
be, authorized, unissued or issued and thereafter acquired by the Corporation.
EIGHTH:
8.1 ELIMINATION OF CERTAIN LIABILITY OF DIRECTORS.
The directors of the Corporation shall be entitled to the benefits of all
limitations on the liability of directors generally that are now or hereafter
become available under the General Corporation Law of Delaware. Without limiting
the generality of the foregoing, a director of the Corporation shall not be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (a) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(b) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (c) for paying a dividend or approving
a stock repurchase in violation of Section 174 of the Delaware General
Corporation Law, or (d) for any transaction from which the director derived an
improper personal benefit. Any repeal or modification of this Section 8.1 shall
be prospective only, and shall not affect, to the detriment of any director, any
limitation on the personal liability of a director of the Corporation existing
at the time of such repeal or modification.
8.2 INDEMNIFICATION AND INSURANCE.
8.2.1 RIGHT TO INDEMNIFICATION. Each person who was or is made a party
or is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "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 Corporation or is or was serving at the request of the
Corporation as a director or officer of another company, partnership, joint
venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged
action in an official capacity as a director or officer or in any other
capacity while serving as a director or officer shall be indemnified and
held harmless by the Corporation 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 Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including attorneys'
fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or
to be paid in settlement) 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; provided, however, that,
except as provided in Section 8.2.2 hereof, the Corporation shall indemnify
any such person seeking indemnification in connection with a proceeding (or
part thereof) initiated by such person only if such proceeding (or part
thereof) was authorized by the Board of Directors of the Corporation. The
right to indemnification conferred in this Section shall be a contract right
and shall include the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final
disposition; provided, however, that, if the Delaware General Corporation
Law requires, the payment of such expenses incurred by a director or officer
in his or her capacity as a director or officer (and not in any other
capacity in which service was or is rendered by such person while a director
or officer, including, without limitation, service to an employee benefit
plan) in advance of the final disposition of a proceeding, shall be made
only upon delivery to the Corporation of an undertaking, by or on behalf of
such director or officer, to repay all amounts so advanced if it shall
ultimately be determined that such director or officer is not entitled to be
indemnified under this Section or otherwise. The
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Corporation may, by action of its Board of Directors, provide
indemnification to employees and agents of the Corporation with the same
scope and effect as the foregoing indemnification of directors and officers.
8.2.2 RIGHT OF CLAIMANT TO BRING SUIT. If a claim under Section 8.2.1
is not paid in full by the Corporation within thirty days after a written
claim has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount
of the claim and, if successful in whole or in part, the claimant shall be
entitled to be paid also the expense of prosecuting such claim. It shall be
a defense to any such action (other than an action brought to enforce a
claim for expenses incurred in defending any proceeding in advance of its
final disposition where the required undertaking, if any is required, has
been tendered to the Corporation) that the claimant has not met the
standards of conduct which make it permissible under the Delaware General
Corporation Law for the Corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the
claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant
has not met such applicable standard of conduct, shall be a defense to the
action or create a presumption that the claimant has not met the applicable
standard of conduct.
8.2.3 NON-EXCLUSIVITY OF RIGHTS. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Section shall not be exclusive of any
other right which any person may have or hereafter acquire under any
statute, provision of this Certificate of Incorporation, Bylaws, agreement,
vote of stockholders or disinterested directors or otherwise.
8.2.4 INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of
the Corporation or another corporation, partnership, joint venture, trust or
other enterprise against any such expense, liability or loss, whether or not
the Corporation would have the power to indemnify such person against such
expense, liability or loss under the Delaware General Corporation Law.
2. This Amended and Restated Certificate of Incorporation has been duly
adopted by the Board of Directors of the Corporation in accordance with the
provisions of Section 242, of the General Corporation Law of the State of
Delaware and has been duly adopted in accordance with the provisions of the
Certificate of Incorporation of the Corporation heretofore amended.
3. This Amended and Restated Certificate of Incorporation shall become
effective at the time it is filed in the office of the Secretary of State of the
State of Delaware.
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IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this instrument to be signed in its name by its Chairman and
attested by its Secretary.
WADDELL & REED FINANCIAL, INC.
By:
-----------------------------------------
Name: Keith A. Tucker
Title: Chairman of the Board and
Chief Executive Officer
ATTESTED:
-----------------------------------------
Name: Daniel C. Schulte
Title: General Counsel and Secretary
By:
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EXHIBIT B
FORM OF
AMENDED AND RESTATED
BYLAWS OF
WADDELL AND REED FINANCIAL, INC.
AMENDED AND RESTATED BYLAWS
OF
WADDELL & REED FINANCIAL, INC.
EFFECTIVE AS OF APRIL , 2001
ARTICLE I. OFFICES
Section 1. REGISTERED OFFICE:
The registered office shall be established and maintained at the office of
the Corporation Trust Company, in the City of Wilmington, in the County of New
Castle, in the State of Delaware, and said corporation shall be the registered
agent of this corporation in charge thereof.
Section 2. OTHER OFFICES:
The Corporation may have other offices, either within or without the State
of Delaware, at such place or places as the Board of Directors may from time to
time appoint or the business of the Corporation may require. The principal place
of business of the Corporation shall be in Overland Park, Kansas.
ARTICLE II. MEETINGS OF STOCKHOLDERS
Section 1. STOCKHOLDER ACTION:
Any action required or permitted to be taken by the stockholders of the
Corporation must be effected at a duly called annual or special meeting of
stockholders of the Corporation and may not be effected by any consent in
writing by such stockholders. Subject to rights of holders of Preferred Stock to
elect additional directors under specified circumstances, special meetings of
stockholders of the Corporation may be called only by the Board of Directors
pursuant to a resolution approved by a majority of the entire Board of Directors
or the Chairman of the Board, upon not less than ten nor more than sixty days'
written notice.
Section 2. ANNUAL MEETINGS:
Annual meetings of stockholders shall be held at such place, either within
or without the State of Delaware, and at such time and date as the Board of
Directors, by resolution, shall determine and as set forth in the notice of the
meeting. In the event the Board of Directors fails to so determine the time,
date and place of meeting, the annual meeting of stockholders shall be held at
the principal executive offices of the Corporation in Kansas on the last
Wednesday of April. If the date of the annual meeting shall fall upon a legal
holiday, the meeting shall be held on the next succeeding business day. At each
annual meeting, the stockholders entitled to vote shall elect members of a class
of the Board of Directors, and they may transact such other corporate business
as may properly come before the meeting. If the presiding officer at an annual
meeting determines that business was not properly brought before the annual
meeting, the presiding officer shall declare to the meeting that such business
was not properly brought before the meeting and such business shall not be
transacted.
Section 3. VOTING AND PROXIES:
In accordance with the terms of the Certificate of Incorporation and in
accordance with the provisions of these Bylaws each holder of Class A Common
Stock shall be entitled to one vote, in person or by proxy, per share. No proxy
shall be voted after eleven months from its date unless such proxy provides for
a longer period. Such proxy shall be filed with the Secretary of the Corporation
before or at the time of the meeting. Voting at meetings of stockholders need
not be by written ballot unless such is demanded at the meeting before voting
begins by any stockholder. If a vote is taken by written ballot, then each such
ballot shall state the name of the stockholder or proxy voting and such other
information as the chairperson of the meeting deems appropriate, and if
authorized by the Board of Directors, the ballot may be submitted by electronic
transmission in the manner provided by law. All elections for directors shall be
decided by a
plurality of votes cast; all other questions shall be decided by a majority of
votes cast, except as otherwise provided by these Bylaws, the Certificate of
Incorporation or the laws of the State of Delaware.
A complete list of the stockholders entitled to vote at the ensuing
election, arranged in alphabetical order, with the address of each, and the
number of shares held by each, shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours for a period of at least ten days prior to the meeting on a reasonably
accessible electronic network as permitted by law (provided that the information
required to gain access to the list is provided with the notice of the meeting)
or during the ordinary business hours at the principal place of business of the
Corporation. If the meeting is held at a place, the list shall also be produced
and kept at the time and place of the meeting during the whole time thereof, and
may be inspected by any stockholder who is present. If the meeting is held
solely by means of remote communication, then the list shall be open to the
examination of any stockholder during the whole time of the meeting on a
reasonably accessible electronic network, and the information required to access
the list shall be provided with the notice of the meeting.
Section 4. QUORUM:
A majority of the outstanding shares of the Corporation entitled to vote,
represented in person or by proxy, shall constitute a quorum at meetings of
stockholders. In determining whether a quorum is present treasury shares shall
not be counted. If less than a majority of the outstanding shares are
represented, a majority of the shares so represented may adjourn the meeting
from time to time without further notice, but until a quorum is secured no other
business may be transacted. The stockholders present at a duly organized meeting
may continue to transact business until an adjournment notwithstanding the
withdrawal of enough stockholders to leave less than a quorum.
Section 5. NOTICE OF MEETINGS:
Notice, stating the place, if any, date and time of the special or annual
meeting, and the general nature of the business to be considered, shall be given
in writing or by electronic transmission in the manner provided by law
(including, without limitation, as set forth in Article VI, Section 11 of these
Bylaws) to each stockholder entitled to vote thereat at such stockholder's
address as it appears on the records of the Corporation, not less than ten nor
more than sixty days before the date of the meeting. No business shall be
transacted at any special meeting other than that stated in the notice of such
special meeting. No business shall be transacted at any annual meeting other
than that stated in the notice of such annual meeting or brought before the
annual meeting by or at the direction of the Board. A stockholder proposal of
business to be considered at an annual meeting will be included in the notice of
such annual meeting and considered by the stockholders thereat if: (a) such
proposal is delivered, in writing, to the Secretary of the Corporation at the
principal executive offices of the Corporation not less than 120 days in advance
of the first anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting has been changed
by more than 30 days from the date of the previous year's annual meeting,
delivery of such proposal by the stockholder, to be timely, must be so delivered
not earlier than the close of business on the later of: (i) the 120th day prior
to such meeting, or (ii) the 10th day following the day on which public
announcement of the date of such meeting is first made, (b) such proposal is a
proper matter for stockholder action and (c) the stockholder complies with all
requirements of applicable law, including without limitation, the Securities and
Exchange Act of 1934, as amended.
ARTICLE III. DIRECTORS
Section 1. NUMBER, ELECTION AND TERMS:
The business and affairs of the Corporation shall be managed by or under the
direction of a Board of Directors consisting of not less than seven nor more
than 15 persons. Subject to any rights of holders of Preferred Stock to elect
directors under specified circumstances, the exact number of directors within
the minimum and maximum limitations specified in the preceding sentence shall be
fixed from time to time by
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the Board of Directors pursuant to a resolution adopted by a majority of the
entire Board of Directors. The Board of Directors shall be divided into three
classes, designated as Class I, Class II and Class III. Each class shall
consist, as nearly as may be possible, of one-third of the total number of
directors constituting the entire Board of Directors. The initial Board of
Directors elected following the filing of this Certificate of Incorporation
shall consist of four Class I directors, four Class II directors and two
Class III directors. Class I directors shall be elected initially for a one-year
term, Class II directors initially for a two-year term and Class III directors
initially for a three-year term. At each succeeding annual meeting of
stockholders beginning in 1999, successors to the class of directors whose term
expires at that annual meeting shall be elected for a three-year term. If the
number of directors is changed, any increase or decrease shall be apportioned
among the classes so as to maintain the number of directors in each class as
nearly equal as possible, and any additional director of any class elected to
fill a vacancy resulting from an increase in such class shall hold office for a
term that shall coincide with the remaining term of that class, but in no case
shall a decrease in the number of directors shorten the term of any incumbent
director. Directors need not be stockholders.
Section 2. RESIGNATIONS:
Any director, member of a committee or other officer may resign at any time
upon notice given in writing or by electronic transmission, and such resignation
shall take effect at the time of its receipt by the Chief Executive Officer or
Secretary or at such other time as may be specified therein. The acceptance of a
resignation shall not be necessary to make it effective.
Section 3. NEWLY CREATED DIRECTORSHIPS AND VACANCIES:
Subject to the rights of the holders of any series of Preferred Stock then
outstanding, newly created directorships resulting from any increase in the
authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause shall, unless the Board of Directors otherwise determine,
be filled by a majority vote of the directors then in office even if less than a
quorum remain on the Board of Directors, or if all of the directors shall have
been removed, by stockholders with a majority of the outstanding shares of
stock, and directors so chosen shall hold office for a term expiring at the
annual meeting of stockholders at which the term of the class to which they have
been elected expires. No decrease in the number of directors constituting the
Board of Directors shall shorten the term of any incumbent director.
If the office of any member of a committee or other officer becomes vacant,
the directors in office, by a majority vote, may appoint any qualified person to
fill such vacancy, who shall hold office for the unexpired term and until his
successor shall be duly chosen.
Subject to the rights of holders of Preferred Stock to elect directors under
specified circumstances, directors may be removed only for cause and only upon
the affirmative vote of holders of at least 80% of the then outstanding shares
of stock entitled to vote generally in the election of directors.
If the holders of any series of Preferred Stock then outstanding are
entitled to elect one or more directors, these provisions shall not apply, in
respect to the removal of a director or directors so elected, to the vote of the
holders of the outstanding shares of that series and the rights of the holders
of such shares shall be as set out in the Certificate of Designations,
Preferences and Rights for such shares.
Section 4. POWERS:
The Board of Directors shall exercise all the powers of the Corporation
except such as are by law, or by the Certificate of Incorporation of the
Corporation or by these Bylaws conferred upon or reserved to the stockholders.
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Section 5. ELECTION OF COMMITTEE MEMBERS:
At each annual meeting or at any regular meeting of the Board of Directors,
the directors may, by resolution or resolutions passed by a majority of the
whole Board, designate directors to serve as members of the executive committee,
the compensation committee, the finance committee, the nominating committee, and
the audit committee until the next annual meeting of the Board of Directors or
until their successors shall be duly elected and qualified or their earlier
resignation or removal. At any regular or special meeting of the Board of
Directors, the directors may elect additional advisors for these committees.
Such advisors may or may not be members of the Board of Directors and shall
serve until the next annual meeting of the Board of Directors or for the period
of time designated by the Board. The Board of Directors may from time to time
provide for such other committees as may be deemed necessary and assign to such
committees such authority and duties as are appropriate and allowed by Delaware
law.
Section 6. MEETINGS:
The directors may hold their annual meeting for the purpose of organization
and the transaction of business, if a quorum be present, immediately after the
annual meeting of the stockholders; or the time and place of such meeting may be
fixed by resolution of the directors.
Annual meetings of the directors may be held without notice at such places
and times as shall be determined from time to time by resolution of the
directors.
Special meetings of the Board of Directors may be called by the Chief
Executive Officer at any time or by the Secretary on the written request of any
two directors upon at least twelve hours personal notice to each director.
Notice of the time, date and place of such meeting shall be given, orally, in
writing or by electronic transmission (including electronic mail), by the person
or persons calling the meeting. Such special meetings shall be held at such
place or places as may be determined by the Chief Executive Officer or the
directors calling the meeting, and shall be stated in the notice of the call of
the meeting.
Unless otherwise restricted by the Certificate of Incorporation or these
Bylaws, members of the Board of Directors, or any committee designated by the
Board of Directors, may participate in a meeting of the Board of Directors, or
any committee, by means of conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
Section 7. QUORUM:
A majority of the directors shall constitute a quorum for the transaction of
business. If at any meeting of the Board of Directors there shall be less than a
quorum present, a majority of those present may adjourn the meeting from time to
time until a quorum is obtained, and no further notice thereof need be given
other than by announcement at the meeting which shall be so adjourned.
Section 8. COMPENSATION:
Directors shall not receive any stated salary for their services as
directors or as members of committees, except that by resolution of the Board of
Directors, retainer fees, meeting fees, expenses of attendance at meetings and
other benefits and payments may be authorized. Nothing herein contained shall be
construed to preclude any director from serving the Corporation in any other
capacity as an officer, agent or otherwise, and receiving compensation
therefore.
Section 9. ACTION WITHOUT MEETING:
Any action required or permitted to be taken at any meeting of the Board of
Directors, or of any committee thereof, may be taken without a meeting if all
members of the Board or such committee, as the case may be, consent thereto in
writing or by electronic transmission, and the writing or writings or electronic
transmission or transmissions are filed with the minutes of proceedings of the
Board or
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committee, respectively. Such filing shall be in paper form if the minutes are
maintained in paper form and shall be in electronic form if the minutes are
maintained in electronic form.
Section 10. AMENDMENT, REPEAL AND ADOPTION:
Notwithstanding anything contained in these Bylaws to the contrary the
shareholders may only amend or repeal, or adopt any provision inconsistent with
this Article III, with the affirmative vote of the holders of at least 80% of
the shares of the Corporation entitled to vote generally in the election of
directors.
ARTICLE IV. STANDING COMMITTEES
Section 1. EXECUTIVE COMMITTEE:
The executive committee of the Board of Directors shall consist of the
Chairman of the Board, the president, and not less than three nor more than
eight members elected by the directors from their own number. The chairman of
this committee shall be appointed by the Chairman of the Board. The executive
committee in the interim between meetings of the Board of Directors shall
exercise all of the powers of the Board of Directors.
Section 2. COMPENSATION COMMITTEE:
The compensation committee shall consist of not less than two nor more than
eight members. The chairman of this committee shall be appointed by the Chairman
of the Board. The compensation committee shall prescribe the compensation of all
officers having an annual compensation of one hundred fifty thousand dollars
($150,000) or more and administer all of the Corporations benefit and stock
option plans. The compensation of all other officers shall be determined by the
Chief Executive Officer.
Section 3. AUDIT COMMITTEE:
The audit committee shall consist of not less than three nor more than eight
members elected by the directors from among their own number; provided, however,
that a majority of the members of the committee shall be outside directors. The
chairman of this committee shall be elected by the full Board of Directors, or
if the chairman is not so elected by the full Board of Directors or if the
chairman elected by the full Board of Directors is not present at a particular
meeting, the members of the audit committee may designate a chairman by majority
vote of the committee membership in attendance. The audit committee shall
recommend to the Board the firm to be employed by the Corporation as its
external auditor; shall consult with the persons chosen to be the external
auditors with regard to the plan of audit; shall review the fees of the external
auditors for audit and non-audit services; shall review, in consultation with
the external auditors, their report of audit, or proposed report of audit, and
the accompanying management letter, if any; shall review with management and the
external auditor before publication or issuance, the annual financial
statements, and any annual reports to be filed with the Securities and Exchange
Commission; shall consult with the external auditors (periodically, as
appropriate, out of the presence of management) with regard to the adequacy of
the internal auditing and general accounting functions of the Corporation; shall
consult with the internal auditors (periodically, as appropriate, out of the
presence of management) with regard to cooperation of corporate divisions with
the internal auditing and accounting departments and the adequacy of corporate
systems of accounting and controls; shall serve as a communications liaison
between the Board of Directors, the external auditors, and the internal
auditors; and shall perform such other duties not inconsistent with the spirit
and purpose of the committee as are delegated to it by the Board of Directors.
Section 4. FINANCE COMMITTEE:
The Board of Directors may elect from its membership a finance committee of
not less than three nor more than eight members elected by the directors from
among their own number. The chairman of this committee shall be appointed by the
Chairman of the Board. The finance committee shall have special charge and
control of all financial affairs of the Company. The principal functions and
responsibilities of
B-5
the finance committee are to: review and approve investment and loan policies;
review and approve asset-liability management policies; monitor corporate
financial results; recommend corporate financial actions, including dividends
and capital financing. The finance committee shall make recommendations to the
Board of Directors with respect to the terms and provisions of any issue of
securities of the Company, including equity and debt securities, and shall serve
as the pricing committee in connection with any such financing and shall
authorize the execution of such underwriting agreements as may be necessary or
desirable to effectuate such issue.
Section 5. NOMINATING COMMITTEE:
The nominating committee shall consist of all non-employee (outside)
directors of the Company. The chairman of this committee shall be appointed by
the Chairman of the Board. The nominating committee shall meet periodically to
review the qualifications of potential Board candidates from whatever source
received; shall report its findings to the Board and propose nominations for
Board membership for approval by the Board and for submission to stockholders
for approval; and shall review and make recommendations to the Board, where
appropriate, concerning the size of the Board and the frequency of meetings. The
nominating committee shall have and exercise all such power as it shall deem
necessary for the performance of its duties.
Section 6. MEETINGS:
Meetings of the executive committee, the finance committee, the nominating
committee, the compensation committee, and the audit committee shall be held on
call of the Chairman of the Board or any committee member. Meetings may be held
informally, by telephone, or by mail, and it is not necessary that members of
the committee be physically present together in order for a meeting to be held.
The greater of two or one-third of the members of a committee shall constitute a
quorum.
ARTICLE V. OFFICERS
Section 1. OFFICERS:
The officers of the Corporation shall be a President, such Vice-Presidents
as shall from time to time be deemed necessary, a Secretary, a Treasurer, and
such other officers as may be deemed appropriate. A Chairman of the Board and a
Vice Chairman of the Board may also be elected. All such officers shall be
elected by the Board of Directors and shall hold office until their successors
are elected and qualified. None of the officers of the Corporation need be
directors. More than one office may be held by the same person.
Section 2. CHAIRMAN OF THE BOARD:
In the event that there is a Chairman of the Board, he shall preside at all
meetings of the Board of Directors and stockholders. He shall have and perform
such duties as usually devolve upon his office and such other duties as are
prescribed by the Bylaws and by the Board of Directors.
Section 3. VICE CHAIRMAN OF THE BOARD:
The Vice Chairman of the Board shall in the absence or inability to act of
the Chairman of the Board preside at all meetings of the Board of Directors and
stockholders, and exercise and discharge the responsibilities and duties of the
Chairman of the Board. He shall have and perform such other duties as may be
prescribed or assigned by the Board of Directors or the Chairman of the Board.
Section 4. PRESIDENT:
The President shall perform such duties as usually devolve upon his office
and such other duties as are prescribed by these Bylaws, by the Board of
Directors, and by the Chairman. In the absence or inability to act of the
Chairman of the Board and the Vice Chairman of the Board or if the offices of
Chairman of the Board and Vice Chairman of the Board shall be vacant, the
President shall have and exercise all the
B-6
powers and duties of such office. If the Chairman of the Board, Vice Chairman of
the Board or the President is absent from any meeting of the Board of Directors
or stockholders where either was to have presided, the other directors shall
elect one of their number to preside at the meeting.
Section 5. EXECUTIVE VICE PRESIDENT:
The Executive Vice President shall be the chief operating officer of the
Corporation, unless the Board elects a separate Chief Operating Officer, and
shall perform such duties as may be assigned to him from time to time by these
Bylaws, by the Board of Directors, and by the President.
Section 6. VICE PRESIDENTS:
The Vice Presidents shall perform such duties as may be assigned to them
from time to time by these Bylaws, the Board of Directors, the Chairman of the
Board, or the President.
Section 7. TREASURER:
The Treasurer shall have custody of all funds of the Corporation. The
Treasurer shall have and perform such duties as are incident to the office of
Treasurer and such other duties as may from time to time be assigned to him by
the Board of Directors, the Chairman, or the President.
Section 8. SECRETARY:
The Secretary shall keep minutes of all meetings of the stockholders and the
Board of Directors unless otherwise directed by those bodies. The Secretary
shall have custody of the corporate seal, and the Secretary or any Assistant
Secretary shall affix the same to all instruments or papers requiring the seal
of the Corporation. The Secretary, or in his absence, any Assistant Secretary,
shall attend to the giving and serving of all notices of the Corporation. The
Secretary shall perform all the duties incident to the office of Secretary,
subject to the control of the Board of Directors, and shall do and perform such
other duties as may from time to time be assigned by the Board of Directors, the
Chairman, or the President.
Section 9. OTHER OFFICERS AND AGENTS:
The Board of Directors may appoint such other officers and agents as it may
deem advisable, who shall exercise such powers and perform such duties as shall
be determined from time to time by the Board of Directors.
Section 10. CHIEF EXECUTIVE OFFICER:
The Chairman of the Board shall serve as the chief executive officer of the
Corporation. Subject to the control of the Board of Directors, the Chairman of
the Board shall be vested with authority to act for the Corporation, and shall
have general and active management of the business of the Corporation and such
other general powers and duties of supervision and management as usually devolve
upon such office and as may be prescribed from time to time by the Board of
Directors.
Section 11. ELECTION AND TERM:
The officers of the Corporation shall be elected annually by the Board of
Directors at the first meeting held after each annual meeting of stockholders.
Each officer shall hold office at the pleasure of the Board of Directors until
his death, resignation, retirement, or removal. Any officer may be elected by
the Board of Directors at other than annual meetings to serve until the first
meeting of the Board of Directors held after the annual meeting of stockholders
next following his election.
ARTICLE VI. MISCELLANEOUS
Section 1. CERTIFICATES OF STOCK:
A certificate of stock or certificates of stock, signed by the Chairman or
Vice Chairman of the Board, the President or Vice-President, the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant
B-7
Secretary, shall be adopted by the Board of Directors and shall be issued to
each stockholder certifying the number of shares owned by such stockholder in
the Corporation. Any or all of the signatures may be facsimiles.
Section 2. LOST CERTIFICATES:
The Board of Directors may order a new certificate or certificates of stock
to be issued in the place of any certificate or certificates of the Corporation
alleged to have been lost or destroyed, but in every such case the owner of the
lost certificate or certificates shall first cause to be given to the
Corporation or its authorized agent a bond in such sum as said Board may direct,
as indemnity against any loss that the Corporation may incur by reason of such
replacement of the lost certificate or certificates; but the Board of Directors
may, at their discretion refuse to replace any lost certificate of stock save
upon the order of some court having jurisdiction in such matter and may cause
such legend to be inscribed on the new certificate or certificates as in the
Board's discretion may be necessary to prevent loss to the Corporation.
Section 3. TRANSFER OF SHARES:
The shares of stock of the Corporation shall be transferable only upon its
books by the holders thereof in person or by their duly authorized attorneys or
legal representatives, and upon such transfer the old certificates shall be
surrendered to the Corporation by the delivery thereof to the person in charge
of the stock and transfer books, and ledgers, or to the authorized agent of the
Corporation, by whom they shall be canceled, and new certificates shall
thereupon be issued. A record shall be made of each transfer and whenever a
transfer shall be made for collateral security, and not absolutely, it shall be
so expressed in the entry of the stock and transfer books.
The Corporation may decline to register on its stock books transfers of
stock standing in the name of infants, unless (a) the law of the state of which
the infant is a resident relieves the Corporation of all liability therefore in
case the infant or anyone acting for him thereafter elects to rescind such
transfer, or (b) a court having jurisdiction of the infant and the subject
matter enters a valid decree authorizing such transfer.
Section 4. FRACTIONAL SHARES:
No fractional part of a share of stock shall ever be issued by this
Corporation.
Section 5. STOCKHOLDERS RECORD DATE:
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than sixty nor less than ten days before the date of such meeting,
nor more than sixty days prior to any other action. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to adjournment of the meeting; provided, however, that
the Board of Directors may fix a new record date for the adjourned meeting.
Section 6. DIVIDENDS:
Subject to the provisions of the Certificate of Incorporation, the Board of
Directors may, out of funds legally available therefore at any regular or
special meeting, declare dividends upon the capital stock of the Corporation as
and when they deem expedient. Before declaring any dividend there may be set
apart out of any fund of the Corporation available for dividends, such sum or
sums as the directors from time to time in their discretion deem proper for
working capital or to serve as a fund to meet contingencies or for equalizing
dividends or for such other purposes as the directors shall deem conducive to
the interests of
B-8
the Corporation. The Corporation may decline to pay cash dividends to infant
stockholders except where full and valid release may be granted by the infant or
under a decree of court of competent jurisdiction.
Section 7. SEAL:
The corporate seal shall consist of two concentric circles between which
shall be "WADDELL & REED FINANCIAL, INC." with a representation of the Corporate
Logogram in the center.
Section 8. FISCAL YEAR:
The fiscal year of the corporation shall be the calendar year or such other
period as shall be determined by resolution of the Board of Directors.
Section 9. CHECKS:
All checks, drafts or other orders for the payment off money, notes or other
evidences of indebtedness issued in the name of the Corporation shall be signed
by such officer or officers, agent or agents of the Corporation, and in such
manner as shall be determined from time to time by resolution of the Board of
Directors.
Section 10. FORM OF RECORDS: Any records maintained by the Corporation in
the regular course of its business, including its stock ledger, books of account
and minute books, may be kept on or by means of, or be in the form of, diskettes
or any other information storage device or method, provided that the records so
kept can be converted into clearly legible paper form within a reasonable time.
The Corporation shall so convert any records so kept upon the request of any
person entitled to inspect such records pursuant to any provision of the
Delaware General Corporation Law.
Section 11. NOTICE: (a) Except as otherwise specifically provided in these
Bylaws (including, without limitation, the provisions of Article VI,
Section 11(b) below) or required by law, all notices required to be given
pursuant to these Bylaws shall be in writing and may in every instance be
effectively given by hand delivery (including use of a delivery service), by
depositing such notice in the United States mail, postage prepaid, or by sending
such notice by prepaid telegram, telex, overnight express courier, mailgram or
facsimile. Any such notice shall be addressed to the person to whom notice is to
be given at such person's address as it appears on the records of the
Corporation. The notice shall be deemed given (i) in the case of hand delivery,
when received by the person to whom notice is to be given or by any person
accepting such notice on behalf of such person, (ii) in the case of delivery by
mail, upon deposit in the mail, (iii) in the case of delivery by overnight
express courier, when dispatched, and (iv) in the case of delivery via telegram,
telex, mailgram or facsimile, when dispatched.
(b) Without limiting the manner by which notice otherwise may be given
effectively to stockholders, any notice to stockholders given by the Corporation
under any provision of the Delaware General Corporation Law, the Certificate of
Incorporation, or these Bylaws shall be effective if given by a form of
electronic transmission consented to by the stockholder to whom the notice is
given. Any such consent shall be revocable by the stockholder by written notice
to the Corporation. Any such consent shall be deemed revoked if (i) the
Corporation is unable to deliver by electronic transmission two consecutive
notices given by the Corporation in accordance with such consent and (ii) such
inability becomes known to the Secretary or an Assistant Secretary of the
Corporation or to the transfer agent, or other person responsible for the giving
of notice; provided, however, the inadvertent failure to treat such inability as
a revocation shall not invalidate any meeting or other action. Notice given
pursuant to this Article VI, Section 11(b) shall be deemed given: (i) if by
facsimile telecommunication, when directed to a number at which the stockholder
has consented to receive notice; (ii) if by electronic mail, when directed to an
electronic mail address at which the stockholder has consented to receive
notice; (iii) if by a posting on an electronic network together with separate
notice to the stockholder of such specific posting, upon the later of (A) such
posting and (B) the giving of such separate notice; and (iv) if by any other
form of electronic transmission, when directed to the stockholder.
B-9
(c) An affidavit of the Secretary or an Assistant Secretary or of the
transfer agent or other agent of the Corporation that the notice has been given
in writing or by a form of electronic transmission shall, in the absence of
fraud, be prima facie evidence of the facts stated therein.
Section 12. WAIVER OF NOTICE: Whenever notice is required to be given
under any provision of these Bylaws, a written waiver of notice, signed by the
person entitled to notice, or waiver by electronic transmission by such person,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting at the beginning of the meeting to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders, directors or members of a committee of directors need be
specified in any waiver of notice.
ARTICLE VII. AMENDMENTS
Except as otherwise provided in Article III of these Bylaws, these Bylaws
may be altered or repealed and Bylaws may be adopted at any annual meeting of
the stockholders, or at any special meeting thereof if notice of the proposed
alteration or repeal or Bylaw or Bylaws to be adopted is contained in the notice
of such special meeting, by the affirmative vote of a majority of the stock
issued and outstanding and entitled to vote thereat, or without any stockholder
action by the affirmative vote of a majority of the Board of Directors, at any
annual meeting of the Board of Directors, or at a special meeting of the Board
of Directors, if notice of the proposed alteration or repeal, or Bylaw or Bylaws
to be adopted, is contained in the notice of such special meeting.
B-10
APPENDIX B
AUDIT COMMITTEE CHARTER
WADDELL & REED FINANCIAL, INC.
AUDIT COMMITTEE CHARTER
I. PURPOSE AND ROLE
The primary function of the Audit Committee ("Committee") is to assist the
Board of Directors in fulfilling its oversight responsibilities by reviewing in
conjunction with the internal and external auditors of the Corporation: (i) the
financial statements provided by Waddell & Reed Financial, Inc. (the
"Corporation") to the SEC to satisfy its periodic reporting responsibilities
under the Securities Exchange Act of 1934; (ii) the Corporation's systems of
internal controls regarding finance and accounting that management and the Board
have established; and (iii) the Corporation's auditing, accounting and financial
reporting processes generally.
All of the requirements in this Charter are qualified by the understanding
that the role of the Audit Committee is to act in an oversight capacity and is
not intended to imply or require a detailed review of the work performed by the
independent auditors unless specific circumstances are brought to its attention
warranting such a review.
The Audit Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities, and it has direct access to the
independent auditors as well as anyone in the organization. The Audit Committee
has the ability to retain, at the Corporation's expense, special legal,
accounting, or other consultants or experts it deems necessary in the
performance of its duties.
II. COMPOSITION
The Audit Committee shall be comprised of three or more directors as
determined by the Board. All of the members of the Audit Committee must (i) be
free of any relationship to the Corporation that may interfere with the exercise
of their independence from management and the Corporation, and (ii) not be
subject to any of the other restrictions on independence set forth in
Rule 303.01(B)(3) of the New York Stock Exchange ("NYSE").
All of the members of the Committee shall possess a basic understanding of
financial statements, including a company's balance sheet, income statement and
cash flow statement or be able to do so within a reasonable period of time after
his or her appointment to the Committee. At least one member of the Committee
shall have accounting or related financial management expertise, as the Board,
in its business judgement, interprets such qualification.
The members of the Committee shall be elected by the Board at the annual or
at any regular meeting of the Board. The members of the Committee shall serve
until their successors shall be duly elected and qualified or until their
earlier resignation or removal. If a Chair is not elected by the full Board or
is not present at a particular meeting, the members of the Committee may
designate a Chair by majority vote of the Committee membership in attendance.
III. MEETINGS
The Committee shall meet at least two times annually, or more frequently as
circumstances dictate. The Committee should meet at least annually with
management, the manager of the internal auditing department, the independent
auditors, and as a Committee, in separate executive sessions, to discuss any
matters that the Committee or each of these groups believe should be discussed
privately. In addition, the Committee, or at least its Chair, should meet with
the independent auditors and financial management quarterly either in person or
telephonically, to review the Corporation's interim financial statements
consistent with Section IV.3 below. The Committee Chair shall prepare and/or
approve an agenda in advance of each meeting.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall perform
the following:
DOCUMENTS/REPORTS REVIEW
1. The Committee has adopted this Charter following its approval by the
Board of Directors based upon the recommendation of the Committee. The
Committee shall review, and reassess the adequacy of, this Charter at
least annually. The Charter shall be included as an appendix to the
Corporation's proxy statement for its annual meeting of stockholders at
least once every three years.
2. Review and discuss with management and the independent auditors the
Corporation's annual audited financial statements prior to filing or
distribution. This review and discussion should encompass the results of
the audit, including significant issues regarding accounting principles,
practices and judgments.
3. Review with financial management and the independent auditors the
quarterly financial results prior to the earlier of the release of
earnings or the filing of the Quarterly Report on Form 10-Q. The Chair
of the Audit Committee may represent the entire Committee for purposes
of this review. In connection with such review, the Audit Committee
should ensure that the communications and discussions with the
independent auditors contemplated by Statement of Auditing Standards
No. 71 (as may be modified or amended) have been received and held.
INDEPENDENT ACCOUNTANTS
4. Recommend to the Board of Directors the selection of the independent
auditors, considering independence and effectiveness and approve the
fees and other compensation to be paid to the independent accountants.
5. Require that the independent auditors for the Corporation understand
that they are ultimately accountable to the Committee and the Board of
Directors and that the Committee and Board of Directors have the
ultimate authority and responsibility to select, evaluate and, where
appropriate, replace the independent accountants or to nominate the
independent auditor to be proposed for shareholder approval in any proxy
statement.
6. Require that the independent auditors submit on a periodic basis (but at
least annually) to the Audit Committee a formal written statement in
accordance with Independence Standards Board Statement No. 1 (as may be
modified or amended) delineating all relationships between them and the
Corporation and actively engage in a dialogue with the Committee with
respect to any disclosed relationships or services that may impact their
objectivity and independence and recommend that the Board of Directors
take appropriate action in response to the report of the independent
auditors to satisfy itself of the outside auditor's independence.
7. Review the performance of the independent auditors and approve any
proposed discharge of the independent auditors when circumstances
warrant.
8. In conjunction with management and the independent auditors, review the
independent auditors' audit plan--discussing and questioning the
adequacy, scope, limitations, staffing, reliance upon management, and
internal audit and general audit approach of the audit plan.
FINANCIAL REPORTING PROCESSES
9. In consultation with management, the independent auditors, and the
manager of the internal auditing department, consider the integrity of
the Corporation's financial reporting processes and controls. Discuss
significant financial reporting risk exposures and the steps management
has
2
taken to monitor, control, and report such exposures. Review significant
findings prepared by the independent auditors and the internal auditing
department together with management's responses.
10. Prior to releasing the year-end earnings, discuss the results of the
audit with the independent auditors.
11. Discuss with the independent auditors the matters contemplated by
Statement of Auditing Standards No. 61 (as may be modified or amended),
including, without limitation, the independent accountant's judgments
about the quality, not just the acceptability, of the Corporation's
accounting principles as applied in its financial reporting.
12. Based on, among other things, the review and discussions referred to in
subsections 2, 6 and 11 of this Section IV, recommend to the Board of
Directors that the audited financial statements be included in the
Corporation's Annual Report on Form 10-K.
13. Prepare a report of the Committee to be included in the Corporation's
proxy statement for its Annual Meeting of Stockholders satisfying the
requirements of Item 7 of Schedule 14A and Item 306 of Regulation S-K.
MISCELLANEOUS
14. Nothing in this Charter will, or will be deemed to, decrease or modify
in any manner adverse to any member of the Audit Committee, such
member's right to rely on statements and certifications made by the
Corporation's officers, employees, agents, counsel, experts and
auditors.
15. Nothing in this Charter will, or will be deemed to, adversely affect in
any manner the rights of members of the Audit Committee to
indemnification and advancement of expenses under the Certificate of
Incorporation or Bylaws of the Corporation or under any contract,
agreement, arrangement or understanding benefiting such member.
16. Notwithstanding any other provision of this Charter, no provision of
this Charter will, except to the extent required by applicable law, be
construed to create any duty, liability or obligation on the part of the
Audit Committee or any of its members.
3
WADDELL & REED FINANCIAL, INC.
PROXY
FOR THE ANNUAL MEETING OF THE STOCKHOLDERS OF
WADDELL & REED FINANCIAL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Keith A. Tucker and Henry J. Herrmann,
jointly and severally with full power of substitution, to represent and vote,
as represented on the reverse side, all shares of Company Class A and Class B
common stock which the undersigned holds of record and is entitled to vote at
the Annual Meeting of Stockholders to be held at the executive offices of the
Company, 6300 Lamar Avenue, Overland Park, Kansas 66202 on the 25th day of
April 2001 at 10:00 a.m. (CDT), or any adjournment thereof. All shares
votable by the undersigned, including shares held of record by agents or
trustees for the undersigned as a participant in the Waddell & Reed
Financial, Inc. 401(k) and Thrift Plan, Torchmark Corporation Savings and
Investment Plan, Liberty National Life Insurance Company 401(k) Plan and the
Profit Sharing and Retirement Plan of Liberty National Life Insurance
Company, will be voted in the same manner specified and in the discretion of
the persons named above, or such agents or trustees, on such other matters as
may properly come before the meeting.
ELECTION OF DIRECTORS:
Henry J. Herrmann, James M. Raines and William L. Rogers
(change of address/comments)
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE
BOXES, SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE
IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXY
COMMITTEE CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
SEE REVERSE SIDE
-------------------------------------------------------------------------------
FOLD AND DETACH HERE
Please mark
your votes [X]
as in this example
THIS PROXY WHEN PROPERLY SIGNED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2 AND 3. THE PROXIES WILL USE THEIR DISCRETION WITH
RESPECT TO ANY MATTER REFERRED TO IN PROPOSAL 4. THIS PROXY IS REVOCABLE AT
ANY TIME BEFORE IT IS EXERCISED.
The Board of Directors recommends a vote FOR:
FOR WITHHELD
1. Election of Directors (see reverse) [ __ ] [ __ ]
FOR, except vote withheld from the following nominee(s):
_____________________________________________________
(Instruction: To withhold authority to vote for any
individual nominees, write that nominee's name here.)
2. Approval of the merger of a wholly-owned subsidiary into Waddell & Reed
Financial, Inc. which will result in a combination of all of the
outstanding Class A and Class B common stock into a single class of
Class A common stock.
FOR AGAINST ABSTAIN
[ __ ] [ __ ] [ __ ]
3. Ratification of the selection of KPMG LLP as independent auditors for
the fiscal year 2001.
FOR AGAINST ABSTAIN
[ __ ] [ __ ] [ __ ]
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournments
thereof.
IMPORTANT -- PLEASE SIGN EXACTLY AS NAME APPEARS
BELOW AND RETURN PROMPTLY. When shares are held by
joint tenants, both should sign. When signing as
attorney, executive administrator, trustee or
guardian, please give full title as such. If a
corporation, please sign in full corporate name by
President or other authorized officer. If a
partnership, please sign in partnership name by an
authorized person.
RECEIPT HEREWITH OF THE COMPANY'S ANNUAL REPORT AND NOTICE OF MEETING AND
PROXY STATEMENT, DATED MARCH __, 2001, IS HEREBY ACKNOWLEDGED.
Signature __________________________ Signature if held jointly ________________
Dated ______________ ___, 2001
--------------------------------------------------------------------------------
FOLD AND DETACH HERE
WADDELL & REED FINANCIAL, INC.
---------------------------------
VOTER CONTROL NUMBER PRINTS HERE
---------------------------------
Shareholder Name
and Address prints here
Dear Stockholder:
If voting by proxy, we encourage you to vote your shares electronically this
year either by telephone or via the Internet. This will eliminate the need
to return your proxy card. Your telephone or Internet vote authorizes the
named proxies to vote your shares in the same manner as if you had marked,
signed and returned your proxy card. You will need your proxy card and
Social Security Number (where applicable) when voting your shares
electronically. The Voter Control Number that appears in the box above, just
below the perforation, must be used in order to vote by telephone or via the
Internet.
The EquiServe Vote by Telephone and Vote by Internet systems can be accessed
24-hours a day, seven days a week up until the day prior to the meeting.
TO VOTE BY TELEPHONE:
Using a touch-tone phone call Toll-free: 1-877-PRX-VOTE (1-877-779-8683)
From outside the United States, call direct: 1-201-536-8073
TO VOTE BY INTERNET:
Log on to the Internet and go to the website: http://www.eproxyvote.com/wdr
NOTE: IF YOU VOTE OVER THE INTERNET, YOU MAY INCUR COSTS SUCH AS
TELECOMMUNICATION AND INTERNET ACCESS CHARGES FOR WHICH YOU WILL BE
RESPONSIBLE.
THANK YOU FOR VOTING YOUR SHARES
YOUR VOTE IS IMPORTANT!
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Stockholder Inquiries
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