280G Clause Samples
The 280G clause addresses the tax implications of so-called "golden parachute" payments made to executives in the event of a change in company control, such as a merger or acquisition. It typically outlines how compensation exceeding certain thresholds will be treated, often requiring the company to reduce payments or provide tax gross-ups to avoid triggering punitive excise taxes under Section 280G of the Internal Revenue Code. This clause is essential for ensuring that both the company and its executives understand and manage the tax risks associated with large severance or bonus payments during corporate transactions.
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280G. In the event that the amount of any compensation, payment or distribution by Tempest or its affiliates to or for your benefit, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, calculated in a manner consistent with Section 280G of the Code and the applicable regulations thereunder (the “Aggregate Payments”) would be subject to the excise tax imposed by Section 4999 of the Code, then the Aggregate Payments shall be reduced (but not below zero) so that the sum of all of the Aggregate Payments shall be $1.00 less than the amount at which you become subject to the excise tax imposed by Section 4999 of the Code; provided that such reduction shall only occur if it would result in you receiving a higher After Tax Amount (as defined below) than you would receive if the Aggregate Payments were not subject to such reduction. In such event, the Aggregate Payments shall be reduced in the following order, in each case, in reverse chronological order beginning with the Aggregate Payments that are to be paid the furthest in time from consummation of the transaction that is subject to Section 280G of the Code: (i) cash payments not subject to Section 409A of the Code; (ii) cash payments subject to Section 409A of the Code; (iii) equity-based payments and acceleration; and (iv) non-cash forms of benefits; provided that in the case of all the foregoing Aggregate Payments all amounts or payments that are not subject to calculation under Treas. Reg. § 1.280G-1, Q&A-24(b) or (c) shall be reduced before any amounts that are subject to calculation under Treasury Regulation §1.280G-1, Q&A- 24(b) or (c). For purposes of this Section 9, the “After Tax Amount” means the amount of the Aggregate Payments less all federal, state, and local income, excise and employment taxes imposed on you as a result of your receipt of the Aggregate Payments. For purposes of determining the After Tax Amount, you shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation applicable to individuals for the calendar year in which the determination is to be made, and state and local income taxes at the highest marginal rates of individual taxation in each applicable state and locality, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. The determination as to whether a reduction in the Aggregate Payments shall be made pursuant to this ...
280G. Notwithstanding anything to the contrary in this Agreement, if Executive is a “disqualified individual” (as defined in Section 280G(c) of the Internal Revenue Code of 1986, as amended (the “Code”)), and the severance benefits provided for in this Section 7.7, together with any other payments and benefits which the Executive has the right to receive from Company and other person or entity (the “Aggregate Severance”), would be subject to the excise tax imposed by Section 4999 of the Code, including any interest and penalties imposed with respect to such excise tax (the “Excise Tax”), then the severance benefits provided thereunder shall be either (1) reduced (but not below zero) so that the present value of the Aggregate Severance equals the Safe Harbor Amount (as defined below) and so that no portion of the Aggregate Severance shall be subject to the Excise Tax, or (2) paid in full, whichever produces the better net after-tax position to the Executive (taking into account the Excise Tax and any other applicable taxes). The determination as to whether any such reduction in the Aggregate Severance is necessary shall be made initially by Company in good faith. If applicable, the reduction of the amounts payable hereunder in accordance with clause (1) of the first sentence of the preceding paragraph shall be made in the following order and in such a manner as to maximize the value of the Aggregate Severance paid to the Executive (i) cash severance pay that is exempt from Section 409A, (ii) any payments intended to pay for continued medical benefits under COBRA, (iii) any other cash severance pay, (iv) any other cash payable that is a severance benefit, (v) any restricted stock or restricted stock units, and (vi) stock options. If the Aggregate Severance is reduced in accordance with the preceding sentence and through error or otherwise the Aggregate Severance exceeds the Safe Harbor Amount, the Executive shall immediately repay such excess to the Employer upon notification that an overpayment has been made.
280G. In the event that the severance and all other benefits provided for in this Agreement or otherwise payable to Executive (but excluding any payments that may be made under this Section 8.5(c)) constitute "parachute payments" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") and will be subject to the excise tax imposed by Section 4999 of the Code, then Executive shall receive a payment from Company sufficient to pay such excise tax. Notwithstanding the foregoing, Executive may elect, in her sole discretion and by written notice to the Company, (i) to not receive the payment provided for in this subsection or (ii) to reduce the amount of severance and other benefits that she would otherwise receive so as to eliminate any "parachute payments." Such notice must be delivered to the Company no later than 10 days following the determination by the Accountants of the amount of Executive's excise tax liability, as described below. This election shall not be effective as to benefits that Executive has already received. Unless Company and Executive otherwise agree in writing, the determination of Executive's excise tax liability and the amount required to be paid under this subsection shall be made promptly in writing by Company's independent public accountants or such other tax experts as reasonably agreed to by the Company and Executive (the "Accountants") and such amount shall be paid to Executive promptly, but not before 10 days after such determination. In the event that the excise tax incurred by Executive is determined by the Internal Revenue Service to be greater or lesser than the amount so determined by the Accountants, Company and Executive agree to promptly make such additional payment, including interest and any tax penalties, to the other party as the Accountants reasonably determine is appropriate. For purposes of making the calculations required by this subsection, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on interpretations of the Code for which there is "substantial authority" tax reporting position. Company and Executive shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this subsection. Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this subsection.
280G. If the Company determines, in good faith, that any payments or benefits payable or provided by the Company or any of the Company Subsidiaries to any person in connection with the transactions contemplated by this Agreement could reasonably be expected to constitute “parachute payments” under Section 280G(b)(2) of the Code and could reasonably be expected, absent the vote described below, to result in the imposition of Taxes under Section 4999 of the Code, then no later than five Business Days prior to the Closing, the Company shall use commercially reasonable efforts to (a) obtain from each Person who is a “disqualified individual” (as defined in Section 280G of the Code) and who has a right or potential right to any payments or benefits in connection that could, individually or in the aggregate, constitute “parachute payments” (as defined in Section 280G(b) of the Code) an executed waiver of all or a portion of such Person’s rights to any such payments and/or benefits, such that all remaining payments and/or benefits applicable to such Person shall not be deemed to be “parachute payments” pursuant to Section 280G of the Code (such waived portion of any payments and/or benefits, the “Waived 280G Benefits”) and (b) for all such obtained waivers, solicit the approval of its equityholders entitled to vote on such matters of the Waived 280G Benefits, in a manner that complies with Sections 280G(b)(5)(A)(ii) and 280G(b)(5)(B) of the Code and the Treasury Regulations thereunder. The Company shall forward to EQV at least five days prior to distribution to the intended recipients, copies of all documents prepared by the Company in connection with this Section 6.15 (including supporting analysis and calculations, form of waiver agreement, equityholder consent and disclosure statement) for EQV’s review and comment, and the Company shall incorporate all reasonable comments received from EQV on such documents prior to the distribution to the intended recipients. Such equityholder approval, if obtained, shall establish the disqualified individual’s right to receive or retain the Waived 280G Benefits, such that if such equityholder approval is not obtained, no portion of the Waived 280G Benefits shall be paid, payable, received or retained. Prior to the Closing, the Company shall deliver to EQV evidence reasonably satisfactory to EQV that (i) a vote of the Company’s equityholders was obtained in conformance with Section 280G of the Code and the regulations thereunder or...
280G. Notwithstanding anything set forth herein to the contrary, if any payment or benefit Executive would receive from the Company pursuant to this Agreement or otherwise (“Payment”) would constitute a “parachute payment” within the meaning of Section 280G of the Code and, but for this Section 24, would be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment shall equal the Revised Amount which may under clause (a) in the following sentence be a lesser amount than the full Payment. The “Revised Amount” shall be either (a) or (b) whichever amount, after taking into account all applicable federal, state and local employment taxes, income taxes and the Excise Tax (all computed at the highest applicable marginal rate), results in Executive’s receipt, on an after-tax basis, of the greater amount of the Payment notwithstanding that all or some portion of the payment may be subject to the Excise Tax and where: (a) is the largest portion of the Payment that would result in no portion of the Payment being subject to the Excise Tax and (b) is the full, unreduced, total Payment. If a reduction in payments or benefits constituting “parachute payments” is necessary so that the Payment is reduced to the amount in clause (a) above, unless to the extent permitted by Code Section 280G and 409A Executive designates another order, the reduction shall occur in the following order: (A) cash payments shall be reduced first and in reverse chronological order such that the cash payment owed on the latest date following the occurrence of the event triggering such excise tax will be the first cash payment to be reduced; (B) accelerated vesting of equity awards shall be cancelled/reduced next and in the reverse order of the date of grant for such equity awards (i.e., the vesting of the most recently granted stock awards will be reduced first), with full-value awards reversed before any stock option or stock appreciation rights are reduced; and (C) employee benefits shall be reduced last and in reverse chronological order such that the benefit owed on the latest date following the occurrence of the event triggering such excise tax will be the first benefit to be reduced. Except as set forth in the next sentence, all determinations to be made under this Section 24 shall be made by the Company’s independent registered public accounting firm immediately prior to the event giving rise to the Payment (or if such firm cannot make such determination...
280G. If any payment or distribution by the Company to or for the benefit of Employee under this Agreement or any other plans or arrangements between the parties would be subject to the deduction limitations and excise tax imposed by Sections 280G and 4999 of the Internal Revenue Code (including any applicable interest and penalties, collectively “excise taxes”), then the parties agree to take such action as may be necessary to place Employee in the best after-tax position taking into account all income, employment and excise taxes, without regard to the deductibility of any payments by the Company. Thus, for example, any amount deemed to constitute a “parachute payment” under Section 280G, shall be reduced to the extent necessary to avoid excise taxes that would otherwise be imposed if, and only if, such reduction would result in Employee retaining a larger total after-tax amount of compensation, taking into account all Employee compensation, benefits, income, employment and excise taxes.
280G. (a) Notwithstanding any other provision of this Agreement or any other plan, arrangement, or agreement to the contrary, if any of the payments or benefits provided or to be provided by the Company or its affiliates to the Executive or for the Executive’s benefit pursuant to the terms of this Agreement or otherwise (“Covered Payments”) constitute parachute payments within the meaning of Section 280G of the Code (such payments, the “Parachute Payments”) and would, but for this Section 11, be subject to the excise tax imposed under Section 4999 of the Code (or any successor provision thereto) or any similar tax imposed by state or local law or any interest or penalties with respect to such taxes (collectively, the “Excise Tax”), or a loss of deductibility under Section 280G of the Code, then such Covered Payments shall be payable either (i) in full or (ii) reduced to the minimum extent necessary to ensure that no portion of the Covered Payments is subject to the Excise Tax, whichever of the foregoing (i) or (ii) results in the Executive’s receipt on an after-tax basis of the greatest amount of benefits after taking into account the applicable federal, state, local and foreign income, employment and excise taxes (including the Excise Tax).
(b) The Covered Payments shall be reduced in a manner that maximizes the Executive’s economic position. In applying this principle, the reduction shall be made in a manner consistent with the requirements of Section 409A of the Code, to the extent applicable, and where two or more economically equivalent amounts are subject to reduction but payable at different times, such amounts payable at the later time shall be reduced first but not below zero.
(c) Any determination required under this Section 11 shall be made in writing by the Company or by an accounting firm selected and paid for by the Company. The Executive shall provide the Company with such information and documents as the Company may reasonably request in order to make a determination under this Section 11.
280G. If, due to the benefits provided under Section 4.4 above, Executive is subject to any excise tax due to characterization of any amounts payable under Section 4.4 as excess parachute payments pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder (collectively, the “Code”), the amounts payable under Section 4.4 will be reduced (to the least extent possible) in order to avoid any “excess parachute payment” under section 280G(b)(1) of the Code.
280G. Prior to the Closing Date, the Seller shall cause the Company to use its reasonable best efforts to seek valid waivers (collectively, the “Waivers”) of any payments and/or benefits that the Company reasonably determines may, individually or in the aggregate, constitute “parachute payments” (within the meaning of Section 280G of the Code and the regulations promulgated thereunder), in form and substance reasonably satisfactory to the Purchaser, and shall use its reasonable best efforts to seek equityholder approval (in a manner satisfactory to the Purchaser), by such number of equityholders as is required pursuant to Section 280G(b)(5)(B) of the Code, of all such payments and/or benefits (the “Equityholder Approval”), such that such payments and benefits shall not be deemed to be “parachute payments” under Section 280G of the Code and that the deduction of such payments and/or benefits will not be limited by the application of Section 280G of the Code and the applicable regulations thereunder, in each case, if such Waivers and Equityholder Approval are obtained. The Seller will cause the Company to provide the Purchaser with a reasonable opportunity to review and comment on all calculations and documents prepared in connection with the foregoing and will make such modifications thereto as are reasonably requested by the Purchaser.
280G. In the event that the Executive shall become entitled to payment and/or benefits provided by this Agreement or any other amounts in the "nature of compensation" (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any person whose actions result in a change of ownership or effective control covered by Section 280G(b)(2) of the Code or any person affiliated with the Company or such person) as a result of such change in ownership or effective control (collectively the "Company Payments"), and such Company Payments would be subject to the tax imposed by Section 4999 of the Code (together with any similar tax that may hereafter be imposed by any taxing authority, the "Excise Tax") the Executive shall be solely responsible for the payment in full of any such Excise Tax and the Company shall withhold any federal or state taxes as required by applicable law.