This Consulting Agreement (this “Agreement”) is made to be effective as of May 25, 2005 (the “Effective Date”) by and between Waddell & Reed Financial, Inc., a Delaware corporation (the “Company”), and Keith A. Tucker (“Consultant”).
WHEREAS, Consultant has served as a Chief Executive Officer and as Chairman of the Board of Directors of the Company and has substantial knowledge and expertise concerning the business and affairs of the Company;
WHEREAS, Consultant’s employment with the Company terminated effective May 25, 2005;
WHEREAS, the Company desires to engage Consultant as an independent consultant to assist with the daily business and affairs of the Company and Consultant desires to provide such consulting services to the Company and its Affiliates;
NOW, THEREFORE, in consideration of the agreements set forth below and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties, the Company and the Consultant agree as follows:
1. Consulting Services .
(a) The Company hereby engages Consultant, and Consultant hereby agrees to be engaged by the Company, as an independent business consultant on the terms set forth herein. Consultant will provide the Company and its Affiliates (as defined below) with managerial and advisory services, including, without limitation, managerial and advisory services in the mutual fund, mutual fund underwriting and distribution and investment advisor financial planning areas (collectively, the “Services”). Consultant shall provide Services only at the request and under the direction of the Company’s board of directors. Consultant will provide the Services at mutually agreeable times and at mutually agreed locations; provided, however, that in no event shall Consultant be required to provide Services in excess of (i) an aggregate of 325 hours during the first year of the term of this Agreement, (ii) an aggregate of 250 hours during the second year of the term of this Agreement, and (iii) an aggregate of 200 hours during each following year during the term of this Agreement. In the event that the Consultant’s cooperation is requested pursuant to Section 8 of this Agreement, then each hour that the Consultant spends cooperating pursuant to Section 8 shall reduce the aggregate number of hours that Consultant is required to provide Services for the year in which the cooperation is requested; provided, however, that Consultant’s obligations under Section 8 of this Agreement are not limited by the aggregate limits on hours for the Services set forth in this Section 1 , nor shall there be any additional payments for cooperation pursuant to Section 8 of this Agreement. As used herein, “Affiliates” means any other person or entity controlling, controlled by or under common control with the Company.
(b) Consultant may accept engagements by or employment with a third party during the term of this Agreement as long as Consultant continues to provide
the Services as requested by the Company and otherwise complies with the terms and conditions of this Agreement.
2. Term . The term of this Agreement is eight (8) successive years beginning on the Effective Date, unless terminated earlier as set forth in this Section 2 . Consultant may terminate this Agreement voluntarily at any time upon no less than thirty (30) days prior written notice to the Company. This Agreement shall terminate automatically with no action on the part of either party upon the occurrence of any of the following:
(a) Consultant dies;
(b) Consultant becomes disabled and unable to perform his duties under this Agreement for an aggregate of one hundred fifty (150) days within any one hundred eighty (180) day period (exclusive of the period referred to in the first sentence of the following paragraph);
(c) the Company’s Board of Directors terminates this Agreement for Cause; or
(d) Consultant terminates this Agreement due to the Company’s material breach of this Agreement that is not cured within 15 days of receipt of written notice thereof from the Consultant.
For purposes of this Agreement, Consultant will be “disabled and unable to perform his duties under this Agreement” only if the events described in clause (b) of Section 2 have occurred and the Company’s Board of Directors determines, in good faith, based on medical evidence reasonably acceptable to it, that Consultant has become physically or mentally disabled for an additional period of one hundred twenty (120) days in the subsequent one hundred eighty (180) day period.
For purposes of this Agreement, “Cause”‘ is defined to mean any of: (1) an act of fraud, dishonesty or embezzlement by Consultant against the Company; (2) the Consultant’s willful commission of an act intending to cause, and causing, material damage to the Company; (3) Consultant’s willful refusal to perform his duties under this Agreement which continues for a period of ten days after written notice thereof; (4) the conviction of the Consultant for a felony crime involving moral turpitude; or (5) Consultant’s material violation of Sections 5, 6, 7 or 8 hereof that is not cured within 15 days of receipt of written notice thereof from the Company.
3. Payments, Fees and Expenses .
(a) On the business day immediately after the expiration of the Consultant’s unexercised right to revoke the General Release (the “Revocation Expiration Date”), Consultant shall be paid a lump sum cash amount of (i) $3,000,000 plus (ii) his base salary as an employee of the Company through the date hereof, accrued vacation pay and $470,137, representing his pro rata target bonus for 2005.
(b) From the Effective Date until this Agreement terminates, Consultant will be paid fees for the Services (collectively, the “Consulting Fees”) of
$375,000 per year, payable monthly in arrears. In the event of a termination pursuant to clause (d) of Section 2 , all amounts that would thereafter have been paid during the full term of this Agreement shall be immediately paid in cash lump sum, and health insurance benefits shall continue per Section 4(a) hereof (but office/support staff benefits per Section 4(b) shall be terminated).
(c) If the Company requests Consultant to incur any out-of-pocket business expenses in connection with providing the Services, the Company shall reimburse Consultant for such documented expenses. Upon the termination of this Agreement, and except for the obligation to pay consulting fees and health insurance benefits in the event of a termination pursuant to clause (d) of Section 2 as provided in Section 3(b), the Company shall have no obligation to pay Consultant for any Services or reimburse any expenses of Consultant hereunder, except for the payment of Consulting Fees for Services rendered or reasonable out-of-pocket expenses incurred through the effective date of such termination.
(d) The payments and Consulting Fees paid pursuant to this Agreement shall be made without any withholdings or deductions, including without limitation, deductions or withholdings for social security, Medicare or income taxes, unless otherwise required by law. Consultant will be responsible for and will pay any and all taxes owing in respect of the payments and Consulting Fees paid hereunder and will indemnify, defend and hold harmless the Company against all such taxes and will comply with all governmental regulations with respect thereto, including the filing of all necessary returns and reports:
4. Other Rights .
(a) Beginning on the Effective Date, Company agrees to provide health insurance coverage, on terms no less favorable than are in effect for senior executives of the Company, for Consultant and his spouse, if any, during the term of this Agreement and, unless this Agreement is terminated for Cause, thereafter until the death of Consultant and his spouse, if any; provided, however, that in no event shall the Company be responsible for health insurance coverage in excess of what it pays for senior executives of the Company generally per year.
(b) During the term of the Agreement, Company agrees to provide an office and support staff in a mutually agreeable location; provided, however, that in no event shall the Company be responsible for office, equipment, supplies, computer, cell phone and support staff costs in excess of $100,000 per year. In the event that Consultant’s assistant prior to the date of this Agreement is still employed by the Company at such time and is willing to act in such capacity, such assistant shall be available to Consultant on a priority basis for the three month period beginning the Effective Date, with the compensation and out of pocket costs of such assistant during such time being deducted from the $100,000 allowance provided in the first year of this Agreement.
(c) The parties acknowledge that in connection with the termination of Consultant’s employment and in consideration of Consultant’s agreements hereunder and other good and valuable consideration, the Company has agreed to, and has previously approved, effective on the Revocation Expiration Date, (i) the retention by Consultant of 198,189 shares of unvested restricted Company Class A common stock granted to Consultant pursuant to the Company 1998 Stock Incentive Plan, as amended and restated or the Company 1998 Executive Deferred Compensation Stock Award Plan, as amended and restated (which represents all shares of outstanding unvested restricted Company Class A common stock granted to Consultant in connection with his employment by the Company), the vesting of which shall be on the same schedule as Consultant had prior to termination of employment but subject to the continuing performance by Consultant of services to the Company as set forth in this Agreement during such vesting schedule, (ii) the participation by Consultant in the Company’s Stock Option Restoration Program for 2005, and (iii) that Consultant’s termination of employment shall be considered to be an “Early Retirement” (for such options as such concept is relevant) for purposes of all outstanding options held by him prior to his termination. The parties acknowledge that, upon the Effective Date, Consultant is fully vested in his account Company’s Supplemental Executive Retirement Plan (the “SERP”) and is entitled to receive the distribution of the accrued balance of $2,595,239.66 in such account in accordance with all available elections, as provided in the SERP.
5. Confidential Information .
(a) As used herein, “Confidential Information” means all confidential or proprietary information, whether oral or written, now or hereafter developed, acquired or used by the Company and relating to the Company’s business, or that of its Affiliates, that is not generally known to others in the Company’s area of business, including, without limitation (to the extent confidential): (1) any trade secrets, work product, processes, analyses, know-how or other intellectual property of the Company; (2) the Company’s advertising, product development, strategic and business plans and information; (3) the prices at which the Company has sold or offered to sell its products or services; and (4) the Company’s financial statements and other financial information.
(b) In the course of performing services for the Company prior to the date hereof as an employee of the Com