Section 280G Clause Example from Business Contracts

Section 280G. In the event that Holdco or the Company undergoes a "change in ownership or control" (within the meaning of Section 280G of the Code) after Holdco, the Company or any affiliate of Holdco or the Company (including PGA) that would be treated, together with Holdco or the Company, as a single corporation under Section 280G of the Code and the regulations thereunder has stock that is readily tradeable on an established securities market or otherwise (within the meaning of Section 280G of the Code and... the regulations thereunder) and all, or any portion, of the payments provided under this Agreement, either alone or together with other payments or benefits which the Employee receives or is entitled to receive from Holdco, the Company, PGA or any affiliate of Holdco, the Company or PGA (collectively, the "Total Payments"), could constitute an "excess parachute payment" within the meaning of Section 280G of the Code, then the Employee shall be entitled to receive (i) an amount limited (to the minimum extent necessary) so that no portion of the Total Payments shall be non-deductible for US federal income taxes by reason of Section 280G of the Code (the "Limited Amount"), or (ii) if the amount of the Total Payments (without regard to clause (i)) reduced by the excise tax imposed by Section 4999 of the Code (the "Excise Tax") and the amount of all other applicable federal, state and local taxes (with income taxes all computed at the highest applicable marginal rate) is greater than the Limited Amount reduced by the amount of all taxes applicable thereto (with income taxes all computed at the highest marginal rate), the amount of the Total Payments otherwise payable without regard to clause (i). If it is determined that the Limited Amount will maximize the Employee's after-tax proceeds, the Total Payments shall be reduced to equal the Limited Amount in the following order: (i) first, by reducing cash severance payments that are exempt from Section 409A of the Code, (ii) second, by reducing other payments and benefits that are exempt from Section 409A of the Code and to which Q&A 24(c) of Section 1.280G-1 of the Treasury Regulations does not apply, (iii) third, by reducing all remaining payments and benefits that are exempt from Section 409A of the Code and (iv) finally, by reducing payments and benefits that are subject to Section 409A of the Code, in each case, with all such reductions done on a pro rata basis. All determinations made pursuant this Section 25 will be made at the Company's or its affiliates' expense by an accounting firm or consulting group with experience in performing calculations regarding the applicability of Sections 280G and 4999 of the Code selected by the Company for such purpose (the "Independent Advisors"). For purposes of such determinations, no portion of the Total Payments shall be taken into account which, in the opinion of the Company and its legal advisors, (y) does not constitute a 19 "parachute payment" within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) or (z) constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the "base amount" (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation. In the event it is later determined that (A) a greater reduction in the Total Payments should have been made to implement the objective and intent of this Section 25, the excess amount shall be returned immediately by the Employee to the Company or (B) a lesser reduction in the Total Payments should have been made to implement the objective and intent of this Section 25, the additional amount shall be paid immediately by Holdco, the Company, PGA or any affiliate of Holdco, the Company or PGA, as applicable, to the Employee. [The remainder of this page is intentionally left blank.] View More