A "Resignation for Good Reason" clause allows an employee to resign while still receiving severance benefits if significant negative changes—such as a substantial reduction in salary or job responsibilities—occur within the company environment without the employee's consent. This clause is designed to protect employees from adverse modifications to their employment terms, maintaining fairness and security in their job conditions.
If you experience an Involuntary Termination or Resignation for Good Reason (each as defined below) within the Cliff Period, you will be entitled to pro rata acceleration of the Equity Award based on the number of months of service you provided to the Company (and for the avoidance of doubt, not the number of shares you may otherwise be entitled should you have completed the Cliff Period).
Conditions. Any other provision of this letter agreement notwithstanding, no rights to any benefit (whether related to equity vesting or acceleration thereof or otherwise), related to an Involuntary Termination or a Resignation for Good Reason shall be given effect unless and until: (a) you have executed (and do not revoke) a full and complete general release of all claims that you may have against the Company, or persons affiliated with the Company, including its employees and stockholders, on the Company’s standard form provided by the Company (the “Release”) and such Release has become effective no later than the 45th day after the date of your Involuntary Termination or Resignation for Good Reason (the “Deadline Date”); (b) you have returned all Company property in your possession within ten (10) business days following the date of your Involuntary Termination or Resignation for Good Reason; (c) you have signed a written declaration declaring that such Company property has been returned and that you shall completely honor and abide by any on-going obligations you may have to Company that may survive such termination, including without limitation any such surviving obligations with respect to inventions, confidential information, non-solicitation, and non-competition effective no later than the Deadline Date; and (d) in the event you experience a Resignation for Good Reason, if requested by the Board, you shall (i) work as a consultant to the Company up to 20 hours/week over the first two months following your last day of service (the “Transition Period”) to, among other duties, transition your knowledge and information regarding the Company and otherwise transition your services to persons designated by the Company and (ii) within forty-five (45) days following the last day of the Transition Period, if any, you shall execute another Release, without revocation to continue receiving any remaining severance amounts (collectively, the “Conditions”).
Resignation For Good Reason. Executive’s employment may be immediately terminated by Executive, subject to the notice and time limitations set forth in Section 1(n), upon written notice to the Company of a Resignation For Good Reason. Upon termination pursuant to this Section 4(d), the Company shall continue to pay Executive an amount equal to Executive’s base salary, as provided in Section 3(a), at the annual rate in effect at the time of termination, for a period equal to twelve (12) months from the date of such termination (“Good Reason Severance Pay”). Good Reason Severance Pay shall also include, in addition to the foregoing, all amounts of base salary compensation, any accrued or vested benefits, and expense reimbursement earned to the effective date of termination but not yet paid by the Company.
Such eligibility is not available if the Resignation for Good Reason is in lieu of a Termination for Cause as determined by the Board of Directors. Other than the foregoing, Executive shall not be entitled to any payment upon Executive’s termination of employment upon a Resignation For Good Reason.
Termination by Executive other than a Resignation for Good Reason. Executive shall have the right to terminate his employment with the Company for any reason or for no reason; provided, that if such termination does not constitute a Resignation for Good Reason, Executive shall provide thirty (30) days’ prior written notice to the Company of such termination. Upon termination pursuant to this Section 3(g), the Company shall have no further obligation to Executive, except payment of all amounts of base salary compensation and expense reimbursement accrued to the effective date of termination, except as otherwise required by law.
Upon a resignation for Good Reason or a termination by the Company without Cause, in each case other than within 24 months after a Change in Control, Mr. Kramer is entitled to an amount equal to two times base salary, payable in 12 monthly installments. Upon a resignation for Good Reason or a termination by the Company without Cause, in each case within 24 months after a Change in Control, Mr. Kramer is entitled to a lump sum payment equal to three times his base salary.
All unvested shares subject to the stock option would have vested upon a termination without cause or a resignation for good reason, in each case in connection with a change of control.
A Resignation for Good Reason will not be deemed to have occurred unless you give the Company written notice of the condition within ninety (90) days after the condition comes into existence and the Company fails to remedy the condition within thirty (30) days after receiving your written notice. For the avoidance of doubt, an acquisition of the Company without a corresponding change in authority, duties or responsibilities shall not constitute grounds for a “Resignation for Good Reason.”
If Mr. Soloway’s employment is terminated by the Company without Cause (as defined in his existing employment agreement) or as a result of his resignation for Good Reason (as amended pursuant to his Retention Agreement, as described below), or due to his death or disability, he will be eligible to receive any unpaid portion of his cash retention award, subject to his execution of a release of claims in the event of a termination without Cause or a resignation for Good Reason.
2.4 Effective as of the date hereof, the definition of Resignation for Good Reason as set forth in Section 12 of the Employment Agreement is hereby amended and restated as follows: ““Resignation for Good Reason” means a Separation as a result of your resignation after you become aware of one of the following conditions without your consent: (a) A material diminution in your title, authority, duties or responsibilities, or a change in reporting structure so that you no longer report directly to the Board; or (b) A reduction in your base salary or target annual bonus that is not effectuated as part of a reduction that proportionately affects all other C-level executives of the Company (provided, however, that a voluntary reduction of your base salary shall not constitute a trigger event for purposes of this definition). A Resignation for Good Reason will not be deemed to have occurred unless you give the Company written notice of the condition within 30 days after you become aware of the condition, the Company fails to remedy the condition within 30 days after receiving your written notice and you resign immediately after expiration of the cure period.”
The Loffredo Employment Agreement provides that, in the event of a termination without Cause (as defined in the Loffredo Employment Agreement) or a resignation for Good Reason (as defined in the Employment Agreement), Mr. Loffredo shall be entitled to payment of twelve (12) months’ Loffredo Base Salary at the time of termination. In the event, within two (2) years after a Change in Control (as defined in the Plan), of a termination without Cause (other than due to Mr. Loffredo’s death or disability), a resignation for Good Reason, or upon notice by the Company that it does not wish to renew the Term (as defined in the Loffredo Employment Agreement), then in lieu of receiving the amounts described above, Mr. Loffredo would be entitled to receive a lump sum payment equal to two (2) times the sum of (a) his then-current annual Loffredo Base Salary and (b) the Loffredo Target Bonus for the year of termination.
“Resignation for Good Reason” is a contractual clause often found in employment agreements that allows an employee to resign from their position while still receiving certain benefits, typically those offered to an employee who is terminated without cause. This clause is designed to offer protection to employees by enabling them to leave their job under circumstances where they might feel they have no choice but to resign due to significant negative changes in their employment conditions initiated by the employer.
Incorporate a Resignation for Good Reason Clause in employment contracts when:
Negotiating Executive Contracts: High-level executives and key employees often have such clauses to safeguard against material changes in their roles or conditions.
Mergers and Acquisitions: To protect employees from significant changes in management or relocation requests following company restructuring.
Employment Contracts in Volatile Industries: Sectors prone to frequent organizational changes may benefit from this clause for employee security.
When drafting a Resignation for Good Reason Clause, consider the following elements:
Define “Good Reason” Clearly: Specify what changes constitute good reason for resignation, such as changes in compensation, role, location, or work environment.
Example: “Good Reason shall include any significant reduction in base salary, any substantial alteration in duties that results in a lesser role, or any required relocation of over 50 miles from Employee’s designated workplace.”
Notice Requirements: Detail the process the employee must follow to invoke the clause, including any notification period.
Example: “Employee must provide the Company with written notice of the condition constituting Good Reason within 30 days of its occurrence.”
Opportunity to Remedy: Allow the employer a period to rectify the situation before the resignation becomes effective.
Example: “The Company shall have 60 days from the notice date to remedy the condition.”
Consequences: Define the entitlements following a resignation for good reason, like severance or accrued benefits.
Example: “Upon resignation for Good Reason, Employee shall be entitled to receive any earned but unpaid compensation, as well as severance equivalent to six months of salary.”
Contracts that commonly include a Resignation for Good Reason Clause are:
Executive Employment Agreements: Protects high-ranking employees from demotions or unfavorable terms changes.
Change of Control Agreements: Often used to provide assurances during mergers and acquisitions.
Employment Contracts in Competitive Fields: Sectors where employers want to attract top talent, offering added security to potential candidates.
Try our AI contract analysis and extract important clauses and information from existing contracts.
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