Code Section 409A Notification Clause Samples
The Code Section 409A Notification clause serves to inform parties about the potential application of Section 409A of the Internal Revenue Code to certain compensation or benefits arrangements. In practice, this clause typically alerts employees or contractors that deferred compensation plans, such as severance payments or equity awards, may be subject to specific tax rules and penalties if not structured in compliance with Section 409A. Its core function is to ensure that recipients are aware of these tax implications, thereby promoting compliance and reducing the risk of unexpected tax liabilities.
Code Section 409A Notification. Executive acknowledges that Executive has been advised of the American Jobs Creation Act of 2004, which includes Internal Revenue Code Section 409A, and the regulations and guidance promulgated thereunder (collectively “Code Section 409A”), and which also significantly changed the taxation of nonqualified deferred compensation plans and arrangements.
(i) The intent of the parties is that payments and benefits under this Agreement comply with, or be exempt from, Code Section 409A and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in accordance therewith. If any provision of this Agreement (or of any award of compensation, including equity compensation or benefits) would cause the Executive to incur any additional tax or interest under Code Section 409A, the Company shall, after consulting with the Executive, reform such provision to try to comply with Code Section 409A through good faith modifications to the minimum extent reasonably appropriate to conform with Code Section 409A. To the extent that any provision hereof is modified in order to comply with Code Section 409A, such modification shall be made in good faith and shall, to the maximum extent reasonably possible, maintain the original intent and economic benefit to the Executive and the Company of the applicable provision without violating the provisions of Code Section 409A.
(ii) A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment that are considered “nonqualified deferred compensation” under Code Section 409A unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.” If the Executive is deemed on the date of termination to be a “specified employee” within the meaning of that term under Code Section 409A(a)(2)(B), then with regard to any payment that is considered non-qualified deferred compensation under Code Section 409A payable on account of a “separation from service,” and with regard to which an exemption from such section does not apply, such payment or benefit shall be made or provided at the date which is the earlier of (A) the expiration of the six (6)-month period measured from the d...