In reasonably be expected to result in a material adverse effect on the business, financial condition or results of operations of the Target Company, taken as a whole; provided, however, that changes, events, effects or circumstances which, directly or indirectly, to the extent they relate to or result from the following shall be excluded from, and not taken into account in, the determination of MAE:

1. Any condition, change, effect or circumstance generally affecting any of the industries or markets in which the Target Company operates;
2. Any change in any law or generally accepted accounting principles;
3. General economic, regulatory or political conditions (or changes therein) or conditions (or changes therein) in the financial, credit or securities markets (including changes in interest or currency exchange rates) in the United States or any other country or region in the world;
4. Any acts of God, force majeure events, natural disasters, terrorism, cyberattack, data breach, armed hostilities, sabotage, war or any escalation or worsening of any of the foregoing;
5. Any epidemics, pandemics or contagious disease outbreaks (including COVID-19) and any political or social conditions, including civil unrest, protests and public demonstrations or any other COVID-19 measures that relate to, or arise out of, an epidemic, pandemic or disease outbreak (including COVID-19) or any change in such COVID-19 measures, directive, pronouncement or guideline or interpretation thereof, or any continuation or of any of the foregoing, in the United States or any other country or region in the world;
6. The negotiation, execution, announcement, performance, consummation or existence of this Agreement or the transactions contemplated by this Agreement;
7. Any action taken pursuant to the terms of this Agreement or with the consent or at the direction of Parent or Acquisition Sub;
8. Any changes in the market price or trading volume of the Target Company common stock, any failure by the Target Company to meet internal, analysts' or other earnings estimates or financial projections or forecasts for any period, any changes in credit ratings and any changes in any analysts' recommendations or ratings with respect to the Target Company; and
9. Any matter disclosed in the Target Company SEC documents filed by the Target Company prior to the date of this Agreement (other than any disclosures set forth under the headings "Risk Factors" or "Forward-Looking Statements").

Question A.  The Target Company has two key employees that were critical to the Acquiring Company's decision to buy the Target Company's business.  Before closing, the two employees advised the Target Company's current management that they plan to quit after the closing.  Based on the MAE, can the Acquiring Company get out of the deal without a penalty?

Question B.  Before closing, Musk is concerned that the Target Company has a lot of fake and spam accounts and he likely overpaid for the Target Company.  Based on the MAE, what are the Acquiring Company's best arguments that it should be able to get out of the deal without a penalty?

Question C.  The management of the Target Company believes that it has always been honest with Musk about the status of any Target Company accounts and is concerned that Musk is all "show and no go."  Based on the MAE, what are the Target Company's best arguments that Musk has no right to back out and must close the deal and, if he does not do so, he must pay the reverse break-up fee?

Answer rating: 100% (QA)

A In this scenario the MAE Material Adverse Effect provision typically excludes employeerelated matters from being considered an MAE unless the depart... View the full answer