Common use of Reduction of Payments Clause in Contracts

Reduction of Payments. a. Anything in this Agreement to the contrary notwithstanding, if any compensation, payment or distribution by FairMarket to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the "Severance Payments"), would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), the following provisions shall apply: i. If the Severance Payments, reduced by the sum of (A) the Excise Tax (as defined below) and (B) the total of the federal, state and local income and employment taxes payable by Executive on the amount of the Severance Payments which are in excess of the Threshold Amount (as defined below), are greater than or equal to the Threshold Amount, Executive shall be entitled to the full benefits payable under this Agreement. ii. If the Threshold Amount is less than (A) the Severance Payments, but greater than (B) the Severance Payments reduced by the sum of (1) the Excise Tax and (2) the total of the federal, state and local income and employment taxes on the amount of the Severance Payments which are in excess of the Threshold Amount, then the benefits payable under this Agreement shall be reduced (but not below zero) to the extent necessary so that the maximum Severance Payments shall not exceed the Threshold Amount. To the extent that there is more than one method of reducing the payments to bring them within the Threshold Amount, Executive shall determine which method shall be followed; provided that if Executive fails to make such determination within forty-five (45) days after the delivery by FairMarket to Executive of written notice of the need for such reduction, FairMarket may determine the amount of such reduction in its sole discretion.