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Deferred Compensation Agreements
"I need a Deferred Compensation Agreement for our new CFO who will be deferring 30% of their annual bonus and 20% of their base salary, with a 5-year vesting period and special provisions for early vesting in case of a change in control; the agreement should be compliant with both US and UK tax laws as the executive splits time between both jurisdictions."
1. Parties: Identifies the employer and employee/executive entering into the agreement
2. Background: Establishes the context and purpose of the agreement, including the intention to provide deferred compensation in compliance with Section 409A
3. Definitions: Defines key terms including Deferred Compensation, Separation from Service, Change in Control, and other 409A-compliant terms
4. Amount of Deferred Compensation: Specifies the amount or formula for determining deferred compensation and timing of deferrals
5. Vesting Provisions: Details the vesting schedule and conditions for the deferred compensation
6. Distribution Provisions: Specifies the timing and form of payment distributions in compliance with 409A requirements
7. Payment Triggers: Defines permissible payment events (e.g., separation from service, disability, death) in accordance with 409A
8. Funding and Security: Describes any trust arrangements or other funding mechanisms, noting the unfunded nature of the arrangement
9. Administration: Details how the plan will be administered and who has authority to interpret provisions
10. Claims Procedures: Outlines the process for submitting and appealing claims
11. Amendment and Termination: Specifies conditions under which the agreement can be modified or terminated
12. General Provisions: Includes standard contractual provisions such as governing law, notices, and entire agreement
1. Change in Control Provisions: Additional provisions specifically addressing treatment of deferred compensation upon a change in control event
2. Golden Parachute Limitations: Include when payments might trigger excise taxes under IRC Section 280G
3. Competing Activity Restrictions: Non-compete and non-solicitation provisions, if applicable
4. Performance-Based Compensation: Special provisions for performance-based compensation with different deferral election timing rules
5. International Tax Provisions: Include for executives who may be subject to tax in multiple jurisdictions
6. SERP Provisions: Additional provisions if the agreement includes supplemental retirement benefits
7. Rabbi Trust Provisions: Detailed trust provisions if a rabbi trust is being used to hold deferred compensation assets
1. Schedule A - Deferral Elections: Details of the executive's initial deferral elections and timing
2. Schedule B - Vesting Schedule: Detailed vesting schedule and any acceleration provisions
3. Schedule C - Distribution Election Form: Form for specifying the timing and form of distributions
4. Schedule D - Beneficiary Designation Form: Form for designating beneficiaries for death benefits
5. Schedule E - Performance Metrics: If applicable, details of performance-based vesting conditions
6. Appendix A - Section 409A Compliance: Detailed provisions ensuring compliance with Section 409A requirements
7. Appendix B - Definition of Change in Control: Detailed definition of change in control events under 409A
Authors
Financial Services
Technology
Healthcare
Manufacturing
Retail
Professional Services
Energy
Telecommunications
Real Estate
Insurance
Pharmaceuticals
Consumer Goods
Media and Entertainment
Human Resources
Legal
Finance
Tax
Compensation
Executive Management
Board Secretariat
Compliance
Payroll
Chief Executive Officer
Chief Financial Officer
Chief Operating Officer
Executive Vice President
Senior Vice President
Division President
Managing Director
General Counsel
Department Head
Regional Director
Senior Sales Executive
Key Technical Expert
Research Director
Principal Scientist
Senior Partner
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