asset acquisitions - Jackson Walker LLP

was not to adopt specific language to deal with September 11 type risks, but discussed theissues and a few examples as follows:Unless the parties view terrorism or war as a class of risk thatshould be treated differently from other general risks, general effects ofterrorism or war should be treated in the merger agreement in the same wayas other general changes or events. It should be recognized that theexceptions for general events or changes relating to the financial markets,the economy, or parties’ stock prices are not intended to protect a partyfrom party-specific impacts of terrorism or other catastrophes, such asphysical damage to its facilities, financial loss, or loss of key personnel, norwould one normally expect a party to be protected against such impacts. If,as was the case with the September 11 attacks, entire industries may beadversely affected by a general event, an exception for general industrychanges may protect a party, depending upon the precise formulation of theexception, and the factual context. But the scope of any of these exceptionsis often ambiguous, leaving room for argument over whether a change isgeneral or specific. Indeed, in order to avoid the problem that economic,financial or industry changes, while they may be general in nature, mayhave quite disparate impacts even on two similar companies in the sameindustry, it is not unusual to see language in the carve-out for generalchanges which provides that this carve-out does not apply todisproportionate impacts on the company that is the object of the clause.In a few post-September 11 deals, the parties have addressedimpacts of September 11, or of other acts of terrorism, war or armedconflict, in the MAC clause. A merger agreement between First MerchantsCorporation and Lafayette Bancorporation dated October 14, 2001,expressly excludes from the definition of material adverse change “…eventsand conditions relating to the business and interest rate environment ingeneral (including consequences of the terrorist attack on the United Stateson September 11…” (italics added). Since the italicized language is merelyindicative of a type of event that may affect the business and interest rateenvironment in general, it was really not necessary to include such languagein the agreement, although perhaps the parties took comfort from dealingexplicitly with the events of September 11.A merger agreement between Reliant Resources, Inc., ReliantEnergy Power Generation Merger Sub, Inc. and Orion Power Holdings, Inc.dated as of September 26, 2001 expressly includes certain terrorism relatedevents within the definition of a “Material Adverse Effect”:“Material Adverse Effect” shall mean any change or eventor effect that, individually or together with other changes,events and effects, is materially adverse to the business,assets or financial condition of the Company and itssubsidiaries, taken as a whole, except for…(ii) changes ordevelopments in national, regional, state or local electrictransmission or distribution systems except to the extentcaused by a material worsening of current conditionscaused by acts of terrorism or war (whether or not3148166v1- 91 -