Exhibit 10.39

 

Summary of Compensation Arrangements With Executive Officers of the Company

 

I.                                         Named Executive Officer
Compensation.                       On December 8, 2005, the Compensation
Committee (the “Committee”) of the Board of Directors of Waddell & Reed
Financial, Inc. (the “Company”) approved the annual base salaries (effective as
of January 1, 2006) of the Company’s executive officers.  The following table
sets forth the annual base salaries of the Company’s Chief Executive Officer and
the next four most highly compensated officers (collectively, the “Named
Executive Officers”) for 2006:

 

Named Executive Officer

 

Salary

 

 

 

 

 

Henry J. Herrmann
Chief Executive Officer

 

$

800,000

 

 

 

 

 

Michael L. Avery
Senior Vice President and Chief Investment Officer

 

$

425,000

 

 

 

 

 

Thomas W. Butch
Senior Vice President and Chief Marketing Officer

 

$

400,000

 

 

 

 

 

Michael D. Strohm
Senior Vice President and Chief Operations Officer

 

$

350,000

 

 

 

 

 

John E. Sundeen, Jr.
Senior Vice President and Chief Administrative Officer – Investments

 

$

350,000

 

 

The Company has adopted a supplemental executive retirement plan (the “SERP”)
pursuant to which participants’ accounts are credits with (1) an amount equal to
4% of his or her base salary, less the amount of the maximum employer matching
contribution allowable that can be made on the participant’s behalf under the
Company’s 401(k) plan, and (2) a non-formula award, as determined by the
Committee in its discretion.   For 2005, the Committee designated Mr. Herrmann
as a participant of the SERP and awarded him a non-formula award of $300,000 on
December 8, 2005.  None of the other Named Executive Officers were eligible to
participate in the SERP for 2005.

 

II.                                     2005 Executive Incentive
Awards.             Pursuant to the Company’s 2003 Executive Incentive Plan, as
amended and restated (the “EIP”), eligible participants may receive (1) an
annual incentive award of cash, and (2) an annual incentive award of restricted
stock, both based upon the annual financial performance of the Company.

 

A.                                   Cash Awards.  On December 8, 2005, the
Committee authorized the payment of annual cash incentive (i.e., bonus) awards
based on the Company’s financial

 

--------------------------------------------------------------------------------

 

performance for the year ended December 31, 2005 to executive officers
participating in the EIP, which included Messrs. Herrmann, Butch, Strohm and
Sundeen.  These annual incentive awards were determined based on performance
goals established in March 2005.  As permitted by the EIP, the Committee
exercised its discretion to reduce the amount of the cash awards payable to
Messrs. Herrmann, Butch, Strohm and Sundeen, but in accordance with the EIP, the
reductions did not increase the award amounts for any other participant.   Mr.
Avery did not participate in the EIP for 2005.  The following table sets forth
the annual cash incentive awards to the Named Executive Officers for 2005
performance:

 

Named Executive Officer

 

Cash Award

 

 

 

 

 

Henry J. Herrmann
Chief Executive Officer

 

$

1,200,000

 

 

 

 

 

Michael L. Avery
Senior Vice President and Chief Investment Officer

 

$

500,000

 

 

 

 

 

Thomas W. Butch
Senior Vice President and Chief Marketing Officer

 

$

400,000

 

 

 

 

 

Michael D. Strohm
Senior Vice President and Chief Operations Officer

 

$

400,000

 

 

 

 

 

John E. Sundeen, Jr.
Senior Vice President and Chief Administrative Officer – Investments

 

$

350,000

 

 

Pursuant to the Company 1998 Executive Stock Award Plan, as amended and
restated, eligible executives may annually convert all or a portion of their
annual cash incentive award into restricted stock of the Company.  Additionally,
the Compensation Committee may, in its sole discretion, direct that all or a
portion of the cash incentive award payments payable under the EIP be paid in
restricted stock.  Pursuant to such discretion, the Committee directed that 10%
of the above referenced cash incentive awards for Messrs. Butch, Strohm and
Sundeen be paid in restricted stock on April 3, 2006.  Awards granted pursuant
to an executive’s election or the Committee’s discretion are granted in
accordance with the form of restricted stock agreement filed as Exhibit 10.6 to
the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30,
2005.

 

B.                                     Restricted Stock Awards.  On December 8,
2005, the Committee authorized the payment of the annual incentive awards of
restricted stock based on the Company’s financial performance for the year ended
December 31, 2005 to executive officers participating in the EIP, which included
Messrs. Herrmann, Butch, Strohm and

 

--------------------------------------------------------------------------------

 

Sundeen.  These annual incentive awards were determined based on performance
goals established in March 2005.  As permitted by the EIP, the Committee
exercised its discretion to reduce the amount of the restricted stock awards
payable to Messrs. Herrmann, Butch, Strohm and Sundeen, but in accordance with
the EIP, the reductions did not increase the restricted stock award amounts for
any other participant.   As stated above, Mr. Avery did not participate in the
EIP for 2005; the Committee approved Mr. Avery’s award of restricted stock on
February 22, 2006.  The following table sets forth the annual restricted stock
awards to the Named Executive Officers for 2005 performance:

 

Named Executive Officer

 

Restricted Stock Award

 

 

 

 

 

Henry J. Herrmann
Chief Executive Officer

 

100,000 shares

 

 

 

 

 

Michael L. Avery
Senior Vice President and Chief Investment Officer

 

30,000 shares

 

 

 

 

 

Thomas W. Butch
Senior Vice President and Chief Marketing Officer

 

30,000 shares

 

 

 

 

 

Michael D. Strohm
Senior Vice President and Chief Operations Officer

 

25,000 shares

 

 

 

 

 

John E. Sundeen, Jr.
Senior Vice President and Chief Administrative Officer - Investments

 

25,000 shares

 

 

These shares will be granted on April 3, 2006 pursuant to the Company 1998 Stock
Incentive Plan, as amended and restated, in accordance with the form of
restricted stock agreement filed as Exhibit 10.4 to the Company’s Quarterly
Report on Form 10-Q for the quarter ended September 30, 2005.

 

--------------------------------------------------------------------------------