ADT Inc

Section 280G of the Code disallows a tax deduction with respect to certain payments to executives of companies that undergo a change in control, and Section 4999 of the Code imposes a 20% penalty on the individual receiving “excess parachute payments.” Generally, parachute payments are compensation that is linked to or triggered by a change in control and may include, but are not limited to, bonus payments, severance payments, certain fringe benefits, and payments and acceleration of vesting from long-term incentive plans, including stock options and other equity-based compensation. Excess parachute payments are parachute payments that exceed a threshold determined under Section 280G based on the executive’s prior compensation.

We do not provide excise tax gross-ups to our NEOs, including those imposed by Section 4999 of the Code. Instead, the employment agreements with Messrs. DeVries, Likosar and Young, each provide for a best-net cutback, whereby if the adverse tax consequences described above were triggered, the executive would receive all relevant payments in full, but subject to the excise tax, or the payments would be reduced to the greatest amount that would not trigger such tax consequences, whichever results in the greater after-tax amount.