Code Section 409A Waiver and Release Clause Samples
The Code Section 409A Waiver and Release clause is designed to ensure that any payments or benefits provided under an agreement comply with Section 409A of the Internal Revenue Code, which governs the taxation of deferred compensation. In practice, this clause may require the recipient to sign a waiver or release of claims before receiving certain payments, and it may specify the timing and conditions under which payments are made to avoid adverse tax consequences. Its core function is to protect both parties from unintended tax liabilities by ensuring that the agreement's terms do not inadvertently trigger penalties or additional taxes under Section 409A.
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Code Section 409A Waiver and Release. THIS WAIVER AND RELEASE made as of this day of , 20 by , the holder of a share Option under the Company’s 2009 Share Option/Share Issuance Plan. All capitalized terms in this Waiver shall have the meaning assigned to them in the attached Appendix. Optionee hereby agrees and acknowledges that the Company’s Board has taken reasonable steps to value the Common Shares and to set the Exercise Price at the Fair Market Value per Common Share on the Grant Date so that the Option will not be treated as an item of deferred compensation subject to Code Section 409A. However, because the Common Shares are not readily tradable on an established securities market, there can be no assurance that the Exercise Price is at least equal to the Fair Market Value per Common Share on the Grant Date. Were the Internal Revenue Service to conclude that the Exercise Price is in fact less than such Fair Market Value and that the Option is accordingly subject to Code Section 409A, then Optionee would be subject the following adverse tax consequences:
Code Section 409A Waiver and Release. Optionee further agrees to be bound by the terms of the Code Section 409A Waiver and Release attached hereto as Exhibit A.
Code Section 409A Waiver and Release. Optionee understands and agrees that the Grant is made subject to and in accordance with the terms of the Plan. Optionee further agrees to be bound by the Code Section 409A Waiver and Release attached hereto as Exhibit 5.4. Optionee hereby acknowledges receipt of a copy of the Plan in the form attached hereto as Exhibit 1.