This is the so-called "Golden Parachute/Golden Handcuff" clause. Compensation that is paid or accrued incidental to business acquisitions are unallowable. Specifically FAR states that the following costs are unallowable.
- Payments to employees under agreements in which they receive special compensation, in excess of the contractor's normal severance pay practice, if their employment terminates following a change in the management control over, or ownership of, the contractor or a substantial portion of its assets (Golden Parachutes).
- Payments to employees under plans introduced in connection with a change (whether actual or prospective) in the management control over, or ownership of, the contractor or a substantial portion of its assets in which those employees receive special compensation, which is contingent upon the employee remaining with the contractor for a specified period of time (Golden Handcuffs).
These prohibitions were added in 1988.
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