‘ARTICLE 1 INTERPRETATION … “Closing Date” means the date that is ten (10) Business Days following the date upon which all of the conditions to the purchase and sale of the Corporation Shares set out in Sections 6.1, 6.3 and 6.5 … have been satisfied or waived, or such other date as may be agreed to in writing by the Parties. … “Damages” means any loss, damage, claim, settlement, award, fine, penalty, fee (including reasonable legal fees), charge, cost or expense actually incurred by an Indemnified Party; provided, however, that, except in the case of Third Party Claims, Damages shall not include lost profits, opportunity costs, damages based upon a multiple of earnings or similar financial measure, or consequential, incidental, special, indirect, aggravated, exemplary or punitive damages. … “Group Companies” means the Corporation [viz Mirabela Participações SA, a company owned by FIP2, and owner of Atlantic Nickel], the Subsidiary [viz Atlantic Nickel] and the Royalty Company [viz AMH (Jersey) Limited] … … “Interim Period” means the period from the date of this Agreement to the Closing Time. … “Material Adverse Effect” means any change, event or effect that individually or in the aggregate is or would reasonably be expected to be material and adverse to the business, financial condition, results of operations, the properties, assets, liabilities or operations of the Group Companies, taken as a whole, excluding any such change, event or effect arising out of, in connection with or resulting from (a) general global, national or regional economic, business, political, market, regulatory or social conditions (or changes therein), including in respect of interest or currency rates, inflation or deflation or the financial, credit or capital markets, (b) any change or proposed change in Law (the enforcement, implementation or interpretation thereof), except where such change or proposed change is in respect of the Corporation or the Subsidiary specifically, (c) any change affecting the mining industry generally or metal or other commodity prices, (d) any change or proposed change in any applicable accounting practices or rules (or the enforcement, implementation or interpretation thereof), (e) any natural or man-made disaster, (f) any epidemic, pandemic, disease, outbreak of illness (including COVID-19), including the worsening thereof, other health crisis or public health event, (g) the commencement or continuation of any war, armed hostilities, civil unrest, including the escalation or worsening thereof, or acts of terrorism, (h) any action by the Purchaser or any of its Affiliates, (i) any action, omission, change, effect, circumstance or condition attributable to or contemplated by the execution, delivery or performance of this Agreement or the announcement of the transactions contemplated in this Agreement (including any adverse effect proximately caused by threatened or actual loss of, or disruption in, any customer, supplier, vendor, lender, contractor, employee, landlord, community or government relationships or loss of any personnel, or by reason of the identity of the Purchaser or any communication by the Purchaser regarding its plans or intentions with respect to the Group Companies or the Project [viz the Santa Rita Mine]), (j) compliance with the terms of this Agreement or Applicable Law (including COVID-19 Measures), (k) any action taken, or failure to take any action, or such other change or event, in each case, to which the Purchaser has consented or requested, or (l) the failure of the Project to meet internal projections, estimates, forecasts or revenue or earning predictions for any period. … “Ordinary Course of Business” when used in relation to the taking of any action by a Person means that (a) the action is consistent, in all material respects, with past practices of the Person or its business as the case may be, and is taken in the ordinary course of the normal day-to-day operations of the Person or its business, (b) in the case of the Subsidiary, includes the development, construction and operation of mining and processing operations in accordance with the Business Plan and (c) notwithstanding the foregoing, includes any COVID-19 Measures. “Outside Date” means January 14, 2022, or such other date as the Parties agree to in writing. … ARTICLE 3 REPRESENTATIONS AND WARRANTIES … 3.3 No Other Representations and Warranties. The Parties acknowledge and agree that, except for the representations and warranties contained in Sections 3.1 and 3.2, none of the Vendor, the Purchaser or any other Person makes any express or implied representation or warranty on behalf of any of the Vendor or the Purchaser, as the case may be, or any of their respective Affiliates, with respect to the proposed transactions, and each of the Vendor and the Purchaser disclaims any other representations or warranties. For the avoidance of doubt, the Vendor did not give or make any warranty or representation as to, and shall have no indemnification obligation or other liabilities in respect of, the accuracy or reasonableness of any forecasts, estimates, projections, statements of intent or statements of opinion, whether oral or in writing, provided to the Purchaser, any of its Affiliates, or any of their respective Representatives on or prior to the date of this Agreement, any management presentations (including any questions posed or answers given and any related discussions, whether formal or informal) and any other information made available in the Data Room. The Purchaser acknowledges and agrees that neither the Vendor nor any other Person makes any representations or warranties to the Purchaser regarding the probable success or profitability of the Corporation, the Subsidiary or the Project. … ARTICLE 4 THE PURCHASER GUARANTOR AND THE VENDOR GUARANTOR 4.1 The Purchaser Guarantor. (1) In consideration for the Vendor entering into this Agreement, the Purchaser Guarantor irrevocably and unconditionally guarantees to the Vendor the due and punctual performance of each obligation of the Purchaser contained in this Agreement. The Purchaser Guarantor shall pay to the Vendor from time to time on demand any sum of money which the Purchaser is at any time liable to pay to the Vendor under or pursuant to this and which has not been paid at the time the demand is made. The Purchaser Guarantor’s obligations under this Article 4 are primary obligations and not those of a mere surety. … ARTICLE 5 CLOSING ARRANGEMENTS 5.1 Closing. The Closing shall take place at 8:00 a.m. on the Closing Date … … 5.2 Vendor’s Closing Deliveries. At the Closing, the Vendor shall deliver or cause to be delivered to the Purchaser, the following documents: [(a) to (n)] … ARTICLE 6 CONDITIONS OF CLOSING 6.1 Purchaser’s Conditions. The Purchaser shall not be obligated to complete the transactions contemplated by this Agreement, including the purchase of the Corporation Shares, unless, at or before the Closing Time, each of the conditions listed below in this Section 6.1 has been satisfied, it being understood that the conditions in this Section 6.1 are included for the exclusive benefit of the Purchaser. The Vendor shall take all such actions, steps and proceedings as are reasonably within its control as may be necessary to ensure that the conditions listed below in this Section 6.1 are fulfilled at or before the Closing Time. (1) Representations and Warranties. The Vendor’s Fundamental Representations shall be true and correct in each case as of the Closing Date as if made on and as of such date … and the other representations and warranties of the Vendor in Section 3.1 shall be true and correct in each case as of the Closing Date as if made on and as of such date … (2) Vendor’s Compliance. The Vendor shall have performed and complied in all material respects with all covenants, conditions and agreements required by this Agreement to be performed or complied with by the Vendor on or prior to the Closing Time … (3) Material Adverse Effect. No Material Adverse Effect shall have occurred since the date hereof. 6.2 Condition Not Fulfilled. If (1) any condition in Section 6.1 has not been fulfilled at the Closing Time, (2) any condition in Section 6.1 has not been fulfilled at the Outside Date or (3) any such condition is, or becomes, impossible to satisfy, other than as a result of the failure of the Purchaser to comply with its obligations under this Agreement, then the Purchaser in its sole discretion may either: (a) terminate this Agreement by notice to the Vendor … 6.5 Mutual Conditions. Neither Party shall be obligated to complete the transactions contemplated by this Agreement unless, at or before the Closing Time, each of the conditions listed below in this Section 6.5 has been satisfied, it being understood that the conditions in this Section 6.5 are included for the benefit of both Parties. … … (3) South African Reserve Bank Approval. The Purchaser obtaining, to the extent required under South Africa laws and regulations, the consent of the Financial Surveillance Department of the South African Reserve Bank for the purposes of any South African applicable exchange control regulations, in respect of Closing. … ARTICLE 7 INDEMNIFICATION … 7.3 Indemnity by the Purchaser. The Purchaser shall indemnify the Vendor’s Indemnified Parties and save them fully harmless against, and will reimburse or compensate them for, any Damages arising from, or in connection with: … (b) any breach or non-fulfilment of any covenant or agreement on the part of the Purchaser contained in this Agreement. … 7.16 Remedies. Except in cases of wilful misconduct by a Party or as otherwise specifically provided in this Agreement, the remedies provided in this Article 7 shall be the sole and exclusive remedies (other than specific performance to enforce any payment or performance due under this Agreement) of the Parties from and after the date hereof in connection with any breach of a representation or warranty, or any breach or non-fulfilment of any covenant or agreement contained in this Agreement or the transactions contemplated thereby. … ARTICLE 8 COVENANTS … 8.3 Action During Interim Period (1) Operate in Ordinary Course. During the Interim Period … the Vendor shall cause the Group Companies to operate the Project in the Ordinary Course of Business … ARTICLE 10 TERMINATION 10.1 Grounds for Termination. This Agreement may be terminated on or prior to the Closing Date: (a) by the mutual written agreement of the Vendor and the Purchaser; (b) by written notice from the Purchaser to the Vendor as permitted in Section 6.2; (c) by written notice from the Purchaser to the Vendor as permitted in Section 6.4; (d) by written notice from either Party to the other Party if the Closing has not occurred on or before the Outside Date … 10.2 Effect of Termination. If this Agreement is terminated: … (b) by a Party under Section 10.1(b), 10.1(c) or 10.1(d) and the right to terminate arose because of a breach of this Agreement or the MVV Purchase and Sale Agreement by the other Party (including in a breach by the other Party resulting in a condition failing to be satisfied), then, the other Party shall remain fully liable for any and all Damages sustained or incurred by the terminating Party as a result thereof in accordance with Article 7.’
‘In the early hours of9 November 2021 , a portion of the Phase 5 slope at the pit crest displaced by up to two meters, moving as a coherent block (ie as one solid unit of rock). This followed a blast on the afternoon of8 November 2021 of a 12-meter-high production bench drilled from elevation 82 to elevation 70. The displacement was discovered by a truck operator, who observed cracks in the main access ramp above the area of the blast. Cracks resulting from the [GE] extended from elevation 70 to elevation 154 for a total height of approximately 84 meters… … the [GE] … involved a rock mass with a volume of approximately 120,000m³ to 170,000m³.’
‘This continuous radar monitoring confirmed the global stability of the [GE] by11 November 2021 , with no material slope deformations measured after that time.’
‘Thanks for your message … Important to mention that this is not – at least for now – a failure, so we need to ensure the right terminology is applied to avoid confusion. All measures around safety have taken place. This was identified early morning yesterday. I was at site for the safety day sessions and we were close to the issue. Mobiliaed (sic) the vendor for the radar system to work with us and set up a closer PMO to monitor the situation. From a safety perspective I am confident we have covered the key aspects, and will continue to monitor via the PMO. From a production perspective the area in question is where Fagundes is working. We are working to understand the impact and will revert soon.’
‘The general mood in the days following the [GE] was cautious optimism as it appeared that the displacement was the extent of the movement that was likely to occur. With monitoring in place and a period of observation having passed without further material movement being recorded, within a day or two of the [GE], the focus turned to assessing and implementing the solution necessary to address the instability.’
‘… I wanted to ask you to be ready for some ‘Safety shares’ that you would like to do during our visits in the coming week. Right away, I think that this issue of geotechnics [viz the GE] and ‘Stop’ are topics that we have to address. My suggestion is that you work with MGN [Mr Nagato] and Thulio [Mr Leite] to prepare one or two slides on the issue of the geo technique (sic) of the mine for us to use in the initial meetings that we will have (without the ATN [Atlantic Nickel] or MVV team) on Monday 15 Nov. And the other topics you can work on in parallel. I suggest that you have four very clear themes in your head, covering different areas, with good and ‘not so good’ news, learnings, etc. See please to have these materials ready and with me by Suning (sic) 14 November…’
‘The geotechnical incident occurred between Phase 05 and 06, passing through the main ramp, between elevations 142 and 70, which generated slump and transversal cracks in the access ramp. No injury or material loss were recorded. In the picture, the truck highlighted in A [which was a yellow circle] remained inside breaking area as safety measure while further geotechnical assessment has been provided. Equipment highlighted in B [viz a yellow circle outside the ‘area of breaking’] (a truck and an excavator) were safely removed on Nov 10th.’
‘The geotechnical incident occurred on Nov 09th at 01.00am at Phases 05 and 06, between elevations 142 and 70, generating slump and transversal cracks on the main ramp. No injuries or material losses occurred. Control actions have been taken since then, such as, Communication to all employees and contractors; Area isolation; Establishment of a War Room; 24-hours radar monitoring; Help-Chain definition; Engagement with geotech experts and safely (sic) removal of all equipment. Note: Daily geotechnical inspections on previous days and fault model did not indicate the possibility of this event. External specialist reviews will confirm this assumption.’
‘Quality time had been spent with the [Brazilian] corporate and operational teams; sufficient time was spent on visiting the open pit operations, the tailing storage facilities and the plants etc. Adequate time was spent sharing high-level information, which was very informative and allowed both teams to get to know one another.’
‘Notwithstanding minimum basic geotechnical functions available on site, the visit did coincide with a geotechnical event temporarily sterilizing ~ 4-5 benches in the eastern hanging wall. Subsequent repositioning of a Groundprobe radar indicates movement stabilisation, whilst geotechnical investigations and mitigation plans are being considered. This level of geotechnical risk is to be anticipated in mature mining operations, and sufficient buffer in mine designs and plans must be considered going forward.’
‘…There are a number of isolated areas where the cut-back design needs to be optimized. Essentially, parts of the cut-back design will lead to the formation of wedges near crests… In addition, the cut-back design has a large re-entrant where the cut-back meets the existing wall to the south. This may potentially lead to a failure of this design element… It is also noted that cut-back bench faces have been designed at 75°. Based on the kinematic analyses above a probability of failure of around 60% is anticipated for benches in the cut-back in this zone. If possible, bench face angles should be reduced to 50°-55° to ensure more acceptable probability of bench failure.’
‘The cut-back design, in principle, is acceptable. However, the current design may lead to the formation of wedges on crests of certain sections of the design. A number of design changes were recommended, with parts of the design pushed-back a further 8 m to 10 m.’
‘A number of initial recommendations were made [sc. in the Austra Letter] with respect to the cut-back design, which significantly, contained a recommendation to reduce bench face angles to 55°, to reduce the impact of bench scale failures in this section of the pit. The recommended reduction of bench face angles in the proposed cut-back design has led to inter-ramp slope reduction from approximately 47° to around 36°, which although restricted to the failure area, will have an impact on the economics of the operation. … It is noted that the current operating pit wall design parameters are based on PFS level design recommendations only, which were based on limited geotechnical data, especially for deeper sections of the pit. Concern has also been raised whether similar design changes need to be applied in other sectors of pit phases and final walls to maintain safety of operations. Such changes which could represent a significant economic impact to the operation and a potential business risk for Atlantic Nickel. To reduce pit wall performance uncertainty and risks, it is strongly recommended that final designs should be based on more robust FS level geotechnical recommendations.’
‘Can we then use a 13.20 metre berm with a 70 degree face angle, as proposed below? Would this geometry be equivalent to the one you proposed, since the overall angle would remain the same?’
‘We have completed the request checks below and a 70° face angle can be used. However, the width of the berm should be 14 m. We also re-evaluated the containment berm at the foot of the slope at elevation 70, and this can be 30 m wide. We reaffirm the need to continue with the monitoring and execution of activities to identify and occur the horizon greenish lesions present on the slope evaluated.’
‘The rupture, in the portions in Class III mass can be classified as structurally controlled type, involving three main families [sc of faults], which established the limits of the geometry of the blocks that moved. …’
‘At this time, the slope failure appears to have occurred due to the presence of various key factors including; major and minor structures that create anisotropy in the rock mass environment, poor to moderate rock mass conditions, development of high transient pore pressures in the discontinuities and its zone of influence in the rock masses around that are fully saturated, and inadequate operational practices that possibly might have included uncontrolled blasting. … A preliminary back analysis has been carried out, however … more information is required for a final back analysis … A preliminary assessment of the proposed pushback was not yet conducted since results from back analysis tell us the rock mass strength completely differs from strength in the design reports. Accordingly, it is required to review/validate available information in the area of the pushback for a geotechnical evaluation of the pushback’s design. The pushback will be constructed on less disturbed rock masses with higher strength, which must be verified with a detailed rock mass characterisation above the instability area. The pushback’s design is required to be a long term solution provided that best operational practices including controlled blasting and controlled excavation can be implemented on-site. In addition, a deep seated rock mass failure during and after construction of the pushback is not probable to occur based on the location of structures in the model.’
‘7.1 PRELIMINARY PUSHBACK DESIGN A detailed assessment of different pushback configurations was conducted based on the strength results from back analysis of the geotechnical event and total and partial removal of the flat angle structure. Accordingly, it is required to review/validate available information in the area of the pushback specially by characterization of the flat angle structure with geotechnical core drilling and logging for a reliable evaluation of the pushback’s design. In this final draft we have considered the following for the pushback’s design: • BFA = 70° and, 80° • IRA = 45° and 50° • The flat angle structure has been mined out partially / totally to reduce / eliminate the risk • D = 0.6, and D = 0.4 assuming good to best practices for blasting and mining activities Stability analysis results were satisfactory with a partial removal of the flat angle structure since total height of the material on top of the structure was removed. … 7.2 EVALUATION OF THE PUSHBACK DESIGN BY MINE PLANNING For stability analysis purposes of the pushback design made by mine planning we have received four sections, and we have analysed three sections. The following conclusions were obtained: • The parallel structure that caused the slope instability was completely removed as shown in the four sections; • The northern and southern edges of the pushback consist of sharp geometries with nose shapes that will develop tensile stresses. In addition, these edges might probably cut the parallel structure should it extends (sic) beyond the northern and southern edges. This condition must be verified in the geology model; • The three sections that were analysed have shown high safety factors considering good blasting practices D=0.6, partially saturated conditions in the Gabro R=0.35, and saturated conditions in the sub vertical structures; • We discard any slope instability with the structures present in the geology model with the pushback design provided by the mine; With these considerations we endorse the implementation for the pushback design by mine planning provided good operational practices will be implemented for design compliance. … 10. GENERAL CONCLUSIONS • The slope stability analysis results of three sections of the pushback design made by mine planning are satisfactory (high safety factors) after the complete removal of the parallel structure. With this proposed remedial solution from the analysis it is possible to steepen inter ramp slope angles with assumed favorable values of Ru (pore-pressures coefficient) and D factor (stress relief and blasting) provided that good/best operational practices can be implemented on-site; • It is endorsed the immediate implementation of the pushback design once the recommendations proposed have been incorporated, including review of the structural geology and the geometry of the pit walls at the ends of the pushback, and the implementation of good operational practices for design compliance…’
‘We are reviewing potential options to open a discussion with Appian around price which are presented in the following slides. Our current approach is to get as much information from Appian as possible, and as amicably as possible, concerning the adjustments to the projected costs without giving Appian any indication we would be unwilling to Close the transaction, before likely having to open a more forceful dialogue.’
‘Laurent I remain very concerned about our ability to renegotiate and litigation will be an absolute mess and I suspect we will be on the receiving end.’
‘Athena [the project name] Closing Date Confirmation – Jan 7th’
‘I have confirmed the closing date will be Friday January 7th with Robert Philpot. … Sibanye will initiate the wiring process on Tuesday 4th, and then we have until Friday the 7th to receive the funds and perform the various FX transactions.’
‘In support of your request we [ie Appian Capital] are okay with accommodating the following revised timeline to close, which still results in a Closing on or before the Outside Date of January 14th.’
‘Ok so to understand the “materiality” of the geotechnical event(s) we should request the Stantec and Tec3 reports described in the Operational Reports, however they may not yet be complete. This will assist everyone in understanding the, when, where and why. With regards to geotechnical event(s) vs contractor performance, it is my opinion that we will never be able to fully understand these impacts individually, there are just to (sic) many moving parts to consider like, fleet availability, blasting performance and low productivity.’
‘Please could you start thinking/tweaking the following: 1. Tweak your board pack on the assumption that today’s conversation is the way we move forward. We will need to include a conclusion (the discussion today) on the decision taken and why, risks with the decision and possible exposure (unknown but could be up to xxx). Laurent [Charbonnier] has had some discussions with me on the xxx, let’s pick up tomorrow. I don’t know what Neal [Froneman] will want to send but let’s be prepared. 2. I don’t think it’s clear from the approval framework but could you review and see what approval we believe is necessary. I don’t think we’ll be able to tell and this is going to be a discussion between Neal and Charl [Keyter, CFO of Sibanye Stillwater]. 3. We also need to have a call with Jake in the morning to discuss as he’s worked in a similar situation before so worth just speaking to him. 4. [Redacted] 5. For the meeting in the afternoon we will need to raise disclosure including both an announcement (I am checking with Neal when he wants to discuss with James – Laurent wants him in the meeting) as well as in our financials (again, when do we discuss with Charl and thereafter auditors etc.).’
‘On the second point – Litigation in excess of US$2.5 million requires board notification.’
‘I had a good feeling that it was going to be satisfied … on the basis of the feedback I had received and the feedback from my team.’
‘Dear Board members As per my previous correspondence I promised to revert on the Appian issue and the way forward. I have also included a number of attachments which I will reference in my note below. We have continued to investigate, using both internal and external technical experts. Based on the studies conducted to date, we have determined that the impact of the geotechnical event is material with a financial impact at least 20% of the value of Santa Rita. The attached presentation contains significant technical detail that graphically illustrates the stability issues for those of you who would find this helpful to appreciate the mining implications. [Redacted] we are proposing to cancel the contract based on this event, [redacted] We would like your support to proceed down this route and I am available to provide further clarity or discuss at your convenience should that be required. I apologise for the short notice but we have only really been able to complete the work early this morning (Sunday) and in the interests of time distribute to the Board at the earliest opportunity. …’
‘… I have completed my Board interactions. Please go ahead and issue notice to Appian and initiate the appropriate disclosure as we have discussed, pre market opening and after the notice letter has been transmitted to Appian. Appian should receive notice before start of business their time so that we can announce on the JSE Market opening. Rob/Laurent will you please let James know when you have emailed the letter and please don’t take any sleeping tablets…’
‘Once additional structural orientation data is available, the structural geology model of the East Wall should be expanded to include areas outside of the Bullnose and Phase 10 Instability zones. If similarly oriented shallow to moderate dipping fault structures are found outside of these areas, instabilities such as those that occurred in the Bullnose and Phase 10 areas are possible. Future East Wall pit geometries proposed by ATN should be evaluated using the updated structural geology model, with consideration of the pit wall design guidance prepared by Stantec (2019), to determine if inter-ramp and overall wall angles are in conformance with those designs and still achievable, and whether the walls are steeper than the interpreted structural fabric will allow.’
‘Because the overall toe to crest angle of the [GE] was so flat (approximately 29° to 30°), the conclusion of a standard runout analysis would be that there was no potential for runout and therefore any exclusion zone could be limited to rockfall containment. In order to estimate maximum potential runout, I carried out the runout calculations using only the steepest sections of the [GE] (ie between the toe and the outslope crest of the ramp, which have an effective slope height of 40 to 50 m, about four mine benches). This is a conservative estimation which evaluates runout considering only those parts of the slope that produce the largest estimated runouts, even though there was no identified credible failure mechanism for those steeper slope sections… My calculations, based on conservative assumptions, indicate that the potential runout distances were 16 and 22 meters at the two representative sections that I analyzed, meaning that the containment capacity exceeded the conventional standards by 8 to 14 m. Thus, even applying a conservative and unrealistic approach, my calculations conclude that the 30 m safety exclusion zone implemented by Atlantic Nickel was conservative based on the application of current industry experience and practices. Moreover, at the time of my initial site reconnaissance in January / February 2022, in addition to the safety exclusion zone defined at elevation 70/82, there was an access ramp and part of a production bench beyond the safety exclusion zone that afforded additional protection to any operations below elevation 70….’
‘… you don’t limit your evaluation at the boundaries of that incident. You look … to improve your geotechnical structural model in general to see if there’s risks of, if not identical, at least similar types of events elsewhere’
‘The direct effects of the remediation required were not limited to the Phase 10 pushback. The [GE] had large-scale ramifications. Critically, the failure demonstrated that the recommendations upon which the mine design for the Santa Rita operation was premised was flawed; the slope angles were unsafe. Therefore, the remedial work resulting from the [GE] could not reasonably be confined to its locality. A fact proven by the occurrence of the Bullnose Instability, which was structurally connected to the [GE], and should have been included as part of the remedial works. … it is my opinion that the [GE] necessitated an in-depth investigation lasting approximately 17-18 months, in addition to the re-design of the majority of the East Wall.’
‘Based on my experience, I routinely observe geotechnical incidents that are handled as part of normal mining operations. These often impact significantly greater tonnage and areas of mine operations to that of that (sic) at Santa Rita; thus my usage of the word relatively. … I rarely visit sites without observing current or historical geotechnical events.’
‘[10] The court’s task is to ascertain the objective meaning of the language which the parties have chosen to express their agreement. It has long been accepted that this is not a literalist exercise focused solely on a parsing of the wording of the particular clause but that the court must consider the contract as a whole and, depending on the nature, formality and quality of drafting of the contract, give more or less weight to elements of the wider context in reaching its view as to that objective meaning. In Prenn v Simmonds[1971] 1 WLR 1381 (1383H-1385D) and in Reardon Smith Line Ltd v Yngvar Hansen-Tangen[1976] 1 WLR 989 (997), Lord Wilberforce affirmed the potential relevance to the task of interpreting the parties’ contract of the factual background known to the parties at or before the date of the contract, excluding evidence of the prior negotiations. When in his celebrated judgment in Investors Compensation Scheme Ltd v West Bromwich Building Society[1998] 1 WLR 896 Lord Hoffmann (pp 912-913) reformulated the principles of contractual interpretation, some saw his second principle, which allowed consideration of the whole relevant factual background available to the parties at the time of the contract, as signalling a break with the past. But Lord Bingham in an extra-judicial writing, A new thing under the sun? The interpretation of contracts and the ICS decision Edin LR Vol 12, 374-390, persuasively demonstrated that the idea of the court putting itself in the shoes of the contracting parties had a long pedigree. [11] Lord Clarke elegantly summarised the approach to construction in Rainy Sky at para 21f. In Arnold all of the judgments confirmed the approach in Rainy Sky (Lord Neuberger paras 13-14; Lord Hodge para 76; and Lord Carnwath para 108). Interpretation is, as Lord Clarke stated in Rainy Sky (para 21), a unitary exercise; where there are rival meanings, the court can give weight to the implications of rival constructions by reaching a view as to which construction is more consistent with business common sense. But, in striking a balance between the indications given by the language and the implications of the competing constructions the court must consider the quality of drafting of the clause (Rainy Sky para 26, citing Mance LJ in Gan Insurance Co Ltd v Tai Ping Insurance Co Ltd (No 2) [2001] 2 All ER (Comm) 299 paras 13 and 16); and it must also be alive to the possibility that one side may have agreed to something which with hindsight did not serve his interest: Arnold (paras 20 and 77). Similarly, the court must not lose sight of the possibility that a provision may be a negotiated compromise or that the negotiators were not able to agree more precise terms. [12] This unitary exercise involves an iterative process by which each suggested interpretation is checked against the provisions of the contract and its commercial consequences are investigated: Arnold para 77 citing In re Sigma Finance Corpn[2010] 1 All ER 571 , para 10 per Lord Mance. To my mind once one has read the language in dispute and the relevant parts of the contract that provide its context, it does not matter whether the more detailed analysis commences with the factual background and the implications of rival constructions or a close examination of the relevant language in the contract, so long as the court balances the indications given by each. [13] Textualism and contextualism are not conflicting paradigms in a battle for exclusive occupation of the field of contractual interpretation. Rather, the lawyer and the judge, when interpreting any contract, can use them as tools to ascertain the objective meaning of the language which the parties have chosen to express their agreement. The extent to which each tool will assist the court in its task will vary according to the circumstances of the particular agreement or agreements. Some agreements may be successfully interpreted principally by textual analysis, for example because of their sophistication and complexity and because they have been negotiated and prepared with the assistance of skilled professionals. The correct interpretation of other contracts may be achieved by a greater emphasis on the factual matrix, for example because of their informality, brevity or the absence of skilled professional assistance. But negotiators of complex formal contracts may often not achieve a logical and coherent text because of, for example, the conflicting aims of the parties, failures of communication, differing drafting practices, or deadlines which require the parties to compromise in order to reach agreement. There may often therefore be provisions in a detailed professionally drawn contract which lack clarity and the lawyer or judge in interpreting such provisions may be particularly helped by considering the factual matrix and the purpose of similar provisions in contracts of the same type. The iterative process, of which Lord Mance spoke in Sigma Finance Corpn (above), assists the lawyer or judge to ascertain the objective meaning of disputed provisions.’
‘While I would agree that the [US] cases are not admissible as factual matrix, this is just the kind of situation where a review of the authorities from a foreign court is called for. Those authorities will obviously not be binding or formally persuasive, but to ignore the thinking of the leading forum for the consideration of these clauses, a forum which is both sophisticated and a common law jurisdiction, would plainly be imprudent – as well as discourteous to that court. The same goes for the academic learning which is often cited in the Delaware Court.’
‘To a short-term speculator, the failure of a company to meet analysts’ projected earnings for a quarter could be highly material. Such a failure is less important to an acquiror who seeks to purchase the company as part of a long-term strategy. To such an acquiror, the important thing is whether the company has suffered a Material Adverse Effect in its business or results of operations that is consequential to the company’s earnings power over a commercially reasonable period, which one would think would be measured in years rather than months. It is odd to think that a strategic buyer would view a short-term blip in earnings as material, so long as the target’s earnings-generating potential is not materially affected by that blip or the blip’s cause. … Practical considerations lead me to conclude that a New York court would incline toward the view that a buyer ought to have to make a strong showing to invoke the Material Adverse Effect exception to its obligation to close. Merger contracts are heavily negotiated and cover a large number of specific risks specifically. As a result, even where a Material Adverse Effect condition is as broadly written as the one in the Merger Agreement, that provision is best read as a backstop protecting the acquiror from the occurrence of unknown events that substantially threaten the overall earnings potential of the target in a durationally-significant manner. A short-term hiccup in earnings should not suffice; rather the Material Adverse Effect should be material when viewed from the longer-term perspective of a reasonable acquiror.’
‘The question of whether a particular “problem” would have an MAE has both quantitative and qualitative aspects.’
‘Many commentators have noted that Delaware courts have never found a material adverse effect to have occurred in the context of a merger agreement. This is not a coincidence.’
‘When this phrase is used, “[f]uture occurrences qualify as material adverse effects”. As a result, an MAE “can have occurred without the effect on the target’s business being felt yet.” Even under this standard, a mere risk of an MAE cannot be enough. “There must be some showing that there is a basis in law and in fact for the serious adverse consequences prophesied by the party claiming the MAE”.’
‘One commentator argues that the “would reasonably be expected” formulation is best thought of as meaning ‘“likely to happen’, with likely, in turn, meaning ‘a degree of probability greater than five on a scale of one to ten’”… In other words, it means more likely than not.’
‘First, there is the general magnitude of a 20% change … By one common definition, a bear market occurs when stock prices fall at least 20% from their peak, which suggests a broad cultural sense that this level of losses is viewed as material… Second, there are the levels at which parties renegotiate after one side asserts an MAE. One unpublished study found that “[w]hen the target experiences a firm-specific MAE, the subsequent renegotiation reduces the price by 15%, on average”. The fact that acquirers force renegotiations and then reach agreement (on average) at the 15% level suggests that an acquirer would regard a drop in value of 20% as material.’
‘There is no “bright-line test” for evaluating whether an event has caused a material adverse effect. To assess whether a financial decline has had or would reasonably be expected to have a sufficiently material effect, this court will look to “whether there has been an adverse change to the target’s business that is consequential to the company’s long-term earnings power over a commercially reasonable period.’ … What constitutes durational significance is also context specific. “A short-term hiccup in earnings should not suffice” to constitute a material adverse effect. The effect “should be material when viewed from the longer-term perspective of a reasonable acquiror”. Generally, it is expected that the “commercially reasonable period” will be “measured in years rather than months”.’
‘… a Material Adverse Effect requires a material adverse effect on the company’s business or on its financial condition or on any other of a long list of MAE Objects. This logical structure, however, is misleading. Especially when the list of MAE Objects becomes long, the impression may be created that the scope of the definition is being significantly expanded, with the result that more and more events would fall within the meaning of the phrase “Material Adverse Effect” as used in the agreement. This impression is largely, probably entirely, erroneous. The Delaware Court of Chancery has consistently ignored the list of MAE Objects and asked simply whether the “company” had suffered a material adverse effect. While surprising at first blush, there is nevertheless a good reason for this. For, what might it mean for the business of the company to have suffered a material adverse effect but not its financial condition, or its financial condition but not its results of operations, and so on? Probably, transactional lawyers should drop the whole concept of MAE Objects and draft MAE clauses in accordance with the principle from the caselaw that an MAE requires a material adverse effect “on the company”.’ (2) At p.784-5, the author considers the reference in Frontier Oil to a MAE having quantitative and qualitative aspects. He refers to this as ‘unguarded language’ and comments: ‘But the problems with these qualitative analyses runs even deeper. In particular, it seems that any event that passes the quantitative test will necessarily pass the qualitative one (for how could an event that substantially reduces the target’s overall earnings in a durationally significant manner not be a qualitative material adverse effect?), and any event that fails the quantitative tests will necessarily fail the qualitative one (for why would a rational acquirer think a change is material if it did not reduce the overall earnings potential of the target in a durationally significant manner?) If this is right, then the qualitative test adds nothing to the quantitative and could be eliminated without affecting the outcome of cases. …. Indeed, without falling back on the quantitative understanding of a material adverse effect, it is not even clear what it means to say that an event is a “qualitative” material adverse effect.’
‘The interpretation of a “material adverse change” clause depends on the terms of the clause construed according to well established principles. In the present case, the clause is in simple form, the borrower representing that there has been no material adverse change in its financial condition since the date of the loan agreement. Under such terms, the assessment of the financial condition of the borrower should normally begin with its financial information at the relevant times, and a lender seeking to demonstrate a MAC should show an adverse change over the period in question by reference to that information. However, the enquiry is not necessarily limited to the financial information if there is other compelling evidence. The adverse change will be material if it significantly affects the borrower's ability to repay the loan in question. However, a lender cannot trigger such a clause on the basis of circumstances of which it was aware at the time of the agreement. Finally, it is up to the lender to prove the breach.’
‘Although such American authority is of course not binding on me, as it was not on Blair J, the fact that such a clause is relied on to discharge a party’s obligations and terminate a contract obviously emphasises its significance.’
‘I consider that both parties’ espousal of the epithets significant or substantial as the proper interpretation of material in this case is right. I consider that I am entitled to take into account, in assessing materiality, all the matters set out above. I conclude that I do not need any further assistance by way of the interpolation of the word “very”…’
‘they’re consultants, of course they’re recommending a broader scope of work, that is the nature of consulting’
‘Q. And those are items C and D, and having received this second bridge analysis, did you personally regard the 60 million as less reliable than the 80 million from the first analysis? A. Personally I would have believed that 60 is not as convincing as 80. Q. Because 80 was higher and therefore closer to your objective of establishing a material adverse event? A. That’s correct.’
‘In line with industry practice and based on recent events TMC is of the opinion that no mining activity should be allowed below the slope failure area until the planned corrective work is complete. It should also be noted that very little ore remains in Phase 4, which will be depleted in the first half of 2022. On this basis for the first three quarters of 2022 only two mining fronts will be available which will limit the amount of ore delivered to the RoM’
‘This Agreement may be terminated on or prior to the Closing Date…’