Code Section 280G Excise Tax Sample Clauses
The Code Section 280G Excise Tax clause addresses the potential imposition of excise taxes on certain payments made to executives in connection with a change in control of a company. Specifically, it outlines how any payments or benefits that could be considered "parachute payments" under Section 280G of the Internal Revenue Code will be treated, often specifying whether the company or the executive will bear responsibility for any resulting excise taxes. This clause is essential for clarifying financial responsibilities and mitigating unexpected tax liabilities that could arise during mergers or acquisitions, thereby providing certainty and protecting both parties from unforeseen tax consequences.
Code Section 280G Excise Tax i. Notwithstanding anything in this Agreement to the contrary, in the event it shall be determined that any benefit, payment or distribution by the Company to or for the benefit of Executive (whether payable or distributable pursuant to the terms of this Agreement or otherwise) (such benefits, payments or distributions are hereinafter referred to as “Payments”) would, if paid, be subject to the excise tax (the “Excise Tax”) imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), then, prior to the making of any Payments to Executive, a calculation shall be made comparing (1) the net after-tax benefit to Executive of the Payments after payment by Executive of the Excise Tax, to (2) the net after-tax benefit to Executive if the Payments had been limited to the extent necessary to avoid being subject to the Excise Tax. If the amount calculated under (1) above is less than the amount calculated under (2) above, then the Payments shall be limited to the extent necessary to avoid being subject to the Excise Tax (the “Reduced Amount”). The reduction of the Payments due hereunder, if applicable, shall be made by first reducing cash Payments and then, to the extent necessary, reducing those Payments having the next highest ratio of Parachute Value to actual present value of such Payments as of the date of the change of control, as determined by the Determination Firm (as defined in Section 8.2(d)(ii) below). For purposes of this Section 8.2(d), present value shall be determined in accordance with Section 280G(d)(4) of the Code. For purposes of this Section 8.2(d), the “Parachute Value” of a Payment means the present value as of the date of the change of control of the portion of such Payment that constitutes a “parachute payment” under Section 280G(b)(2) of the Code, as determined by the Determination Firm for purposes of determining whether and to what extent the Excise Tax will apply to such Payment.
ii. All determinations required to be made under this Section 8.2(d), including whether an Excise Tax would otherwise be imposed, whether the Payments shall be reduced, the amount of the Reduced Amount, and the assumptions to be utilized in arriving at such determinations, shall be made by an independent, nationally recognized accounting firm or compensation consulting firm mutually acceptable to the Company and Executive (the “Determination Firm”) which shall provide detailed supporting calculations both to the Company and Executive wi...