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Transaction Bonus Agreement

Transaction Bonus Agreement Template for Denmark

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Transaction Bonus Agreement

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Document background
The Transaction Bonus Agreement is typically used when a company anticipates or is preparing for a significant corporate transaction, such as a merger, acquisition, or sale of substantial assets. This document, governed by Danish law, serves to incentivize and retain key employees during the transaction process by offering additional compensation upon successful completion. The agreement needs to carefully balance the interests of both the company and the employee while ensuring compliance with Danish employment law, tax regulations, and corporate governance requirements. It includes detailed provisions on bonus calculation, payment conditions, confidentiality obligations, and various scenarios that might affect the bonus payment. The agreement is particularly important in situations where employee retention and motivation are crucial for transaction success.
Suggested Sections

1. Parties: Identification of the employer company and the employee receiving the potential transaction bonus

2. Background: Context of the agreement, including the purpose of incentivizing the employee in connection with a potential transaction

3. Definitions: Key terms including 'Transaction', 'Closing Date', 'Transaction Value', 'Bonus Amount', and other relevant terms

4. Transaction Bonus: Core terms of the bonus, including calculation method, conditions for payment, and timing

5. Payment Conditions: Specific conditions that must be met for the bonus to become payable, including continued employment requirements

6. Tax and Social Security: Provisions regarding tax treatment, withholding obligations, and social security contributions

7. Confidentiality: Obligations to keep the agreement and transaction details confidential

8. Term and Termination: Duration of the agreement and circumstances under which it may terminate

9. Governing Law and Jurisdiction: Specification of Danish law as governing law and jurisdiction for disputes

Optional Sections

1. Clawback: Optional provisions allowing the company to reclaim bonus payments in specific circumstances, such as misconduct or restatement of financial results

2. Non-Competition: Additional restrictions on the employee's activities following receipt of the bonus, if not covered in existing employment agreements

3. Alternative Transaction Provisions: Provisions addressing how the bonus applies in case of alternative transaction structures

4. Good Leaver/Bad Leaver: Detailed provisions on how different types of employment termination affect bonus entitlement

5. Multiple Transaction Scenarios: Provisions addressing situations where multiple transactions might occur within the relevant period

6. Assignment: Provisions regarding whether the rights under the agreement can be assigned, particularly relevant in group structures

Suggested Schedules

1. Bonus Calculation Formula: Detailed methodology for calculating the transaction bonus, including any sliding scales or thresholds

2. Form of Release: Template release form to be signed by employee upon receipt of the bonus payment

3. Worked Examples: Illustrations of how the bonus would be calculated in different transaction scenarios

4. Required Notices: Templates for any required notices under the agreement, such as transaction notifications or payment notices

Authors

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Relevant legal definitions
Agreement
Board
Bonus
Bonus Payment Date
Cause
Change of Control
Closing
Closing Date
Company
Competing Business
Confidential Information
Corporate Transaction
Effective Date
Employee
Employment Agreement
Enterprise Value
Good Leaver
Bad Leaver
Group
Parent Company
Payment Conditions
Qualifying Transaction
Reference Date
Relevant Period
Sale
Share Purchase Agreement
Subsidiary
Target
Transaction
Transaction Documents
Transaction Value
Trigger Event
Vesting Date
Working Day
Relevant Industries
Relevant Teams
Relevant Roles
Industries
Danish Contracts Act (Aftaleloven): Fundamental law governing contract formation, validity, and enforcement in Denmark. Relevant for ensuring the bonus agreement is legally binding and enforceable.
Danish Employment Contracts Act (Ansættelsesbevisloven): Regulates employment terms and conditions, including requirements for documentation of employment terms and changes to compensation.
Danish Stock Options Act (Aktieoptionsloven): While primarily focused on stock options, its principles may be relevant for transaction bonuses, particularly regarding vesting and good/bad leaver provisions.
Danish Tax Assessment Act (Ligningsloven): Contains specific provisions on the taxation of bonuses and other employment benefits, including timing of taxation and reporting requirements.
Danish Companies Act (Selskabsloven): Relevant for corporate aspects, particularly regarding change of control provisions and corporate approvals needed for bonus payments.
Danish Financial Statements Act (Årsregnskabsloven): Contains requirements for disclosure and accounting treatment of bonus arrangements in company financial statements.
Danish Personal Data Act (Databeskyttelsesloven): Governs the processing of personal data in employment relationships, including compensation data.
Danish Holiday Act (Ferieloven): May be relevant for determining whether transaction bonuses should be included in holiday pay calculations.
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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