Exhibit 10.4
CHANGE
IN CONTROL AGREEMENT
THIS AGREEMENT, dated as of January 1, 2007, is
made by and between Janus Management Holdings Corporation (the
“Company”) and Richard Gibson Smith (the
“Executive”).
WHEREAS, the Company considers it essential to
the best interests of the Company to foster the continued
employment of key personnel; and
WHEREAS, the Company recognizes that the
possibility of a Change in Control always exists and that such
possibility, and the uncertainty and questions which it may raise
among employees, may result in the departure or distraction of key
personnel to the detriment of the Company; and
WHEREAS, the Company has determined that
appropriate steps should be taken to reinforce and encourage the
continued attention and dedication of key personnel, including the
Executive, to their assigned duties without distraction in the face
of potentially disturbing circumstances arising from the
possibility of a Change in Control;
NOW, THEREFORE, in consideration of the
premises and the mutual covenants herein contained, the Company and
the Executive hereby agree as follows:
1.
Defined Terms . The definitions of capitalized terms used in
this Agreement are provided in the last Section hereof.
2.
Term of Agreement . The Term of this Agreement shall
commence on the date hereof and shall continue in effect through
December 31, 2008; provided , however , that
commencing on January 1, 2008 and each January 1 thereafter, the
Term shall automatically be extended for one additional year
unless, not later than September 30 of the preceding year, the
Company or the Executive shall have given notice not to extend the
Term; and further provided , however , that if
a Change in Control shall have occurred during the Term, the Term
shall expire no earlier than twenty-four (24) months beyond the
month in which such Change in Control occurred. Notwithstanding
anything herein to the contrary, the Term of the Agreement shall
immediately terminate if, prior to the Change in Control, the
Company (or such other Affiliate of the Parent that then employs
the Executive) ceases to be an Affiliate of the Parent.
3.
Company’s Covenants Summarized . In order to induce
the Executive to remain in the employ of the Company and in
consideration of the Executive’s covenants set forth in
Section 4 hereof, the Company agrees, under the conditions
described herein, to pay the Executive the Severance Payments and
the other payments and benefits described herein. Except as
provided in Section 9.1 hereof, no Severance Payments shall be
payable under this Agreement unless there shall have been (or,
under the terms of the second sentence of Section 6.1 hereof, there
shall be deemed to have been) a termination of the
Executive’s employment with the Company following a Change in
Control and during the Term. This Agreement shall not be construed
as creating an express or implied contract of employment and,
except as otherwise agreed in
writing between
the Executive and the Company, the Executive shall not have any
right to be retained in the employ of the Company.
4.
The Executive’s Covenants . The Executive agrees that,
subject to the terms and conditions of this Agreement, in the event
of a Potential Change in Control during the Term, the Executive
will remain in the employ of the Company until the earliest of (i)
a date which is six (6) months from the date of such Potential
Change in Control, (ii) the date of a Change in Control, (iii) the
date of termination by the Executive of the Executive’s
employment for Good Reason or by reason of death, Disability or
Retirement, or (iv) the termination by the Company of the
Executive’s employment for any reason.
5.
Compensation Other Than Severance Payments .
5.1
Following a Change in
Control and during the Term, during any period that the Executive
fails to perform the Executive’s full-time duties with the
Company as a result of incapacity due to physical or mental
illness, the Company shall pay the Executive’s base salary to
the Executive at the rate in effect at the commencement of any such
period, together with all compensation and benefits payable to the
Executive under the terms of any compensation or benefit plan,
program or arrangement maintained by the Company during such period
(other than any disability plan), until the Executive’s
employment is terminated by the Company for Disability.
5.2
If the
Executive’s employment shall be terminated for any reason
following a Change in Control and during the Term, the Company
shall pay the Executive’s base salary and incentive
compensation to the Executive through the Date of Termination as in
effect immediately prior to the Date of Termination or, if higher,
as in effect immediately prior to the Change in Control, together
with all compensation and benefits payable to the Executive through
the Date of Termination under the terms of the Company’s
compensation and benefit plans, programs or arrangements as in
effect immediately prior to the Date of Termination or, if more
favorable to the Executive, as in effect immediately prior to the
Change in Control.
5.3
If the
Executive’s employment shall be terminated for any reason
following a Change in Control and during the Term, the Company
shall pay to the Executive the Executive’s normal
post-termination compensation and benefits as such payments become
due. Such post-termination compensation and benefits shall be
determined under, and paid in accordance with, the Company’s
retirement, insurance and other compensation or benefit plans,
programs and arrangements as in effect immediately prior to the
Date of Termination or, if more favorable to the Executive, as in
effect immediately prior to the Change in Control.
6.
Severance Payments .
6.1
If the
Executive’s employment is terminated following a Change in
Control and during the Term, other than (A) by the Company for
Cause, (B) by reason of death or Disability, or (C) by the
Executive without Good Reason, then, the Company shall pay the
Executive the amounts, and provide the Executive the benefits,
described in
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this Section 6.1
(“Severance Payments”) and Section 6.2, in addition to
any payments and benefits to which the Executive is entitled under
Section 5 hereof. For purposes of this Agreement, the
Executive’s employment shall be deemed to have been
terminated following a Change in Control by the Company without
Cause or by the Executive with Good Reason, if (i) the
Executive’s employment is terminated by the Company without
Cause prior to a Change in Control (whether or not a Change in
Control ever occurs) and such termination was at the request or
direction of a Person who has entered into an agreement with the
Parent the consummation of which would constitute a Change in
Control, (ii) the Executive terminates his employment for Good
Reason prior to a Change in Control (whether or not a Change in
Control ever occurs) and the circumstance or event which
constitutes Good Reason occurs at the request or direction of such
Person, or (iii) the Executive’s employment is terminated by
the Company without Cause or by the Executive for Good Reason and
such termination or the circumstance or event which constitutes
Good Reason is otherwise in connection with or in anticipation of a
Change in Control (whether or not a Change in Control ever
occurs).
(A)
In lieu of any
further salary payments to the Executive for periods subsequent to
the Date of Termination and in lieu of any severance benefit
otherwise payable to the Executive, the Company shall pay to the
Executive a lump sum severance payment, in cash, equal to two times
the sum of (1) the Executive’s total average annual
cash
compensation earned in the two four-quarter periods immediately
prior to the Date of Termination or, if higher, earned in the two
four-quarter periods immediately prior to the Change in
Control and (2) the value of the Company’s contributions made
pursuant to the Janus Capital Group Inc. 401(k), Profit Sharing and
Employee Stock Ownership Plan (or any successor plan) on behalf of
the Executive in the four quarters immediately prior to the Date of
Termination or, if higher, in the four quarters immediately prior
to the Change in Control. For purposes of calculating the cash
compensation payment under Section 6.1(A)(1), the mid-range of
Executive’s target CIO Compensation (as defined in that
certain Employment Agreement, dated as of January 1, 2007) for the
then-current calendar year will be applied rather than the actual
CIO Compensation paid to the Executive.
(B)
For the twenty-four
(24) month period immediately following the Date of Termination,
the Company shall arrange to provide the Executive and his
dependents medical, dental, and vision insurance benefits
substantially similar to those provided to the Executive and his
dependents immediately prior to the Date of Termination or, if more
favorable to the Executive, those provided to the Executive and his
dependents immediately prior to the Change in Control, at no
greater after tax cost to the Executive than the after tax cost to
the Executive immediately prior to such date. Benefits otherwise
receivable by the Executive pursuant to this Section 6.1(B) shall
be reduced to the extent benefits of the same type are received by
or made available to the Executive during the twenty-four (24)
month period following the Executive’s termination of
employment (and any such benefits received by or made available to
the Executive shall be reported to the Company by the Executive);
provided , however , that the Company shall reimburse
the Executive for the excess, if any, of the after tax cost of such
benefits to the Executive over such cost immediately
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prior to the Date of
Termination or, if more favorable to the Executive, the Change in
Control. The
coverage provided pursuant to this Section 6.1(B) shall run
concurrently with and shall be offset against any continuation
coverage under Part 6 of Title I of Employee Retirement Income
Security Act of 1974, as amended.
(C)
The Company will make
available to the Executive three months of outplacement service at
no cost to the Executive through a provider of such services
selected by the Company.
6.2
(A)
Whether or not the
Executive becomes entitled to the Severance Payments, if any
payment or benefit received or to be received by the Executive
(including any payment or benefit received in connection with a
Change in Control or the termination of the Executive’s
employment, whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement) (all such payments and
benefits, excluding the Gross-Up Payment, being hereinafter
referred to as the “Total Payments”) will be subject
(in whole or part) to the Excise Tax, then, the Company shall pay
to the Executive an additional amount (the “Gross-Up
Payment”) such that the net amount retained by the Executive,
after deduction of any Excise Tax on the Total Payments and any
federal, state and local income and employment taxes and Excise Tax
upon the Gross-Up Payment, and after taking into account the phase
out of itemized deductions and personal exemptions attributable to
the Gross-Up Payment, shall be equal to the Total Payments. For
purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income taxes at the
highest marginal rate of federal income taxation in the calendar
year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rate of taxation in the
state and locality of the Executive’s residence on the Date
of Termination (or if there is no Date of Termination, then the
date on which the Gross-Up Payment is calculated for purposes of
this Section 6.2), net of the maximum reduction in federal income
tax which could be obtained from deduction of such state and local
taxes.
(B)
For purposes of
determining whether any of the Total Payments will be subject to
the Excise Tax and the amount of such Excise Tax, (i) all of the
Total Payments shall be treated as “parachute payments”
within the meaning of section 280G(b)(2) of the Code, unless in the
opinion of tax counsel (“Tax Counsel”) reasonably
acceptable to the Executive and selected by the accounting firm
which was, immediately prior to the Change in Control, the
Company’s independent auditor (the “Auditor”),
such other payments or benefits (in whole or in part) do not
constitute parachute payments, including by reason of section
280G(b)(4)(A) of the Code, (ii) all “excess parachute
payments” within the meaning of section 280G(b)(l) of the
Code shall be treated as subject to the Excise Tax unless, in the
opinion of Tax Counsel, such excess parachute payments (in whole or
in part) represent reasonable compensation for services actually
rendered, within the meaning of section 280G(b)(4)(B) of the Code,
in excess of the Base Amount allocable to such reasonable
compensation, or are otherwise not subject to the Excise Tax, and
(iii) the value of any noncash benefits or any deferred payment or
benefit shall be determined by the Auditor in accordance with the
principles of sections 280G(d)(3) and (4) of the Code. Prior to the
payment date set forth in Section 6.3 hereof, the Company shall
provide the Executive with its calculation of the
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amounts referred to in this
Section 6.2(B) and such supporting materials as are reasonably
necessary for the Executive to evaluate the Company’s
calculations. If the Executive disputes the Company’s
calculations (in whole or in part), the reasonable opinion of Tax
Counsel with respect to the matter in dispute shall
prevail.
6.3
The payments provided
in subsection (A) of Section 6.1 hereof and in Section 6.2 hereof
shall be made not later than the fifth day following the Date of
Termination (or if there is no Date of Termination, then the date
on which the Gross-Up Payment is calculated for purposes of Section
6.2 hereof); provided , however , that if the amounts
of such payments cannot be finally determined on or before such
day, the Company shall pay to the Executive on such day an
estimate, as determined in good faith by the Executive or, in the
case of payments under Section 6.2 hereof, in accordance with
Section 6.2 hereof, of the minimum amount of such payments to which
the Executive is clearly entitled and shall pay the remainder of
such payments (together with interest on the unpaid remainder (or
on all such payments to the extent the Company fails to make such
payments when due) at 120% of the rate provided in section
1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined but in no event later than the thirtieth (30th) day
after the Date of Termination. At the time that payments are made
under this Agreement, the Company shall provide the Executive with
a written statement setting forth the manner in which such payments
were calculated and the basis for such calculations including,
without limitation, any opinions or other advice the Company has
received from Tax Counsel, the Auditor or other advisors or
consultants (and any such opinions or advice which are in writing
shall be attached to the statement).
6.4
In the event the
Executive incurs legal fees and expenses disputing in good faith
any issue hereunder relating to the termination of the
Executive’s employment, seeking in good faith to obtain or
enforce any benefit or right provided by this Agreement or in
connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any
payment or benefit provided hereunder, the Company shall reimburse
the Executive for such legal fees and expenses if the Executive
prevails, in material part, in such dispute.
7.
Termination Procedures and Compensation During Dispute .
7.1
Notice of
Termination . After a Change in Control and during the
Term, any purported termination of the Executive’s employment
(other than by reason of death) shall be communicated by written
Notice of Termination from one party hereto to the other party
hereto in accordance with Section 10 hereof. For purposes of this
Agreement, a “Notice of Termination” sha
