Change in Control payment term

[Guest JMN]

Defines change in control as sale of 70% of the business.

Clearly the % is OK, but could be ambiguous because it could be interpreted in a noncompliant way. For example: could have a series of asset sales over a period longer than 12 months, such as 20% sale 1/1, 10% sale 7/1 and 40% following 2/1, which are stepped together to hit 70%.

Is this problematic or should the definition be amended under the document correction program?

[Guest 409 eh?]

Does the Plan contain a provision saying that it will be interpreted in conformity with 409A? If so, according to IV(B)(1), as long as there is such a provision, there is no document failure. Of course, there still could be an operational failure if the CIC provision was applied inconsistently with 409A.

If the term has never been applied (and the ambiguity was not intentional), it might be worthwhile to correct anyway. This is one of the few areas where the Notice 2010-6 correction is actually pretty simple -- you just adopt an amendment.