Cic Agreement


Most CIC agreements provide that the total benefits payable to the executive in relation to a CIC are “reduced” to the maximum amount that could be payable without negative consequences. Although institutional shareholders and regulators do not like this, other CIC agreements offer the executive a gross amount to cover excise duties of 20% (and taxes on this gross capital). This represents a high cost to the company, especially since any increase in additional gross dollars is also subject to the 20% excise and is not deductible by the company. Finally, some CIC agreements provide that the executive will receive either the full amount (without reduction or gross amount) or the reduction, depending on whether it results from the largest deduction of the amount of tax for the executive. CIC agreements are usually in place well before a transaction is reviewed. Common CIC agreements are either “isolated triggers” or “double triggers” agreements. In a single UCNCHER agreement, CIC benefits are paid after the CIC concludes, whether or not the officer is retained by the purchaser. In a dual-trigger CIC agreement, CIC benefits are paid only if there is a CIC and the executive is terminated for a “protected period.” The duration of protection usually lasts up to two years after the CIC and often begins up to six months before the CIC. As a general rule, the second “trigger” requires either the termination of management by the company or the resignation of management after the company has made certain unfavourable changes to the terms of the manager`s employment.

However, CIC agreements, which provide protection against certain unfavourable employment measures against the CIC, generally do not pay benefits until the CIC arrives. Some CIC agreements also provide for a “window” according to the CIC, in which the executive may, for whatever reason, withdraw and retain its right to find the CIC. This “window” is intended to provide the executive and the purchaser with a “learning” time and to “take or lose” the situation that might otherwise frustrate an early decision of the parties.