Consulting Agreement

[ERISAgeek111]

Consulting Agreement provides for a fee of 250K payable quarterly in arrears. Term of agreement continues until a liquidity event or an event of default under certain senior subordinated debt agreement. If an event of default exists with respect to that certain subordinated debt, fee payable under the agreement is limited to 125K.  Deferred amounts continue to accrue during the default period, and once default cured, the accrued amounts are paid to consultant, and thereafter normal schedule of payments resumes.  

Subject to 409A?

 

[Griswold]

Is this a post-termination consulting arrangement with a a former service provider? Or a standalone agreement with an independent contractor?

If a true independent contractor, they're generally exempt from 409A if the provide significant services to other unrelated parties.

[Luke Bailey]

I will add to Griswold's comment that the rules for determining whether service provider is an IC are objective and set out in regs, e.g number of other clients, not related to service recipient, etc. Need to review in regs; somewhat detailed.

[ERISAgeek111]

So the service provider, which is a corporation, is an IC.  I thought we had a related party issue here potentially, so was hoping for another way out.  Owner/SH of the vice provider company also owns shares in company which owns 44% of the service recipient.  I think we're good though.