Common use of Internal Revenue Code Section 280G Clause in Contracts

Internal Revenue Code Section 280G. Notwithstanding any other provision of this Agreement or any other plan, arrangement or agreement to the contrary, if all or any portion of the payments or benefits payable to Employee under this Agreement or otherwise (“Covered Payments”) constitute “excess parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) and would, but for this Section 5.7, be subject to the excise tax imposed by Code Section 4999 (the “Excise Tax”), then prior to making the Covered Payments, a calculation shall be made comparing (i) the Net Benefit (as defined below) to Employee of the Covered Payments after payment of the Excise Tax to (ii) the Net Benefit to Employee if the Covered Payments are limited to the extent necessary to avoid being subject to the Excise Tax. Only if the amount calculated under (i) above is less than the amount under (ii) above will the Covered Payments be reduced to the minimum extent necessary to ensure that no portion of the Covered Payments is subject to the Excise Tax. For this purpose, “Net Benefit” shall mean the present value of the Covered Payments net of all federal, state, local, foreign income, employment and excise taxes. Any reduction in the Covered Payments shall be made in a manner that maximizes Employee’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, and where two economically equivalent amounts are subject to reduction but payable at different times, such amounts shall be reduced on a pro rata basis but not below zero. If reduction of the Covered Payments is not sufficient to avoid application of Code Sections 280G and 4999, Employee acknowledges and agrees that benefits under this Agreement may be eliminated altogether. The amount of the benefit reduction under this Section 5.7 shall be determined by the Bank, whose determination shall be conclusive and binding on the Bank and Employee.