Parachute Payments; Excise Tax Clause Samples
The "Parachute Payments; Excise Tax" clause addresses the treatment of certain large payments made to executives or key employees in connection with a change of control, such as a merger or acquisition. It typically outlines how the company will handle any additional excise taxes imposed by the IRS if these payments exceed specified thresholds, often by limiting the payments or providing for tax gross-ups. This clause is designed to manage the financial and tax consequences of so-called "golden parachute" payments, ensuring compliance with tax laws and protecting both the company and the recipient from unexpected tax liabilities.
Parachute Payments; Excise Tax. In the event that the severance, acceleration of stock options and other benefits payable to the Executive under this Agreement or otherwise as a result of a Change of Control of the Company (i) constitute “parachute payments” within the meaning of Section 280G (as it may be amended or replaced) of the Code and (ii) but for this Section 4, would be subject to the excise tax imposed by Section 4999 (as it may be amended or replaced) of the Code (the “Excise Tax”), then the Executive’s benefits payable in connection therewith shall be either
(a) delivered in full, or
(b) delivered as to such lesser extent that would result in no portion of such benefits being subject to the Excise Tax, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the Excise Tax, results in the receipt by the Executive on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under the Excise Tax. Unless the Company and the Executive otherwise agree in writing, any determination required under this Section 4 shall be made in writing in good faith by the outside accounting firm responsible for auditing the Company’s financial records (the “Accountants”). In the event of a reduction in benefits hereunder, the Executive shall be given the choice of which benefits to reduce. For purposes of making the calculations required by this Section 4, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of the Code. The Company and the 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 4. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section 4.
Parachute Payments; Excise Tax. In the event that the severance, acceleration of stock options and other benefits payable to the Executive as a result of a Change of Control of the Company (i) constitute “parachute payments” within the meaning of Section 280G (as it may be amended or replaced) of the Code and (ii) but for this Section 4, would be subject to the excise tax imposed by Section 4999 (as it may be amended or replaced) of the Code (the “Excise Tax”), then the Executive’s benefits payable in connection therewith shall be either
(a) delivered in full, or
(b) delivered as to such lesser extent that would result in no portion of such benefits being subject to the Excise Tax, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the Excise Tax, results in the receipt by the Executive on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under the Excise Tax. Unless the Company and the