280G Gross-Up. (a) In the event it will be determined that any payment or distribution by the Company or other amount with respect to the Company to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 5 (a “Payment”), is (or will 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 are (or will be) incurred by Executive with respect to the excise tax imposed by Section 4999 of the Code with respect to the Company (the excise tax, together with any interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), Executive will be entitled to receive an additional cash payment (a “Gross-Up Payment” from the Company in an amount equal to the sum of the Excise Tax and an amount sufficient to pay the cumulative Excise Tax and all cumulative income taxes (including any interest and penalties imposed with respect to such taxes) relating to the Gross-Up Payment so that the net amount retained by Executive is equal to all payments to which Employee is entitled pursuant to the terms of this Agreement (excluding the Gross-Up Payment) or otherwise less income taxes (but not reduced by the Excise Tax or by income taxes attributable to the Gross-Up Payment). (b) Subject to the provisions of Section 5(c), all determinations required to be made under this Section 5, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at the determination, will be made by a nationally recognized certified public accounting firm selected by the Company with the consent of Executive, which should not unreasonably be withheld (the “Accounting Firm”) which will provide detailed supporting calculations both to the Company and Executive within thirty (30) days after the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm will be borne solely by the Company. The Company, as determined in accordance with this Section 5, will pay any Gross-Up Payment to Executive within five (5) days after the receipt of the Accounting Firm’s determination. If the Accounting Firm determines that no Excise Tax is payable by Executive, it will so indicate to Executive in writing. Any determination by the Accounting Firm will be binding upon the Company and Executive; provided, however, that as a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm, it is possible that Gross-Up Payments that the Company should have made will not have been made (an “Underpayment”), consistent with the calculations required to be made hereunder. In the event the Company exhausts its remedies in accordance with Section 5(c), or elects not to exercise such remedies, and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm will determine the amount of Underpayment that has occurred and the Underpayment will be promptly paid by the Company to or for the benefit of Executive. (c) Executive will notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require a Gross-Up Payment (that has not already been paid by the Company). The notification will be given as soon as practicable but no later than ten (10) business days after Executive is informed in writing of the claim and will apprise the Company of the nature of the claim and the date on which the claim is requested to be paid. Executive will not pay the claim prior to the expiration of the 30-day period following the date on which Executive gives notice to the Company or any shorter period ending on the date that any payment of taxes with respect to the claim is due. If the Company notifies Executive in writing prior to the expiration of the 30-day or shorter period that it desires to contest the claim, Executive will: (i) give the Company any information reasonably requested by the Company relating to the claim; (ii) take any action in connection with contesting the claim as the Company will reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to the claim by an attorney reasonably selected by the Company; (iii) cooperate with the Company in good faith in order effectively to contest the claim; and (iv) permit the Company to participate in any proceedings relating to the claim. (d) The Company will bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with the contest and will indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of the representation and payment of costs and expenses. Without limitation of the forgoing provisions of this Section 5, the Company will control all proceedings taken in connection with the contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings, and conferences with the taxing authority in respect of the claim and may, at its sole option, either direct Executive to pay the tax claimed and xxx for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute the contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company will determine. If the Company directs Executive to pay the claim and xxx for a refund, the Company will advance the amount of the payment to Executive, on an interest-free basis, and will indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to the advance or with respect to any imputed income with respect to the advance; and any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which the contested amount is claimed to be due will be limited solely to the contested amount. The Company’s control of the contest will be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive will be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (e) If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 5(d), Executive becomes entitled to receive any refund with respect to the claim, Executive will, subject to the Company’s compliance with the requirements of Section 5(d), promptly pay to the Company the amount of the refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to this Section 5(d), a determination is made that Executive will not be entitled to any refund with respect to the claim and the Company does not notify Executive in writing of its intent to contest the denial of refund prior to the expiration of thirty (30) days after the determination, then the advance will be forgiven and will not be required to be repaid and the amount of the advance will offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. (f) Should the Company elect not to contest the Internal Revenue Service claim in accordance with the foregoing provisions of Section 5(c) or otherwise not provide Executive with written notice of its intention to contest such claim within the applicable thirty (30) day or shorter notice period provided in Section 5(c), then the Company will promptly thereafter pay Executive the applicable Gross-Up Payment attributable to such claim.
Appears in 4 contracts
Samples: Severance and Change of Control Agreement, Severance and Change of Control Agreement (Netsuite Inc), Severance and Change of Control Agreement (Netsuite Inc)
280G Gross-Up. (a) In the event it will be determined that any payment or distribution by the Company or other amount with respect to the Company to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 5 (a “Payment”), is (or will 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 are (or will be) incurred by Executive with respect to the excise tax imposed by Section 4999 of the Code with respect to the Company (the excise tax, together with any interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), Executive will be entitled to receive an additional cash payment (a “Gross-Up Payment” ”) from the Company in an amount equal to the sum of the Excise Tax and an amount sufficient to pay the cumulative Excise Tax and all cumulative income taxes (including any interest and penalties imposed with respect to such taxes) relating to the Gross-Up Payment so that the net amount retained by Executive is equal to all payments to which Employee Executive is entitled pursuant to the terms of this Agreement (excluding the Gross-Up Payment) or otherwise less income taxes (but not reduced by the Excise Tax or by income taxes attributable to the Gross-Up Payment). The Company will pay the Gross-Up Payment to Executive no later than the close of the calendar year following the calendar year in which Executive remits the applicable taxes.
(b) Subject to the provisions of Section 5(c), all determinations required to be made under this Section 5, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at the determination, will be made by a nationally recognized certified public accounting firm selected by the Company with the consent of Executive, which should not unreasonably be withheld (the “Accounting Firm”) which will provide detailed supporting calculations both to the Company and Executive within thirty (30) days after the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm will be borne solely by the Company. The Company, as determined in accordance with this Section 5, will pay any Gross-Up Payment to Executive within five (5) days after the receipt of the Accounting Firm’s determination. If the Accounting Firm determines that no Excise Tax is payable by Executive, it will so indicate to Executive in writing. Any determination by the Accounting Firm will be binding upon the Company and Executive; provided, however, that as a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm, it is possible that Gross-Up Payments that the Company should have made will not have been made (an “Underpayment”), consistent with the calculations required to be made hereunder. In the event the Company exhausts its remedies in accordance with Section 5(c), or elects not to exercise such remedies, and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm will determine the amount of Underpayment that has occurred and the Underpayment will be promptly paid by the Company to or for the benefit of Executive.
(c) Executive will notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require a Gross-Up Payment (that has not already been paid by the Company). The notification will be given as soon as practicable but no later than ten (10) business days after Executive is informed in writing of the claim and will apprise the Company of the nature of the claim and the date on which the claim is requested to be paid. Executive will not pay the claim prior to the expiration of the 30-day period following the date on which Executive gives notice to the Company or any shorter period ending on the date that any payment of taxes with respect to the claim is due. If the Company notifies Executive in writing prior to the expiration of the 30-day or shorter period that it desires to contest the claim, Executive will:
(i) give the Company any information reasonably requested by the Company relating to the claim;
(ii) take any action in connection with contesting the claim as the Company will reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to the claim by an attorney reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order effectively to contest the claim; and
(iv) permit the Company to participate in any proceedings relating to the claim.
(d) The Company will bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with the contest and will indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of the representation and payment of costs and expenses. Without limitation of the forgoing provisions of this Section 5, the Company will control all proceedings taken in connection with the contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings, and conferences with the taxing authority in respect of the claim and may, at its sole option, either direct Executive to pay the tax claimed and xxx for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute the contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company will determine. If the Company directs Executive to pay the claim and xxx for a refund, the Company will advance the amount of the payment to Executive, on an interest-free basis, and will indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to the advance or with respect to any imputed income with respect to the advance; and any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which the contested amount is claimed to be due will be limited solely to the contested amount. The Company’s control of the contest will be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive will be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.
(e) If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 5(d), Executive becomes entitled to receive any refund with respect to the claim, Executive will, subject to the Company’s compliance with the requirements of Section 5(d), promptly pay to the Company the amount of the refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to this Section 5(d), a determination is made that Executive will not be entitled to any refund with respect to the claim and the Company does not notify Executive in writing of its intent to contest the denial of refund prior to the expiration of thirty (30) days after the determination, then the advance will be forgiven and will not be required to be repaid and the amount of the advance will offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.
(f) Should the Company elect not to contest the Internal Revenue Service claim in accordance with the foregoing provisions of Section 5(c) or otherwise not provide Executive with written notice of its intention to contest such claim within the applicable thirty (30) day or shorter notice period provided in Section 5(c), then the Company will promptly thereafter pay Executive the applicable Gross-Up Payment attributable to such claim.
Appears in 3 contracts
Samples: Severance and Change of Control Agreement (Netsuite Inc), Severance and Change of Control Agreement (Netsuite Inc), Severance and Change of Control Agreement (Netsuite Inc)
280G Gross-Up. (a) In the event it will be determined that the Executive shall become entitled to payments and/or benefits provided by this Agreement or any payment or distribution by other amounts in the Company or other amount with respect to the Company to or for the benefit “nature of Executive, compensation” (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwiseany other plan, but determined without regard to arrangement or agreement with the Company, or any additional payments required under this arrangement or agreement with any person whose actions result in a change of ownership or effective control covered by Code Section 5 280G(b)(2) (a “Payment”), is (or will be) subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code280G Change in Control”) or any interest person affiliated with the Company or penalties are such person) as a result of a 280G Change in Control (or collectively the “Company Payments”), and such Company Payments will be) incurred by Executive with respect be subject to the excise tax imposed by Section 4999 of the Code with respect to the Company (the excise tax, together with any interest and penalties, are hereinafter collectively referred to as the “Excise Tax”) imposed by Code Section 4999 (and any similar tax that may hereafter be imposed by any taxing authority), subject to Section 8(d) and Section 11 below the Company shall pay to the Executive will be entitled to receive at the time specified below (i) an additional cash payment amount (a the “Gross-Up Payment” from ”) such that the net amount retained by the Executive, after deduction of any Excise Tax on the Company in Payments and any U.S. federal, state, and for local income or payroll tax upon the Gross-up Payment provided for by this paragraph, but before deduction for any U.S. federal, state, and local income or payroll tax on the Company Payments, shall be equal to the Company Payments and (ii) an amount equal to the sum product of any deductions disallowed for federal, state or local income tax purposes because of the inclusion of the Gross-Up Payment in the Executive’s adjusted gross income multiplied by the highest applicable marginal rate of federal, state or local income taxation, respectively, for the calendar year in which the Gross-Up Payment is to be made.
(b) Notwithstanding the foregoing, if it shall be determined that the Executive is entitled to a Gross-Up Payment, but that if the Company Payments (other than that portion valued under Treasury Regulation Section 1.280G, Q&A 24(c)) (the “Cash Payments”) are reduced by the amount necessary such that the receipt of the Company Payments would not give rise to any Excise Tax (the “Reduced Payment”) and the Reduced Payment would not be less than ninety-five percent (95%) of the Cash Payment, then no Gross-Up Payment shall be made to the Executive and the Cash Payments, in the aggregate, shall be reduced to the Reduced Payment. If the Reduced Payment is to be effective, payments shall be reduced in the following order (i) any cash severance based on a multiple of Base Salary or Annual Bonus, (ii) any other cash amounts payable to the Executive, (iii) any benefits valued as parachute payments; (iv) acceleration of vesting of any stock options for which the exercise price exceeds the then fair market value; and (v) acceleration of vesting of any equity not covered by subsection (iv) above.
(c) In the event that the Internal Revenue Service or court ultimately makes a determination that the excess parachute payments plus the base amount is an amount sufficient to pay the cumulative Excise Tax and all cumulative income taxes (including any interest and penalties imposed other than as determined initially, an appropriate adjustment shall be made with respect to such taxes) relating regard to the Gross-Up Payment so that or Reduced Payment, as applicable to reflect the net amount retained by Executive is equal to all payments to which Employee is entitled pursuant to final determination and the terms resulting impact on whether the preceding Section 8(d) applies.
(d) For purposes of this Agreement (excluding determining whether any of the Company Payments and Gross-Up PaymentPayments (collectively the “Total Payments”) or otherwise less income taxes (but not reduced by will be subject to the Excise Tax or by income taxes attributable to the Gross-Up Payment).
(b) Subject to the provisions of Section 5(c), all determinations required to be made under this Section 5, including whether and when a Gross-Up Payment is required and the amount of such GrossExcise Tax, (i) the Total Payments shall be treated as “parachute payments” within the meaning of Code Section 280G(b)(2), and all “parachute payments” in excess of the “base amount” (as defined under Code Section 280G(b)(3)) shall be treated as subject to the Excise Tax, unless and except to the extent that, in the opinion of the Company’s independent certified public accountants appointed prior to any change in ownership (as defined under Code Section 280G(b)(2)) or tax counsel selected by such accountants or the Company (the “Accountants”) such Total Payments (in whole or in part) either do not constitute “parachute payments,” including giving effect to the recalculation of stock options in accordance with Treasury Regulation Section 1.280G-1, Q&A 33, represent reasonable compensation for services actually rendered within the meaning of Code Section 280G(b)(4) in excess of the “base amount” or are otherwise not subject to the Excise Tax, and (ii) the value of any non-Up Payment and cash benefits or any deferred payment or benefit shall be determined by the assumptions Accountants in accordance with the principles of Code Section 280G. To the extent permitted under Revenue Procedure 2003-68, the value determination shall be recalculated to the extent it would be utilized beneficial to the Executive. In the event that the Accountants are serving as accountant or auditor for the individual, entity or group effecting the Change in arriving at Control, the determinationExecutive may appoint with the approval of the Company, will which approval shall not be unreasonable or unreasonably delayed, another nationally recognized accounting firm to make the determinations hereunder (which accounting firm shall then be referred to as the “Accountants” hereunder). All determinations hereunder shall be made by a nationally recognized certified public accounting firm selected by the Company with the consent of Executive, Accountants which should not unreasonably be withheld (the “Accounting Firm”) which will shall provide detailed supporting calculations both to the Company and the Executive within thirty (30) days after the receipt of notice from Executive that there has been a Payment, or at such earlier time as it is requested by the Company. All fees and expenses of Company or the Accounting Firm will be borne solely by the Company. The Company, as determined in accordance with this Section 5, will pay any Gross-Up Payment to Executive within five (5) days after the receipt of the Accounting Firm’s determinationExecutive. If the Accounting Firm determines Accountants determine that no Excise Tax is payable by Executivepayments under this Agreement must be reduced pursuant to this paragraph, it will so indicate they shall furnish the Executive with a written opinion to Executive in writingsuch effect. Any The determination by of the Accounting Firm will Accountants shall be final and binding upon the Company and the Executive; provided, however, that as a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm, it is possible that Gross-Up Payments that the Company should have made will not have been made (an “Underpayment”), consistent with the calculations required to be made hereunder. In the event the Company exhausts its remedies in accordance with Section 5(c), or elects not to exercise such remedies, and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm will determine the amount of Underpayment that has occurred and the Underpayment will be promptly paid by the Company to or for the benefit of Executive.
(c) Executive will notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require a Gross-Up Payment (that has not already been paid by the Company). The notification will be given as soon as practicable but no later than ten (10) business days after Executive is informed in writing of the claim and will apprise the Company of the nature of the claim and the date on which the claim is requested to be paid. Executive will not pay the claim prior to the expiration of the 30-day period following the date on which Executive gives notice to the Company or any shorter period ending on the date that any payment of taxes with respect to the claim is due. If the Company notifies Executive in writing prior to the expiration of the 30-day or shorter period that it desires to contest the claim, Executive will:
(i) give the Company any information reasonably requested by the Company relating to the claim;
(ii) take any action in connection with contesting the claim as the Company will reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to the claim by an attorney reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order effectively to contest the claim; and
(iv) permit the Company to participate in any proceedings relating to the claim.
(d) The Company will bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with the contest and will indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of the representation and payment of costs and expenses. Without limitation of the forgoing provisions of this Section 5, the Company will control all proceedings taken in connection with the contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings, and conferences with the taxing authority in respect of the claim and may, at its sole option, either direct Executive to pay the tax claimed and xxx for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute the contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company will determine. If the Company directs Executive to pay the claim and xxx for a refund, the Company will advance the amount of the payment to Executive, on an interest-free basis, and will indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to the advance or with respect to any imputed income with respect to the advance; and any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which the contested amount is claimed to be due will be limited solely to the contested amount. The Company’s control of the contest will be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive will be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.
(e) If, after the receipt by Executive For purposes of an amount advanced by the Company pursuant to Section 5(d), Executive becomes entitled to receive any refund with respect to the claim, Executive will, subject to the Company’s compliance with the requirements of Section 5(d), promptly pay to the Company determining the amount of the refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to this Section 5(d), a determination is made that Executive will not be entitled to any refund with respect to the claim and the Company does not notify Executive in writing of its intent to contest the denial of refund prior to the expiration of thirty (30) days after the determination, then the advance will be forgiven and will not be required to be repaid and the amount of the advance will offset, to the extent thereofGross-Up Payment, the amount of Executive’s actual U.S. federal income tax rate in the calendar year in which the Gross-Up Payment required is to be paid.
(f) Should made and state and local income taxes at the Executive’s actual rate of taxation in the state and locality of the Executive’s residence for the calendar year in which the Company elect not Payment is to contest be made, net of the Internal Revenue Service claim maximum reduction in accordance with U.S. federal income taxes which could be obtained from deduction of such state and local taxes if paid in such year, shall be used. In the foregoing provisions event that the Excise Tax is subsequently determined by the Accountants to be less than the amount taken into account hereunder at the time the Gross-Up Payment is made, the Executive shall repay to the Company, at the time that the amount of Section 5(c) or otherwise not provide Executive with written notice such reduction in Excise Tax is finally determined, the portion of its intention to contest such claim within the applicable thirty (30) day or shorter notice period provided in Section 5(c), then the Company will promptly thereafter pay Executive the applicable prior Gross-Up Payment attributable to such claimreduction (plus the portion of the Gross-Up Payment attributable to the Excise Tax and U.S. federal, state and local income tax imposed on the portion of the Gross-up Payment being repaid by the Executive if such repayment results in a reduction in Excise Tax or a U.S. federal, state and local income tax deduction), plus interest on the amount of such repayment at the rate provided in Code Section 1274(b)(2)(B). Notwithstanding the foregoing, in the event any portion of the Gross-Up Payment to be refunded to the Company has been paid to any U.S. federal, state and local tax authority, repayment thereof (and related amounts) shall not be required until actual refund or credit of such portion has been made to the Executive, and interest payable to the Company shall not exceed the interest received or credited to the Executive by such tax authority for the period it held such portion. The Executive and the Company shall mutually agree upon the course of action to be pursued (and the method of allocating the expense thereof) if the Executive’s claim for refund or credit is denied.
(f) In the event that the Excise Tax is later determined by the Accountant or the Internal Revenue Service to exceed the amount taken into account hereunder at the time the Gross-Up Payment is made (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest or penalties payable with respect to such excess) at the time that the amount of such excess is finally determined.
(g) Subject to Section 11 below, including, but not limited to, Section 11(d)(1), the Gross-up Payment or portion thereof provided for above shall be paid not later than the thirtieth (30th) day following a 280G Change in Control which subjects the Executive to the Excise Tax; provided, however, that if the amount of such Gross-up Payment or portion thereof 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 Accountant, of the minimum amount of such payments and shall pay the remainder of such payments, subject to further payments pursuant to Section 8(c) hereof, as soon as the amount thereof can reasonably be determined, but in no event later than the ninetieth (90th) day after the occurrence of the event subjecting the Executive to the Excise Tax. Notwithstanding any other provision of this Agreement, all Gross-Up Payments under this Section 8 shall be made to the Executive no later than by the end of the Executive’s taxable year following the Executive’s taxable year in which the Executive remits the applicable taxes. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, subject to Section 8(m) below, such excess shall constitute a loan by the Company to the Executive, payable on the fifth (5th) day after demand by the Company (together with interest at the rate provided in Code Section 1274(b)(2)(B)).
(h) In the event of any controversy with the Internal Revenue Service (or other taxing authority) with regard to the Excise Tax, the Executive shall permit the Company to control issues related to the Excise Tax (at its expense), but the Executive shall control any other issues unrelated to the Excise Tax. In the event that the issues are interrelated, the Executive and the Company shall in good faith cooperate. In the event of any conference with any taxing authority as to the Excise Tax or associated income taxes, the Executive shall permit the representative of the Company to accompany the Executive, and the Executive and his representative shall cooperate with the Company and its representative.
(i) The Company shall be responsible for all charges of the Accountant.
(j) The Company and the Executive shall promptly deliver to each other copies of any written communications, and summaries of any verbal communications, with any taxing authority regarding the Excise Tax covered by this provision.
(k) Nothing in this Section 8 is intended to violate the Xxxxxxxx-Xxxxx Act and to the extent that any advance or repayment obligation hereunder would do so, such obligation shall be modified so as to make the advance a nonrefundable payment to the Executive and the repayment obligation null and void.
Appears in 1 contract
Samples: Employment Agreement (Loral Space & Communications Inc.)
280G Gross-Up. (a) In the event it will be determined that Executive shall become entitled to payments and/or benefits provided by this Agreement or any payment or distribution by other amounts in the Company or other amount with respect to the Company to or for the benefit “nature of Executive, compensation” (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwiseany other plan, but determined without regard to arrangement or agreement with the Company, or any additional payments required under this arrangement or agreement with any person whose actions result in a change of ownership or effective control covered by Code Section 5 280G(b)(2) (a “Payment”), is (or will be) subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code280G Change in Control”) or any interest person affiliated with the Company or penalties are such person) as a result of a 280G Change in Control (or collectively the “Company Payments”), and such Company Payments will be) incurred by Executive with respect be subject to the excise tax imposed by Section 4999 of the Code with respect to the Company (the excise tax, together with any interest and penalties, are hereinafter collectively referred to as the “Excise Tax”) imposed by Code Section 4999 (and any similar tax that may hereafter be imposed by any taxing authority), subject to Section 4.10 above, the Company shall pay to Executive will be entitled to receive at the time specified below (i) an additional cash payment amount (a the “Gross-Up Payment” from ”) such that the net amount retained by Executive, after deduction of any Excise Tax on the Company in Payments and any U.S. federal, state, and for local income or payroll tax upon the Gross-up Payment provided for by this paragraph, but before deduction for any U.S. federal, state, and local income or payroll tax on the Company Payments, shall be equal to the Company Payments and (ii) an amount equal to the sum product of any deductions disallowed for federal, state or local income tax purposes because of the Excise Tax and inclusion of the Gross-Up Payment in Executive’s adjusted gross income multiplied by the highest applicable marginal rate of federal, state or local income taxation, respectively, for the calendar year in which the Gross-Up Payment is to be made.
(b) In the event that the Internal Revenue Service or court ultimately makes a determination that the excess parachute payments plus the base amount is an amount sufficient to pay the cumulative Excise Tax and all cumulative income taxes (including any interest and penalties imposed other than as determined initially, an appropriate adjustment shall be made with respect to such taxes) relating regard to the Gross-Up Payment so that to reflect the net amount retained by Executive is equal to all payments to which Employee is entitled pursuant to final determination.
(c) For purposes of determining whether any of the terms of this Agreement (excluding the Company Payments and Gross-Up PaymentPayments (collectively the “Total Payments”) or otherwise less income taxes (but not reduced by will be subject to the Excise Tax or by income taxes attributable to the Gross-Up Payment).
(b) Subject to the provisions of Section 5(c), all determinations required to be made under this Section 5, including whether and when a Gross-Up Payment is required and the amount of such GrossExcise Tax, (i) the Total Payments shall be treated as “parachute payments” within the meaning of Code Section 280G(b)(2), and all “parachute payments” in excess of the “base amount” (as defined under Code Section 280G(b)(3)) shall be treated as subject to the Excise Tax, unless and except to the extent that, in the opinion of the Company’s independent certified public accountants appointed prior to any change in ownership (as defined under Code Section 280G(b)(2)) or tax counsel selected by such accountants or the Company (the “Accountants”) such Total Payments (in whole or in part) either do not constitute “parachute payments,” including giving effect to the recalculation of stock options in accordance with Treasury Regulation Section 1.280G-1, Q&A 33, represent reasonable compensation for services actually rendered within the meaning of Code Section 280G(b)(4) in excess of the “base amount” or are otherwise not subject to the Excise Tax, and (ii) the value of any non-Up Payment and cash benefits or any deferred payment or benefit shall be determined by the assumptions Accountants in accordance with the principles of Code Section 280G. To the extent permitted under Revenue Procedure 2003-68, the value determination shall be recalculated to the extent it would be utilized beneficial to Executive. In the event that the Accountants are serving as accountant or auditor for the individual, entity or group effecting the Change in arriving at Control, Executive may appoint with the determinationapproval of the Company, will which approval shall not be unreasonable or unreasonably delayed, another nationally recognized accounting firm reasonably acceptable to the Company to make the determinations hereunder (which accounting firm shall then be referred to as the “Accountants” hereunder). All determinations hereunder shall be made by a nationally recognized certified public accounting firm selected by the Company with the consent of Executive, Accountants which should not unreasonably be withheld (the “Accounting Firm”) which will shall provide detailed supporting calculations both to the Company and Executive within thirty (30) days after the receipt of notice from Executive that there has been a Payment, or at such earlier time as it is requested by the Company. All fees and expenses of the Accounting Firm will be borne solely by the Company. The Company, as determined in accordance with this Section 5, will pay any Gross-Up Payment to Executive within five (5) days after the receipt of the Accounting Firm’s determinationCompany or Executive. If the Accounting Firm determines Accountants determine that no Excise Tax is payable by Executivepayments under this Agreement must be reduced pursuant to this paragraph, it will so indicate they shall furnish Executive with a written opinion to Executive in writingsuch effect. Any The determination by of the Accounting Firm will Accountants shall be final and binding upon the Company and Executive; provided, however, that as a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm, it is possible that Gross-Up Payments that the Company should have made will not have been made (an “Underpayment”), consistent with the calculations required to be made hereunder. In the event the Company exhausts its remedies in accordance with Section 5(c), or elects not to exercise such remedies, and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm will determine the amount of Underpayment that has occurred and the Underpayment will be promptly paid by the Company to or for the benefit of Executive.
(c) Executive will notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require a Gross-Up Payment (that has not already been paid by the Company). The notification will be given as soon as practicable but no later than ten (10) business days after Executive is informed in writing of the claim and will apprise the Company of the nature of the claim and the date on which the claim is requested to be paid. Executive will not pay the claim prior to the expiration of the 30-day period following the date on which Executive gives notice to the Company or any shorter period ending on the date that any payment of taxes with respect to the claim is due. If the Company notifies Executive in writing prior to the expiration of the 30-day or shorter period that it desires to contest the claim, Executive will:
(i) give the Company any information reasonably requested by the Company relating to the claim;
(ii) take any action in connection with contesting the claim as the Company will reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to the claim by an attorney reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order effectively to contest the claim; and
(iv) permit the Company to participate in any proceedings relating to the claim.
(d) The Company will bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with the contest and will indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result For purposes of the representation and payment of costs and expenses. Without limitation of the forgoing provisions of this Section 5, the Company will control all proceedings taken in connection with the contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings, and conferences with the taxing authority in respect of the claim and may, at its sole option, either direct Executive to pay the tax claimed and xxx for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute the contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company will determine. If the Company directs Executive to pay the claim and xxx for a refund, the Company will advance determining the amount of the payment to Gross-Up Payment, Executive, on an interest-free basis, and will indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or ’s actual U.S. federal income tax (including interest or penalties with respect thereto) imposed with respect to rate in the advance or with respect to any imputed income with respect to the advance; and any extension of the statute of limitations relating to payment of taxes for the taxable calendar year of Executive with respect to in which the contested amount is claimed to be due will be limited solely to the contested amount. The Company’s control of the contest will be limited to issues with respect to which a Gross-Up Payment would is to be payable hereunder made and Executive will state and local income taxes at Executive’s actual rate of taxation in the state and locality of Executive’s residence for the calendar year in which the Company Payment is to be entitled to settle or contestmade, as net of the case may bemaximum reduction in U.S. federal income taxes which could be obtained from deduction of such state and local taxes if paid in such year, any other issue raised shall be used. In the event that the Excise Tax is subsequently determined by the Internal Revenue Service or any other taxing authority.
(e) If, after the receipt by Executive of an amount advanced by the Company pursuant Accountants to Section 5(d), Executive becomes entitled to receive any refund with respect to the claim, Executive will, subject to the Company’s compliance with the requirements of Section 5(d), promptly pay to the Company be less than the amount of taken into account hereunder at the refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after time the receipt by Executive of an amount advanced by the Company pursuant to this Section 5(d), a determination is made that Executive will not be entitled to any refund with respect to the claim and the Company does not notify Executive in writing of its intent to contest the denial of refund prior to the expiration of thirty (30) days after the determination, then the advance will be forgiven and will not be required to be repaid and the amount of the advance will offset, to the extent thereof, the amount of Gross-Up Payment required is made, Executive shall repay to be paid.
(f) Should the Company elect not to contest Company, at the Internal Revenue Service claim time that the amount of such reduction in accordance with Excise Tax is finally determined, the foregoing provisions portion of Section 5(c) or otherwise not provide Executive with written notice of its intention to contest such claim within the applicable thirty (30) day or shorter notice period provided in Section 5(c), then the Company will promptly thereafter pay Executive the applicable prior Gross-Up Payment attributable to such claimreduction (plus the portion of the Gross-Up Payment attributable to the Excise Tax and U.S. federal, state and local income tax imposed on the portion of the Gross-up Payment being repaid by Executive if such repayment results in a reduction in Excise Tax or a U.S. federal, state and local income tax deduction), plus interest on the amount of such repayment at the rate provided in Code Section 1274(b)(2)(B). Notwithstanding the foregoing, in the event any portion of the Gross-Up Payment to be refunded to the Company has been paid to any U.S. federal, state and local tax authority, repayment thereof (and related amounts) shall not be required until actual refund or credit of such portion has been made to Executive, and interest payable to the Company shall not exceed the interest received or credited to Executive by such tax authority for the period it held such portion. Executive and the Company shall mutually agree upon the course of action to be pursued (and the method of allocating the expense thereof) if Executive’s claim for refund or credit is denied.
(e) In the event that the Excise Tax is later determined by the Accountant or the Internal Revenue Service to exceed the amount taken into account hereunder at the time the Gross-Up Payment is made (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest or penalties payable with respect to such excess) at the time that the amount of such excess is finally determined.
(f) Subject to Section 4.10 above, the Gross-up Payment or portion thereof provided for above shall be paid within 30 days following a 280G Change in Control which subjects Executive to the Excise Tax; provided, however, that if the amount of such Gross-up Payment or portion thereof cannot be finally determined on or before such day, the Company shall pay to Executive on such day an estimate, as determined in good faith by the Accountant, of the minimum amount of such payments and shall pay the remainder of such payments, subject to further payments pursuant to Section 4.12(b) hereof, as soon as the amount thereof can reasonably be determined, but in no event later than the ninetieth (90th) day after the occurrence of the event subjecting Executive to the Excise Tax. Notwithstanding any other provision of this Agreement, all Gross-up payments under this Section 4.12 shall be made to the Executive no later than by the end of the Executive’s taxable year following the Executive’s taxable year in which Executive remits the applicable taxes. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, the Executive shall reimburse the Company for such amount, such reimbursement to be payable on the fifth (5th) day after demand by the Company (together with interest at the rate provided in Code Section 1274(b)(2)(B)).
(g) In the event of any controversy with the Internal Revenue Service (or other taxing authority) with regard to the Excise Tax, Executive shall permit the Company to control issues related to the Excise Tax (at its expense), but Executive shall control any other issues unrelated to the Excise Tax. In the event that the issues are interrelated, Executive and the Company shall in good faith cooperate. In the event of any conference with any taxing authority as to the Excise Tax or associated income taxes, Executive shall permit the representative of the Company to accompany Executive, and Executive and his representative shall cooperate with the Company and its representative.
(h) The Company shall be responsible for all charges of the Accountant.
(i) The Company and Executive shall promptly deliver to each other copies of any written communications, and summaries of any verbal communications, with any taxing authority regarding the Excise Tax covered by this provision.
(j) Nothing in this Section 4.12 is intended to violate the Xxxxxxxx-Xxxxx Act and to the extent that any advance or repayment obligation hereunder would do so, such obligation shall be modified so as to make the advance a nonrefundable payment to Executive and the repayment obligation null and void.
Appears in 1 contract
280G Gross-Up. (a) In the event it will be determined that the Executive shall become entitled to payments and/or benefits provided by this Agreement or any payment or distribution by other amounts in the Company or other amount with respect to the Company to or for the benefit "nature of Executive, compensation" (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwiseany other plan, but determined without regard to arrangement or agreement with the Company, or any additional payments required under this arrangement or agreement with any person whose actions result in a change of ownership or effective control covered by Code Section 5 280G(b)(2) (a “Payment”"280G Change in Control") or any person affiliated with the Company or such person) as a result of a 280G Change in Control (collectively the "Company Payments"), is (or and such Company Payments will be) be subject to the excise tax (the "Excise Tax") imposed by Code Section 4999 of (and any similar tax that may hereafter be imposed by any taxing authority), subject to Section 8(d) below the Internal Revenue Code of 1986, as amended Company shall pay to the Executive at the time specified below (i) an additional amount (the “Code”) or any interest or penalties are (or will be) incurred by Executive with respect to the excise tax imposed by Section 4999 of the Code with respect to the Company (the excise tax, together with any interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), Executive will be entitled to receive an additional cash payment (a “"Gross-Up Payment” from ") such that the net amount retained by the Executive, after deduction of any Excise Tax on the Company in Payments and any U.S. federal, state, and for local income or payroll tax upon the Gross-up Payment provided for by this paragraph, but before deduction for any U.S. federal, state, and local income or payroll tax on the Company Payments, shall be equal to the Company Payments and (ii) an amount equal to the sum product of any deductions disallowed for federal, state or local income tax purposes because of the inclusion of the Gross-Up Payment in the Executive's adjusted gross income multiplied by the highest applicable marginal rate of federal, state or local income taxation, respectively, for the calendar year in which the Gross-Up Payment is to be made.
(b) Notwithstanding the foregoing, if it shall be determined that the Executive is entitled to a Gross-Up Payment, but that if the Company Payments (other than that portion valued under Treasury Regulation Section 1.280G, Q&A 24(c)) (the "Cash Payments") are reduced by the amount necessary such that the receipt of the Company Payments would not give rise to any Excise Tax (the "Reduced Payment") and the Reduced Payment would not be less than ninety-five percent (95%) of the Cash Payment, then no Gross-Up Payment shall be made to the Executive and the Cash Payments, in the aggregate, shall be reduced to the Reduced Payments. If the Reduced Payments is to be effective, payments shall be reduced in the following order (i) any cash severance based on a multiple of Base Salary or Annual Bonus, (ii) any other cash amounts payable to the Executive, (iii) any benefits valued as parachute payments; (iv) acceleration of vesting of any stock options for which the exercise price exceeds the then fair market value; and (v) acceleration of vesting of any equity not covered by subsection (iv) above, unless the Executive elects another method of reduction by written notice to the Company prior to the change of ownership or effective control.
(c) In the event that the Internal Revenue Service or court ultimately makes a determination that the excess parachute payments plus the base amount is an amount sufficient to pay the cumulative Excise Tax and all cumulative income taxes (including any interest and penalties imposed other than as determined initially, an appropriate adjustment shall be made with respect to such taxes) relating regard to the Gross-Up Payment so that or Reduced Payment, as applicable to reflect the net amount retained by Executive is equal to all payments to which Employee is entitled pursuant to the terms of this Agreement (excluding the Gross-Up Payment) or otherwise less income taxes (but not reduced by the Excise Tax or by income taxes attributable to the Gross-Up Payment).
(b) Subject to the provisions of Section 5(c), all determinations required to be made under this Section 5, including whether and when a Gross-Up Payment is required final determination and the amount of such Gross-Up Payment and resulting impact on whether the assumptions to be utilized in arriving at the determination, will be made by a nationally recognized certified public accounting firm selected by the Company with the consent of Executive, which should not unreasonably be withheld (the “Accounting Firm”) which will provide detailed supporting calculations both to the Company and Executive within thirty (30) days after the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm will be borne solely by the Company. The Company, as determined in accordance with this preceding Section 5, will pay any Gross-Up Payment to Executive within five (5) days after the receipt of the Accounting Firm’s determination. If the Accounting Firm determines that no Excise Tax is payable by Executive, it will so indicate to Executive in writing. Any determination by the Accounting Firm will be binding upon the Company and Executive; provided, however, that as a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm, it is possible that Gross-Up Payments that the Company should have made will not have been made (an “Underpayment”), consistent with the calculations required to be made hereunder. In the event the Company exhausts its remedies in accordance with Section 5(c), or elects not to exercise such remedies, and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm will determine the amount of Underpayment that has occurred and the Underpayment will be promptly paid by the Company to or for the benefit of Executive.
(c) Executive will notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require a Gross-Up Payment (that has not already been paid by the Company). The notification will be given as soon as practicable but no later than ten (10) business days after Executive is informed in writing of the claim and will apprise the Company of the nature of the claim and the date on which the claim is requested to be paid. Executive will not pay the claim prior to the expiration of the 30-day period following the date on which Executive gives notice to the Company or any shorter period ending on the date that any payment of taxes with respect to the claim is due. If the Company notifies Executive in writing prior to the expiration of the 30-day or shorter period that it desires to contest the claim, Executive will:
(i) give the Company any information reasonably requested by the Company relating to the claim;
(ii) take any action in connection with contesting the claim as the Company will reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to the claim by an attorney reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order effectively to contest the claim; and
(iv) permit the Company to participate in any proceedings relating to the claim.8
(d) The Company will bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with the contest and will indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of the representation and payment of costs and expenses. Without limitation of the forgoing provisions of this Section 5, the Company will control all proceedings taken in connection with the contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings, and conferences with the taxing authority in respect of the claim and may, at its sole option, either direct Executive to pay the tax claimed and xxx for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute the contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company will determine. If the Company directs Executive to pay the claim and xxx for a refund, the Company will advance the amount of the payment to Executive, on an interest-free basis, and will indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to the advance or with respect to any imputed income with respect to the advance; and any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which the contested amount is claimed to be due will be limited solely to the contested amount. The Company’s control of the contest will be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive will be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authorityapplies.
(e) If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 5(d), Executive becomes entitled to receive any refund with respect to the claim, Executive will, subject to the Company’s compliance with the requirements of Section 5(d), promptly pay to the Company the amount of the refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to this Section 5(d), a determination is made that Executive will not be entitled to any refund with respect to the claim and the Company does not notify Executive in writing of its intent to contest the denial of refund prior to the expiration of thirty (30) days after the determination, then the advance will be forgiven and will not be required to be repaid and the amount of the advance will offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.
(f) Should the Company elect not to contest the Internal Revenue Service claim in accordance with the foregoing provisions of Section 5(c) or otherwise not provide Executive with written notice of its intention to contest such claim within the applicable thirty (30) day or shorter notice period provided in Section 5(c), then the Company will promptly thereafter pay Executive the applicable Gross-Up Payment attributable to such claim.
Appears in 1 contract
Samples: Employment Agreement (Loral Space & Communications Inc.)
280G Gross-Up. (a) In the event it will be determined that Executive shall become entitled to payments and/or benefits provided by this Agreement or any payment or distribution by other amounts in the Company or other amount with respect to the Company to or for the benefit “nature of Executive, compensation” (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwiseany other plan, but determined without regard to arrangement or agreement with the Company, or any additional payments required under this arrangement or agreement with any person whose actions result in a change of ownership or effective control covered by Code Section 5 280G(b)(2) (a “Payment”), is (or will be) subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code280G Change in Control”) or any interest person affiliated with the Company or penalties are such person) as a result of a 280G Change in Control (or collectively the “Company Payments”), and such Company Payments will be) incurred by Executive with respect be subject to the excise tax imposed by Section 4999 of the Code with respect to the Company (the excise tax, together with any interest and penalties, are hereinafter collectively referred to as the “Excise Tax”) imposed by Code Section 4999 (and any similar tax that may hereafter be imposed by any taxing authority), subject to Section 4.9 above, the Company shall pay to Executive will be entitled to receive at the time specified below (i) an additional cash payment amount (a the “Gross-Up Payment” from ”) such that the net amount retained by Executive, after deduction of any Excise Tax on the Company in Payments and any U.S. federal, state, and for local income or payroll tax upon the Gross-up Payment provided for by this paragraph, but before deduction for any U.S. federal, state, and local income or payroll tax on the Company Payments, shall be equal to the Company Payments and (ii) an amount equal to the sum product of any deductions disallowed for federal, state or local income tax purposes because of the Excise Tax and inclusion of the Gross-Up Payment in Executive’s adjusted gross income multiplied by the highest applicable marginal rate of federal, state or local income taxation, respectively, for the calendar year in which the Gross-Up Payment is to be made.
(b) In the event that the Internal Revenue Service or court ultimately makes a determination that the excess parachute payments plus the base amount is an amount sufficient to pay the cumulative Excise Tax and all cumulative income taxes (including any interest and penalties imposed other than as determined initially, an appropriate adjustment shall be made with respect to such taxes) relating regard to the Gross-Up Payment so that to reflect the net amount retained by Executive is equal to all payments to which Employee is entitled pursuant to final determination.
(c) For purposes of determining whether any of the terms of this Agreement (excluding the Company Payments and Gross-Up PaymentPayments (collectively the “Total Payments”) or otherwise less income taxes (but not reduced by will be subject to the Excise Tax or by income taxes attributable to the Gross-Up Payment).
(b) Subject to the provisions of Section 5(c), all determinations required to be made under this Section 5, including whether and when a Gross-Up Payment is required and the amount of such GrossExcise Tax, (i) the Total Payments shall be treated as “parachute payments” within the meaning of Code Section 280G(b)(2), and all “parachute payments” in excess of the “base amount” (as defined under Code Section 280G(b)(3)) shall be treated as subject to the Excise Tax, unless and except to the extent that, in the opinion of the Company’s independent certified public accountants appointed prior to any change in ownership (as defined under Code Section 280G(b)(2)) or tax counsel selected by such accountants or the Company (the “Accountants”) such Total Payments (in whole or in part) either do not constitute “parachute payments,” including giving effect to the recalculation of stock options in accordance with Treasury Regulation Section 1.280G-1, Q&A 33, represent reasonable compensation for services actually rendered within the meaning of Code Section 280G(b)(4) in excess of the “base amount” or are otherwise not subject to the Excise Tax, and (ii) the value of any non-Up Payment and cash benefits or any deferred payment or benefit shall be determined by the assumptions Accountants in accordance with the principles of Code Section 280G. To the extent permitted under Revenue Procedure 2003-68, the value determination shall be recalculated to the extent it would be utilized beneficial to Executive. In the event that the Accountants are serving as accountant or auditor for the individual, entity or group effecting the Change in arriving at Control, Executive may appoint with the determinationapproval of the Company, will which approval shall not be unreasonable or unreasonably delayed, another nationally recognized accounting firm reasonably acceptable to the Company to make the determinations hereunder (which accounting firm shall then be referred to as the “Accountants” hereunder). All determinations hereunder shall be made by a nationally recognized certified public accounting firm selected by the Company with the consent of Executive, Accountants which should not unreasonably be withheld (the “Accounting Firm”) which will shall provide detailed supporting calculations both to the Company and Executive within thirty (30) days after the receipt of notice from Executive that there has been a Payment, or at such earlier time as it is requested by the Company. All fees and expenses of the Accounting Firm will be borne solely by the Company. The Company, as determined in accordance with this Section 5, will pay any Gross-Up Payment to Executive within five (5) days after the receipt of the Accounting Firm’s determinationCompany or Executive. If the Accounting Firm determines Accountants determine that no Excise Tax is payable by Executivepayments under this Agreement must be reduced pursuant to this paragraph, it will so indicate they shall furnish Executive with a written opinion to Executive in writingsuch effect. Any The determination by of the Accounting Firm will Accountants shall be final and binding upon the Company and Executive; provided, however, that as a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm, it is possible that Gross-Up Payments that the Company should have made will not have been made (an “Underpayment”), consistent with the calculations required to be made hereunder. In the event the Company exhausts its remedies in accordance with Section 5(c), or elects not to exercise such remedies, and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm will determine the amount of Underpayment that has occurred and the Underpayment will be promptly paid by the Company to or for the benefit of Executive.
(c) Executive will notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require a Gross-Up Payment (that has not already been paid by the Company). The notification will be given as soon as practicable but no later than ten (10) business days after Executive is informed in writing of the claim and will apprise the Company of the nature of the claim and the date on which the claim is requested to be paid. Executive will not pay the claim prior to the expiration of the 30-day period following the date on which Executive gives notice to the Company or any shorter period ending on the date that any payment of taxes with respect to the claim is due. If the Company notifies Executive in writing prior to the expiration of the 30-day or shorter period that it desires to contest the claim, Executive will:
(i) give the Company any information reasonably requested by the Company relating to the claim;
(ii) take any action in connection with contesting the claim as the Company will reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to the claim by an attorney reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order effectively to contest the claim; and
(iv) permit the Company to participate in any proceedings relating to the claim.
(d) The Company will bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with the contest and will indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result For purposes of the representation and payment of costs and expenses. Without limitation of the forgoing provisions of this Section 5, the Company will control all proceedings taken in connection with the contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings, and conferences with the taxing authority in respect of the claim and may, at its sole option, either direct Executive to pay the tax claimed and xxx for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute the contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company will determine. If the Company directs Executive to pay the claim and xxx for a refund, the Company will advance determining the amount of the payment to Gross-Up Payment, Executive, on an interest-free basis, and will indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or ’s actual U.S. federal income tax (including interest or penalties with respect thereto) imposed with respect to rate in the advance or with respect to any imputed income with respect to the advance; and any extension of the statute of limitations relating to payment of taxes for the taxable calendar year of Executive with respect to in which the contested amount is claimed to be due will be limited solely to the contested amount. The Company’s control of the contest will be limited to issues with respect to which a Gross-Up Payment would is to be payable hereunder made and Executive will state and local income taxes at Executive’s actual rate of taxation in the state and locality of Executive’s residence for the calendar year in which the Company Payment is to be entitled to settle or contestmade, as net of the case may bemaximum reduction in U.S. federal income taxes which could be obtained from deduction of such state and local taxes if paid in such year, any other issue raised shall be used. In the event that the Excise Tax is subsequently determined by the Internal Revenue Service or any other taxing authority.
(e) If, after the receipt by Executive of an amount advanced by the Company pursuant Accountants to Section 5(d), Executive becomes entitled to receive any refund with respect to the claim, Executive will, subject to the Company’s compliance with the requirements of Section 5(d), promptly pay to the Company be less than the amount of taken into account hereunder at the refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after time the receipt by Executive of an amount advanced by the Company pursuant to this Section 5(d), a determination is made that Executive will not be entitled to any refund with respect to the claim and the Company does not notify Executive in writing of its intent to contest the denial of refund prior to the expiration of thirty (30) days after the determination, then the advance will be forgiven and will not be required to be repaid and the amount of the advance will offset, to the extent thereof, the amount of Gross-Up Payment required is made, Executive shall repay to be paid.
(f) Should the Company elect not to contest Company, at the Internal Revenue Service claim time that the amount of such reduction in accordance with Excise Tax is finally determined, the foregoing provisions portion of Section 5(c) or otherwise not provide Executive with written notice of its intention to contest such claim within the applicable thirty (30) day or shorter notice period provided in Section 5(c), then the Company will promptly thereafter pay Executive the applicable prior Gross-Up Payment attributable to such claimreduction (plus the portion of the Gross-Up Payment attributable to the Excise Tax and U.S. federal, state and local income tax imposed on the portion of the Gross-up Payment being repaid by Executive if such repayment results in a reduction in Excise Tax or a U.S. federal, state and local income tax deduction), plus interest on the amount of such repayment at the rate provided in Code Section 1274(b)(2)(B). Notwithstanding the foregoing, in the event any portion of the Gross-Up Payment to be refunded to the Company has been paid to any U.S. federal, state and local tax authority, repayment thereof (and related amounts) shall not be required until actual refund or credit of such portion has been made to Executive, and interest payable to the Company shall not exceed the interest received or credited to Executive by such tax authority for the period it held such portion. Executive and the Company shall mutually agree upon the course of action to be pursued (and the method of allocating the expense thereof) if Executive’s claim for refund or credit is denied.
(e) In the event that the Excise Tax is later determined by the Accountant or the Internal Revenue Service to exceed the amount taken into account hereunder at the time the Gross-Up Payment is made (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest or penalties payable with respect to such excess) at the time that the amount of such excess is finally determined.
(f) Subject to Section 4.9 above, the Gross-up Payment or portion thereof provided for above shall be paid within 30 days following a 280G Change in Control which subjects Executive to the Excise Tax; provided, however, that if the amount of such Gross-up Payment or portion thereof cannot be finally determined on or before such day, the Company shall pay to Executive on such day an estimate, as determined in good faith by the Accountant, of the minimum amount of such payments and shall pay the remainder of such payments, subject to further payments pursuant to Section 4.10(b) hereof, as soon as the amount thereof can reasonably be determined, but in no event later than the ninetieth (90th) day after the occurrence of the event subjecting Executive to the Excise Tax. Notwithstanding any other provision of this Agreement, all Gross-up payments under this Section 4.10 shall be made to the Executive no later than by the end of the Executive’s taxable year following the Executive’s taxable year in which Executive remits the applicable taxes. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, the Executive shall reimburse the Company for such amount, such reimbursement to be payable on the fifth (5th) day after demand by the Company (together with interest at the rate provided in Code Section 1274(b)(2)(B)).
(g) In the event of any controversy with the Internal Revenue Service (or other taxing authority) with regard to the Excise Tax, Executive shall permit the Company to control issues related to the Excise Tax (at its expense), but Executive shall control any other issues unrelated to the Excise Tax. In the event that the issues are interrelated, Executive and the Company shall in good faith cooperate. In the event of any conference with any taxing authority as to the Excise Tax or associated income taxes, Executive shall permit the representative of the Company to accompany Executive, and Executive and his representative shall cooperate with the Company and its representative.
(h) The Company shall be responsible for all charges of the Accountant.
(i) The Company and Executive shall promptly deliver to each other copies of any written communications, and summaries of any verbal communications, with any taxing authority regarding the Excise Tax covered by this provision.
(j) Nothing in this Section 4.10 is intended to violate the Xxxxxxxx-Xxxxx Act and to the extent that any advance or repayment obligation hereunder would do so, such obligation shall be modified so as to make the advance a nonrefundable payment to Executive and the repayment obligation null and void.
Appears in 1 contract
Samples: Employment Agreement (Torvec Inc)
