For Industry Professionals, Managers, Trades & Suppliers
J. NORMAN STARK, ATTORNEY and REGISTERED ARCHITECT
JURIS DOCTOR, B. ARCHITECTURE, B.F.A.
17000 St. Clair Avenue . Cleveland, Ohio 44110-2535
Tel.: (216) 531-5310 . Fax: (888) 833-5860 . E-Mail: www.Normstark@aol.com
In Florida . 6500 Midnight Pass Rd. #105 . Sarasota, FL 34242 . (941) 349-2061.
"MAC" - MATERIAL ADVERSE CHANGES CLAUSE
In acquisitions and in construction contract financing, MAC clauses are commonly used to provide a means of allocating risks
occasioned by adverse or negative business or economic conditions that occur between the agreement and closing.
In merger agreements, the MAC clause provides both parties certain remedies, or the right to fully cancel the merger, in
the event that stated, specific negative events occur. These negative events may include a sudden or sharp decline in sales
or a regulatory change or economic problem that would seriously impair the ability of the merged company to function.
NOTICE is essential. Since the exact wording of each MAC clause varies from transaction to
transaction, it may also be the subject of much scrutiny and negotiation. Once included however, a MAC is generally not a
basis for immediate termination of a contract, unless expressly provided. Then, only where the affected party has failed
to provide adequate performance assurance, after receiving a written notice and sufficient opportunity to preserve the
integrity of a transaction does a MAC become a terminating event that entitles the unaffected party to terminate the
Lenders will generally also be entitled to exercise remedies relating to project accounts or other collateral security if
an event of default or MAC arises during the project. Given the expected downturn in business activity and tightening of
credit markets, the trend in contract terms generally and MAC clauses specifically, may be starting to shift in favor of
buyers as they seek more flexibility in terminating transactions. Mac clauses which are vague may exclude intended or other,
unanticipated conditions, and while counsel may advise clients
to make their MAC clauses less vague, this too has dangers, in that if a clause is too specific, factors that are not cited
explicitly may be assumed by the courts to be excluded.
The clause has usually been a "compromise of uncertainty, with both sides taking a risk" on the assumption that the courts
will uphold the clause only if there is a big and prolonged change in the nature of the business. Even in the recent
headlined cases, courts and regulators, it is said, have shown no sign of "being sympathetic to buyer's remorse".
Where, however, a buyer has identified certain concerns, those should be addressed either with a carefully tailored MAC
clause or as a separately stated closing condition. There is no substitute for properly drafted agreements, tailored to
the Client's requirements.
"The way to get things done is not to mind who gets the credit of doing them."
AUTHOR / EDITOR: J. NORMAN STARK is an Attorney-at-Law, a Registered Architect, (AIA, NCARB) Registered
Landscape Architect, Interior Designer, Planner and Senior Appraiser (ASA), admitted to practice law before the Bar of
Ohio, the US District Courts, Ohio and Illinois (Central Dist.), the US Court of Appeals, and the United States Supreme
Court. He is a Mediator, Arbitrator and Litigator with experience in Business, Construction Law, and Public Works, and with
additional experience in Real Estate, Construction Attorney (Legal Project and Crisis Management), and as an Expert Witness
(Forensic Architect). His office is in Cleveland, Ohio.