Transition Services Agreement for the United States

Transition Services Agreement Template for United States

A Transition Services Agreement (TSA) is a legally binding contract commonly used in the United States during mergers, acquisitions, or corporate restructuring. It establishes the terms and conditions under which one party (typically the seller) will provide certain services to another party (typically the buyer) for a defined period to ensure business continuity during the transition phase. The agreement is governed by U.S. federal and state laws, including securities regulations, data privacy laws, and industry-specific requirements.

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What is a Transition Services Agreement?

The Transition Services Agreement (TSA) is essential in corporate transactions where immediate separation of all business functions is not feasible. Used predominantly in the United States, it provides a framework for continued operational support during the transition period following mergers, acquisitions, or divestitures. The agreement typically covers various services such as IT, HR, finance, and operations, specifying service levels, costs, duration, and exit criteria. TSAs are crucial for ensuring business continuity while the separated entity establishes its independent operations or integrates with its new parent company.

What sections should be included in a Transition Services Agreement?

1. Parties: Identification of service provider and recipient entities

2. Background: Context of the transition, usually following M&A or corporate restructuring

3. Definitions: Key terms used throughout the agreement including Services, Service Levels, Term, etc.

4. Services: Detailed description of transition services to be provided, including scope, standards and delivery requirements

5. Service Levels: Performance standards, metrics, and remedies for failure to meet agreed service levels

6. Term and Termination: Duration of services, extension options, and circumstances for early termination

7. Fees and Payment: Pricing structure, payment terms, invoicing procedures and late payment consequences

8. Intellectual Property: Rights and licenses to intellectual property used in providing services

9. Confidentiality: Protection of confidential information exchanged during the service period

10. Liability and Indemnification: Allocation of risks, limitation of liability, and indemnification obligations

11. Force Majeure: Circumstances excusing performance and related procedures

12. Governing Law: Applicable law and jurisdiction for dispute resolution

What sections are optional to include in a Transition Services Agreement?

1. Migration Services: Details of knowledge transfer and system migration processes when complex technical transitions are involved

2. Employee Matters: Personnel arrangements and transfers when staff transitions are part of the agreement

3. Data Protection: Specific data handling requirements and compliance measures when personal or sensitive data is involved

4. Business Continuity: Disaster recovery and business continuity requirements for critical services

5. Third Party Contracts: Management of third-party contracts and licenses when relevant to service provision

What schedules should be included in a Transition Services Agreement?

1. Service Description Schedule: Detailed specifications of each service including scope, deliverables, and technical requirements

2. Service Level Agreement: Detailed performance metrics, measurement methods, and remedies for service level failures

3. Pricing Schedule: Detailed fee structure, calculations, and any volume-based pricing arrangements

4. Key Personnel Schedule: List of key staff involved in transition with roles and responsibilities

5. Migration Plan: Detailed timeline and steps for service transition and knowledge transfer

6. Data Processing Agreement: Specific terms for handling personal data and ensuring compliance with privacy laws

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

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Free to use

Relevant legal definitions

Clauses

Relevant Industries

Technology
Financial Services
Healthcare
Manufacturing
Professional Services

Relevant Teams

Legal
Finance
Operations
Information Technology
Human Resources
Procurement

Relevant Roles

Chief Executive Officer
Chief Financial Officer
Chief Operating Officer
General Counsel
Integration Manager
Project Manager

Industries

Securities Exchange Act: Federal law governing securities trading and public company requirements, essential if either party is publicly traded

Sarbanes-Oxley Act: Federal legislation establishing requirements for financial reporting, internal controls, and corporate governance

Federal Data Privacy Laws: Including Gramm-Leach-Bliley Act (GLBA) for financial services sector, governing data protection and privacy requirements

Antitrust Laws: Including Clayton Act and Sherman Act, ensuring compliance with competition laws and preventing monopolistic practices

Federal Trade Commission Act: Governing unfair trade practices and consumer protection at the federal level

ERISA: Employee Retirement Income Security Act, governing employee benefits and pension plans if HR services are included

COBRA: Consolidated Omnibus Budget Reconciliation Act, relating to continuation of health insurance coverage

HIPAA: Health Insurance Portability and Accountability Act, governing protected health information and medical privacy

Fair Labor Standards Act: Federal law establishing minimum wage, overtime pay, and other employment standards

State Contract Laws: Varying by state, governing contract formation, enforcement, and interpretation

State Data Privacy Laws: State-specific privacy regulations, such as CCPA in California, governing data protection requirements

Uniform Commercial Code: Standardized set of laws governing commercial transactions across states

ESIGN Act: Electronic Signatures in Global and National Commerce Act, governing validity of electronic signatures

Trade Secrets Protection: Laws protecting confidential business information including the Defend Trade Secrets Act

Cybersecurity Regulations: Federal and state requirements for data security, breach notification, and cybersecurity standards

Industry-Specific Regulations: Sector-specific requirements such as HITECH for healthcare, Dodd-Frank for financial services

Cross-Border Data Transfer: Regulations governing international data transfers and privacy protection across jurisdictions

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A U.S.-governed agreement between a legal service provider and client establishing terms of legal representation and service delivery.

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What is a Transition Services Agreement?

What sections should be included in a Transition Services Agreement?

What sections are optional to include in a Transition Services Agreement?

What schedules should be included in a Transition Services Agreement?

Authors

Alex Denne

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