Mae Credit Agreement

Projections of the total impact of COVID-19 (better known as coronavirus) on the economy remain highly uncertain and still reflect a large number of outcomes. As a result of this uncertainty, businesses with the remaining credit capacity under existing credit facilities are considering whether they are withdrawing some or all of the remaining credit capacity they hold under their credit facilities. As has been widely reported, many companies have already decided to do just that and use all or most of their available credit capacity. For some companies, these considerations were motivated by a general fear that a rush to the bank by other borrowers would lead to a liquidity crisis for lenders and could render financing unavailable if necessary. A MAC (Material Adverse Change) or MAE (Material Adverse Effect) event in the event of loss provision (MAC and MAE are generally interchangeable terms) in loan contracts (“MC-Commission”) allows lenders to assert certain contractual rights that are primarily aimed at: (i) the suspension of available lines of credit; and (ii) to terminate the legal effects with the “acceleration” of the borrower`s payment obligations resulting in the termination of the contract. Credit agreements generally include a presentation that there is no DFA, define a DEA as standard or both. The most common definition of a DFA is in loan contracts to cover significant negative effects on (1) the borrower`s activities, assets, activities or financial situation, or (2) on the borrower`s ability to meet its payment obligations under the loan agreement. As a general rule, loan agreements require lenders to finance financial commitments as long as there has been no default at the time of the borrower`s request (1) or occur as a result of financing and (2) the guarantees and guarantees provided by the borrower in the loan contracts are maintained on all essential points. However, unlike mergers and acquisitions, the MAE clauses in the loan contracts are not changed by exceptions to well-developed and generally agreed terms, as lenders focus on borrowers` ability to repay the loan.

Historically, court proceedings that determine whether an MAE clause has actually been applied have been judged primarily between buyers and sellers in the context of AMs. Since the legislation in most of the M-A agreements is a Delaware law, most of these court proceedings have been negotiated on the applicability of MMA clauses in Delaware. The Tribunal considered whether an exception in the merger agreement applied to DMA. Merger agreements or credit contracts generally distribute the risks between the parties in the definition of ESM and their exceptions. In Akorn, for example, the court found that business-specific risks were attributed to the seller and that systematic exogenous risks were attributed to the buyer. Derogations from the MAE clauses were used to redistribute certain categories of risk to the purchaser, and exclusions from these exceptions were used to return the risk to the seller. When the court found that Akorn`s MED was not an exception that gave the purchaser a risk, the Tribunal recognized that the seller had suffered a decline in its activities out of step with its industry counterparts. The Tribunal relied on the testimony of an expert, who revealed that the seller had significantly underestimated all businesses comparable to all periods and indicators.