--- name: transitional-services-agreement title: Transitional Services Agreement description: Drafts a Transitional Services Agreement (TSA) for post-closing seller-to-buyer service delivery in U.S. M&A transactions. Use when a corporate acquisition requires temporary operational support or seller-provided service continuity after closing. author: CaseMark author_url: https://github.com/CaseMark/skills/tree/main/skills/legal/transitional-services-agreement license: Apache-2.0 version: 0.1.0 execution_mode: open jurisdiction: us practice: corporate language: en tags: [agreement, drafting] --- # Transitional Services Agreement Bridges closing to operational independence with balanced risk allocation between Service Provider (seller) and Service Recipient (buyer). ## Prerequisites 1. **Transaction agreement** — full purchase/merger agreement text; note any TSA mandates, pricing caps, or term limits 2. **Service inventory** — systems and functions the acquired business relies on (IT, HR/payroll, finance, facilities, procurement) 3. **Closing date** — confirmed or estimated (TSA effective date = closing) 4. **Transition timeline** — buyer's self-sufficiency milestones per service category 5. **Data map** — personal data categories processed through shared systems (for DPA exhibit) ## Quick Start 1. Review transaction agreement for mandated services and pricing constraints 2. Catalog all seller-provided services the acquired business depends on 3. Draft using the output structure below; attach exhibits A–E 4. Align governing law and dispute resolution with the transaction agreement 5. Verify third-party vendor consent requirements ## Output Structure ### 1. Preamble & Recitals - Full legal names; seller = "Service Provider," buyer = "Service Recipient" - Reference transaction agreement by title, date, and parties - Effective date = closing date - Characterize TSA as temporary accommodation, not ongoing commercial relationship ### 2. Definitions | Term | Definition | |------|-----------| | Services | Per Exhibit A; no implied expansion | | Transition Period | Closing through termination; per-service end dates permitted | | Service Levels | Per Exhibit A; default: "substantially the same manner, quality, timeliness, and resources as the 6 months preceding closing" | | Service Fees | Per Exhibit B; includes reimbursable out-of-pocket | | Confidential Information | All non-public information disclosed under this agreement | Import undefined capitalized terms from the transaction agreement. ### 3. Services **Organize by function:** IT, HR/Payroll, Finance/Accounting, Facilities, Procurement/Supply Chain. **Scope formula:** "Access to and support for [category] systems used by the acquired business as of closing, at substantially the same level as provided pre-closing." **Performance standard:** Good faith; same manner/quality/resources as pre-closing 6-month period. Replacement personnel must have substantially similar qualifications. **Explicit exclusions:** - New capability development or system upgrades beyond routine maintenance - Capacity expansion beyond historical levels - Services to locations/functions outside the acquired business **Operational mechanics:** Named contacts + escalation path per party; service request mechanism with response SLAs; access rights and security protocols. ### 4. Compensation **Pricing:** Cost reimbursement (no markup) — standard for TSAs. | Cost Category | Basis | |--------------|-------| | Direct labor | Actual hours × fully-burdened rate | | Third-party costs | Supporting vendor/contractor invoices | | Shared resources | Pro-rata by usage, headcount, or reasonable metric | | Out-of-pocket | Receipted travel, shipping, telecom | - **Invoicing:** Monthly, itemized by service category - **Payment:** 30 days (undisputed); disputes via written notice within 15 days - **Taxes:** Exclude sales/use/VAT/GST; Service Recipient bears transaction taxes (not Provider income tax) - **Extensions:** 10–25% fee escalation to incentivize timely transition ### 5. Term & Termination | Right | Notice | Details | |-------|--------|---------| | Initial term | — | Closing + [6–18] months; per-service end dates in Exhibit A | | Extension (Recipient) | 60–90 days | [1–2] extensions × [3–6] months; escalated fees | | Convenience (Recipient) | 30–90 days | Per service or entire agreement; no penalty | | Material breach (either) | 15–30 day cure | Sustained non-performance, confidentiality breach, non-payment 30+ days | | Insolvency/change of control | Immediate | Bankruptcy, receivership, competitor acquisition | **Post-termination:** Provider cooperates in transition to replacements; Recipient pays fees through termination date; mutual return/destruction of Confidential Information with certification. **Survival:** confidentiality, indemnification, payment, liability limits, dispute resolution. ### 6. Representations & Disclaimers - **Provider reps:** Authority, no conflict, enforceability, good-faith performance, legal compliance - **Provider disclaimer:** NO implied warranties (merchantability, fitness, adequacy); no obligation to enhance beyond closing-date baseline; no liability for third-party system degradation outside Provider's control - **Recipient acknowledgment:** Accepts services as-is subject to "same manner" standard; bears transition planning risk ### 7. Confidentiality & Data Protection **Confidentiality:** Same care as own information (no less than reasonable); need-to-know only; TSA-purpose use only. Standard carve-outs: public info, prior possession, independent development, unrestricted third-party disclosure. **Data protection (if personal data involved):** - Recipient = controller; Provider = processor - Provider: process per documented instructions; implement appropriate safeguards; assist with DSARs and breach response - Breach notification: 24–48 hours; describe nature, scope, affected data, remediation - Attach GDPR Art. 28 / CCPA-compliant DPA as Exhibit D [VERIFY jurisdictional thresholds] ### 8. Indemnification | Party | Covers | |-------|--------| | Provider indemnifies | Gross negligence/willful misconduct; material confidentiality breach; legal violations (data protection, employment); IP infringement not from Recipient specs | | Recipient indemnifies | Use of services / acquired business operations; acquired business claims (employees, customers, suppliers); Recipient legal violations | **Procedure:** Prompt written notice (late notice excuses only if materially prejudicial); indemnifying party controls defense (no settlement imposing obligations without consent); cooperation required. TSA governs service-related claims; transaction agreement governs deal-related claims. ### 9. Limitation of Liability - **Cap:** Total fees paid/payable in preceding 12 months (or full term if shorter) - **Excluded damages (mutual):** Lost profits, revenue, opportunities, anticipated savings, business interruption, reputational harm, all consequential/indirect/punitive damages - **Carve-outs from cap:** Third-party indemnification, confidentiality breach, fraud/willful misconduct/gross negligence, payment obligations - **Specific performance:** Available without bond for confidentiality breach or critical service failure ### 10. Governing Law & Disputes - **Governing law:** Same state as transaction agreement (typically Delaware/New York); exclude conflicts-of-law principles - **Escalation:** Senior executives confer within 10–15 days; if unresolved after 15–30 more days → litigation - **Forum:** Exclusive jurisdiction in governing-state courts; venue objection waived - **Jury waiver:** If agreed; must be conspicuous - **Equitable relief:** Preserved for confidentiality and critical service failures ### 11. General Provisions - [ ] Assignment — consent required; affiliates/asset acquirors exempt - [ ] Notices — written; personal delivery, confirmed email, overnight courier (next day), certified mail (3 days) - [ ] Entire agreement — TSA controls service matters; transaction agreement controls deal matters; specify conflict hierarchy - [ ] Amendment — written and signed only - [ ] Severability, waiver (written only), independent contractor, counterparts/e-signatures - [ ] Force majeure — excludes payment; 60–90 day continuation triggers termination right - [ ] Publicity — mutual written consent; carve-out for legally required disclosure ## Exhibits | Exhibit | Contents | |---------|----------| | **A — Services Schedule** | Per-service description, levels, term, key personnel/systems, dependencies, third-party vendors | | **B — Fee Schedule** | Per-service pricing, rates, volume tiers, invoicing frequency | | **C — SLA** | Metrics (uptime %, response times), measurement method, reporting, remedies (credits, termination triggers) | | **D — DPA** | GDPR Art. 28 / CCPA compliant; data types, sub-processors, security measures, deletion on termination [VERIFY jurisdiction] | | **E — Transition Plan** | Per-service milestones, knowledge transfer, governance, party responsibilities | ## Pitfalls & Checks - **"Same manner" = floor and ceiling** — Provider neither degrades nor upgrades without agreement; document pre-closing baselines - **Transaction agreement alignment** — check for mandated services, pricing caps, approval rights; TSA prevails for service matters - **Incentivize transition** — escalating extension fees + Recipient convenience termination discourage dependency - **Liability cap reflects accommodative nature** — tie to fees received, not deal value - **Data protection is mandatory** — any personal data flow requires a compliant DPA regardless of deal size - **Third-party consents** — flag vendor contracts requiring consent; Provider's obligation limited to commercially reasonable efforts - **Jurisdiction** — US-focused; adapt data protection for cross-border services involving EU/UK data subjects