30.9—Q-9: What actions are necessary for a TARP recipient to comply with the standards established under section 111(b)(3)(C) of EESA (the prohibition on golden parachute payments)?
(a)
Prohibition on golden parachute
payments. To comply with the standards
established under section 111(b)(3)(C) of EESA, a
TARP recipient must prohibit any golden parachute
payment to a SEO and any of the next five most
highly compensated employees during the TARP
period. A golden parachute payment is treated as
paid at the time of departure and is equal to the
aggregate present value of all payments made for a
departure. Thus, a golden parachute payment during
the TARP period may include a right to amounts
actually payable after the TARP period.
(b) Examples.
(a)
lowing
examples illustrate the provisions of paragraph
(a) of this section:
Code of Federal Regulations
Code of Federal Regulations
353
Example 1.
Employee A is a SEO of a TARP recipient.
Employee A is entitled to a payment of three times
his annual compensation upon an involuntary
termination of employment or voluntary termination
of employment for good reason, but such amount is
not payable unless and until the TARP period
expires with respect to TARP recipient. Employee A
terminates employment during the TARP period.
Because, for purposes of the prohibition on golden
parachute payments, the payment is made at the
time of departure, Employee A may not obtain the
right to the payment upon the termination of
employment.
Code of Federal Regulations
Example 2.
Employee B involuntarily terminated employment
on July 1, 2008, at which time Employee B was a
SEO of a financial institution. Employee B's
employment agreement provided that if Employee B
were involuntarily terminated or voluntarily
terminated employment for good reason, Employee B
would be entitled to a series of five equal annual
payments. After the first payment, but before any
subsequent payment, the entity became a TARP
recipient. Because, for purposes of the
prohibition on golden parachute payments, all of
the five payments are deemed to have occurred at
termination of employment and because, in this
case, termination of employment occurred before
the beginning of the applicable TARP period, the
payment of the four remaining payments due under
the agreement will not violate the requirements of
this section.