Section 280g Limitations Clause Samples
The Section 280G Limitations clause restricts the amount of compensation or benefits that can be paid to certain executives in connection with a change in control of a company, in order to avoid triggering adverse tax consequences under Section 280G of the Internal Revenue Code. Practically, this clause may require reducing or capping payments such as severance, bonuses, or accelerated vesting of equity awards if they would otherwise be considered "excess parachute payments" subject to significant excise taxes. Its core function is to protect both the company and the executive from incurring additional tax liabilities and penalties by ensuring compliance with federal tax regulations regarding golden parachute payments.
Section 280g Limitations. In the event that the compensation and other benefits provided for in this Agreement (or otherwise payable to Executive under any other agreement with the Company) (i) constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), and (ii) but for the application of this Section, would result in the Company’s payment or payments to Executive of an “excess parachute payment” within the meaning of Code Section 280G, then at the Company’s sole option Executive’s total compensation and benefits payable under this Agreement (and any other agreement between Executive and the Company) may be reduced by the amount necessary to cause the value of all compensation and benefits payable to Executive to be $1.00 below the amount of payments that would cause any portion of such payments to be classified as an “excess parachute payment” within the meaning of Code Section 280G. Unless the Company and Executive otherwise agree in writing, any determination required under this Section shall be made in writing by the Company’s independent public accountants (the “Accountants”), whose determination shall be conclusive and binding upon the Executive and the Company for all purposes. For purposes of making the calculations required by this Section, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Code Sections 280G and 4999. The 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 Section. The Employer shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section.
Section 280g Limitations. Anything in this Agreement to the contrary notwithstanding, in the event it is determined that any payment or distribution by the Company to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, including, by example and not by way of limitation, acceleration by the Company of the date of vesting or payment or rate of payment under any plan, program or arrangement of the Company, would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive a "280G Gross-Up Payment." For purposes of this Agreement, a "280G Gross-Up Payment" shall be calculated as an amount equal to the Executive's liability for such excise tax(es) and any income tax(es) attributable to such excise tax liability (including any interest or penalty thereon) so that after payment by the Executive of all taxes (including interest and penalties), the Executive has not suffered any adverse economic consequence due to the imposition of such excise tax(es) and income tax(es) thereon. The amount of 280G Gross-Up Payment to which the Executive is entitled under this Section shall be determined by the accounting firm retained by the Company.
Section 280g Limitations. Notwithstanding any provisions of this Agreement to the contrary, if, in the opinion of the Board of Directors of the Company, payments under this Agreement are to be made under conditions which may give rise to a liability under (S) 4999 or (S) 280G of the Internal Revenue Code, as amended, the aggregate present value of all parachute payments payable to or for the benefit of Executive, whether payable pursuant to this Agreement or otherwise, shall be limited to three
Section 280g Limitations