Clawback Agreement: Definition, Terms, Example
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What is a Clawback Agreement?
A clawback agreement is a specific provision within a legal contract that requires the return of money to an employer in the event of specified actions on behalf of the employee. This type of document may require monies to be paid back if there is poor performance, scandal or misconduct on behalf of the employee or if there is a decrease in overall company profit.
A clawback agreement will include the specific amount to be repaid as well as the situations that necessitate the money to be paid. It will also define the timeline for repayment as well as any additional penalty that may be incurred.
Common Sections in Clawback Agreements
Below is a list of common sections included in Clawback Agreements. These sections are linked to the below sample agreement for you to explore.
Clawback Agreement Sample
• | In the event of a restatement of the financial or operating results of the Company, the Company may seek recovery of incentive compensation that would not otherwise have been paid to a “Covered Employee” (as defined below) if the correct performance data had been used to determine the amount payable. The policy is intended to support the Company’s compliance with applicable laws, including incentive-based compensation recovery requirements set forth in Section 10D of the Securities Exchange Act of 1934, as added by Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). |
• | In the event of an act of “Misconduct” (as defined below) by a Covered Employee, the Company may seek recovery of incentive compensation that such Covered Employee was awarded within a specified time period following such Misconduct and cause the forfeiture of such Covered Employee’s outstanding incentive awards. |
Reference:
Security Exchange Commission - Edgar Database, EX-99.2 10 hpr-12312018xex992.htm EXHIBIT 99.2, Viewed October 12, 2021, View Source on SEC.
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Lawyers with backgrounds working on clawback agreements work with clients to help. Do you need help with a clawback agreement?
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