But in the merger agreement, there are also covenants, promises that Musk and Twitter make to each other about what they will do going forward, between the signing of the merger agreement and the closing. If Twitter breaches a representation, Musk still has to close unless the breach causes a material adverse effect. 3 But if Twitter breaches a covenant, Musk can walk away: He doesn’t have to close unless Twitter “shall have performed or complied, in all material respects, with its obligations required under this Agreement.” There is no MAE requirement: You just have to comply with the covenants.
Musk, as a non-lawyer, came up with a pretext that is like “Twitter told me something untrue about its bot problem, so I can walk away.” That sounds like it might work, but doesn’t work. But Musk’s lawyers have a better pretext. It’s something like “keep asking them for more information about their bot problem; eventually you’ll ask questions they won’t answer, and then you can walk away.”
‘Enforcement 40’ for 2020
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