Proper Reason Clause Samples
The 'Proper Reason' clause defines the legitimate grounds or justifications required for a party to take a specific action under the contract, such as terminating the agreement or withholding performance. In practice, this clause typically outlines what constitutes an acceptable reason, such as a material breach, insolvency, or failure to meet key obligations, and may require the party to provide evidence or notice supporting their claim. Its core function is to prevent arbitrary or unjustified actions by ensuring that significant contractual steps are only taken for substantiated and recognized reasons, thereby promoting fairness and reducing disputes.
Proper Reason. Proper Reason" shall mean (i) the reduction of Officer's normal base salary rate by twenty percent (20%) or more, or (ii) a change in a short-term or long-term incentive formula (e.g., a change in the percentage of base salary to be awarded at target level of achievement) which directly results in a reduction of twenty percent (20%) or more in the overall target compensation which applies to Officer in a given period compared to the overall target compensation which would have applied to Officer during that period without such change in bonus formula, or (iii) a change in Officer's primary work location of more than seventy-five (75) miles from the Officer's former primary work location; provided, however, that no base salary rate reduction or bonus formula change or change in primary work location shall constitute Proper Reason if: