A transition payment clause outlines a financial compensation made to facilitate a smooth transition during organizational changes, such as mergers or shifting roles within a company. This payment aims to mitigate any disruptions or hardships experienced by individuals or groups affected by the transition.
Transition Payment. Distributor hereby agrees to pay the Transition Amount in accordance with the terms of this Section 3. Unless otherwise agreed in writing by Distributor, the Transition Payments shall only be utilized by Company to pay currently existing contractual payments, payments necessary under applicable Law or payments that are otherwise agreed in writing by Distributor, in each case to waive, resolve, terminate or otherwise transition the Existing Distributors’ distribution rights or agreements (collectively, “Termination Payments”).
Initial Transition Payment. Distributor agrees to pay to Company $[***] representing an estimate of the Transition Amount associated with Existing Distributors with a less than 90 day notice requirement set forth on Schedule 1 (the “Initial Transition Payment”) within [***] business days of the Effective Date. Distributor shall make such payment by wire transfer in accordance with the wire instructions set forth on Schedule 2.
Second Transition Payment. Distributor agrees to pay to Company $[***] representing an estimate of the Transition Amount associated with Existing Distributors with 90 – 120 day notice requirements set forth on Schedule 1 (the “Second Transition Payment”) within [***] days of written notice from Company that, except as otherwise agreed in writing by Distributor in connection with a Termination Issue, (i) Company has paid the entire Initial Transition Payment to Former Distributors in respect of Termination Payments and (ii) Distributor may commence distribution in the Territory formerly serviced by such Former Distributors (in each case, “Transitioned Territory”).
Transition Balance Payment. If the Initial Transition Payment and Second Transition Payment are not sufficient to cover the required Termination Payments, then Distributor agrees to pay to Company the remainder of the Transition Amount (the “Transition Balance Payment”) within [***] days of written notice from Company that, except as otherwise agreed in writing by Distributor in connection with a Termination Issue, (i) Company has paid the entire Second Transition Payment to Former Distributors in respect of Termination Payments and such Second Transition Payment was not sufficient to cover all Termination Payments, (ii) Distributor may commence distribution in the Transitioned Territory and (iii) Company identifies Existing Distributors to be transitioned with Transition Balance Payment.
Additional Transition Payments. If any Existing Distributor has not been terminated as of the date the Transition Balance Payment is made, including, without limitation, due to a limitation imposed by Law, then, Distributor shall remain obligated to pay the additional Transition Amount, if any, applicable upon the termination of such Existing Distributor, if ever (in each case, if applicable, an “Additional Transition Payment”), within [***] days of written notice from Company that, except as otherwise agreed in writing by Distributor in connection with a Termination Issue, (i) Company has paid the applicable Termination Payment to such Existing Distributor, and (ii) Distributor may commence distribution in the applicable Transitioned Territory, provided, further, that, unless otherwise agreed in writing by Distributor, in no event shall Distributor be obligated to pay more than the Transition Payment Cap. The Initial Transition Payment, the Second Transition Payment, the Transition Balance Payment and, if applicable, the Additional Transition Payment(s), are referenced collectively herein as the “Transition Payment.”
Unused Transition Payment. Company shall return any unused portion of the Transition Payment to Distributor within [***] days of the earlier of (i) the date upon which the final payment is made to transition the last Existing Distributor identified as part of the Second Transition Payment, (ii) the date upon which Company and Distributor mutually determine that no additional Existing Distributors are capable of being transitioned, or (iii) the date which is [***] from the Effective Date. Company shall make such payment by wire transfer in accordance with the wire instructions set forth on Schedule 2. For the avoidance of doubt, notwithstanding the foregoing, Distributor shall remain obligated to pay any and all Additional Transition Payments, if, as and when owed, in accordance with Section 3(d).
Transition of Certain Existing Distributors not part of the Initial Transition Payment. The Parties acknowledge and agree that at least [***] year prior to the expiration of the distribution rights of [***], or as soon as practical if [***] are terminated pursuant to the terms of its distribution agreement with Company or in accordance with applicable Law, the Parties shall meet and discuss in good faith the [***] of such [***] pursuant to the terms of this Agreement or as mutually determined by the Parties. If Distributor chooses not to proceed with the [***] after such good faith discussions, then Distributor shall provide Company with written notice of such determination.
The Offer Letter also provides for a 2021 equity transition payment of $2,250,000 (the “2021 Transition Payment”), to be paid within two pay periods after Effective Date, and a 2022 equity transition payment of $1,750,000, to be paid in June 2022 (the “2022 Transition Payment”). The 2021 Transition Payment is subject to repayment if Mr. Priest’s employment is terminated for cause or if he voluntarily resigns within one year after the Effective Date, and, in the event of such a termination or resignation during the second year of Mr. Priest’s employment, the repayment obligation is reduced by 1/24th for each full month of active employment following the Effective Date. The 2022 Transition Payment is also subject to repayment in the event of termination of employment for cause or voluntary resignation prior to the second anniversary of the payment date of the 2022 Transition Payment, provided the repayment obligation is reduced by 1/24th for every full month of active employment following the payment date.
Mr. Mediratta will remain at Dropbox to help with the transition until December 1, 2020. He will receive a transition payment of $475,000.00 and execute a general release of claims in favor of Dropbox and its affiliates containing customary non-disparagement covenants.
lf and insofar as Employee is entitled to the transition payment as referred to in article 7:673 of the Dutch Civil Code, this transition payment shall be deemed to be factored into the Severance pay, the Severand pay on a Change of Control, and the Pro-Rata Bonus.
If the transition services terminate prior to the end of the transition period, then the transition payment will be paid on a pro-rata basis. Ms. Lau’s Company equity awards will cease to vest as of December 31, 2019, and there will be no continued vesting during the transition period.
Provided you attest that you were not and will not be paid an annual incentive award for 2016 by your prior employer, AXA, you will also receive a transition payment of $600,000 within 30 days of your start date, less applicable withholdings, provided you are employed by the Company on the payment date.
Pursuant to the Transition Agreement, Mr. Erickson will, as a non-executive Company employee, (i) receive an annualized base salary of $75,000 during the Transition Period, (ii) continue to be entitled to his annual bonus for 2019 and a prorated annual bonus for 2020 for service through the Transition Date, (iii) receive a cash transition payment of $1,840,000, (iv) continue to vest in outstanding equity-based awards subject to, and in accordance with, their respective terms, except that all time-based vesting conditions for outstanding equity-based awards will be deemed to have been satisfied as of the Transition Date, and (v) be allowed to participate in all benefit plans and programs of the Company during the Transition Period. The Transition Agreement also includes customary noncompetition, nonsolicitation and non-disparagement covenants in favor of the Company.
Ms. Morreau’s short-term incentive compensation for the fiscal year ended April 30, 2022, will be prorated by the number of calendar days for which she is eligible during the applicable fiscal year. In addition, the Company will provide Ms. Morreau with a $653,371 transition payment paid semi-monthly over the 12 month period commencing July 2, 2021.
Transition Benefits. Provided that Barnes abides by each of Barnes’ commitments set forth herein, then the Company will: (a) Make transition payments to Barnes in a total amount equal to Two Hundred Twenty Five Thousand Dollars ($225,000) (such total transition payments being referred to as the “Transition Payment”), which Transition Payment shall be paid in substantially equal monthly installments within five (5) business days after the end of each month during the transition period between the Retirement Date and the date that is eighteen (18) months following the Retirement Date (“Transition Period”).
A transition payment refers to a financial compensation or arrangement designed to facilitate a shift or change within a business or organizational setting. These payments are typically issued to support employees, stakeholders, or parties impacted by the transition, ensuring a smoother shift to a new structure, ownership, or process. Transition payments can be used to compensate for changes such as mergers and acquisitions, employee lay-offs, or contractual changes.
Transition payments should be used in scenarios where there is a need to mitigate the impact of significant changes within an organization or contract. Some suitable cases include:
When writing a transition payment clause or agreement, clarity and detail are paramount. Here are some steps and considerations:
Identify Purpose: Clearly outline the reason for the transition payment.
Specify Amount: State the exact amount payable, or the method of calculating it.
Define Conditions: Enumerate any conditions that must be fulfilled to receive the payment.
Outline Timing: Provide clear timing for when the payment will be made (e.g., immediately upon execution, within 30 days, etc.).
Include Consequences: Define any repercussions for non-compliance or breach of terms related to the transition.
Example:
Parties agree that Employee will receive a transition payment of $10,000, contingent upon remaining with the company until the merger is finalized. The payment will be made within 30 days following the closing date.
Transition payments can be found in several types of contracts and agreements, particularly in business and employment contexts:
Employment Contracts: Used in severance packages or retention agreements during restructuring.
Merger and Acquisition Agreements: Included to facilitate smooth transitions for employees and operations.
Consulting Agreements: To incentivize consultants who aid significantly in transitional projects.
Vendor Contracts: Applied when modifying service agreements due to operational changes.
These payments help in aligning interests and facilitating a seamless transition for all parties involved.
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