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Musk's 'erratic conduct and public disparagement' caused Twitter employee attrition, per lawsuitby@legalpdf
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Musk's 'erratic conduct and public disparagement' caused Twitter employee attrition, per lawsuit

by Legal PDFNovember 24th, 2022
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Twitter v. Elon Musk Court Filing July 12, 2022 is part of HackerNoon’s Legal PDF Series. Part 22 of 31: .FACTUAL ALLEGATIONS- Defendants materially breach their obligations to work toward closing and refrain from unreasonable withholding of consent to operational changes - Musk delays and stymies key operational decisions

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Twitter v. Elon Musk Court Filing by Potter Anderson & Corroon LLP, July 12, 2022 is part of HackerNoon’s Legal PDF Series. You can jump to any part in this filing here. This is part 22 of 31.


FACTUAL ALLEGATIONS

B. Musk delays and stymies key operational decisions

115. Since signing, Twitter has complied in all respects with its obligation under Section 6.1 of the merger agreement to operate the business in the ordinary course. In an excess of caution, the company has sought Musk’s consent even for matters falling well within the zone of commercial reasonableness. Though Musk has approved some of Twitter’s requests, he has been slow to respond to ones that required urgency and has unreasonably withheld his consent to others, in breach of his own obligations under Section 6.1.


116. Most notably, Musk has unreasonably withheld consent to two employee retention programs designed to keep selected top talent during a period of intense uncertainty generated in large part by Musk’s erratic conduct and public disparagement of the company and its personnel.


117. During negotiation of the merger agreement, Twitter had sought Musk’s consent to a broad retention plan. Musk’s team deferred decision on the matter; the plan Twitter proposed was detailed, and time for negotiation was short. But Musk indicated he was open to further discussion.


118. During a May 6, 2022 post-signing diligence session, Twitter management again broached the subject of retention, and Musk was noncommittal. He suggested the matter be tabled pending further clarity on the expected interval before closing the deal.


119. Over the weeks that followed, Swan discussed with Twitter management a narrower retention plan than the one that had been discussed during the merger agreement negotiations. Consistent with those discussions, on June 20, 2022, Twitter sent defendants a formal request for consent to two tailored employee retention programs that had been vetted by the board and its compensation committee with the assistance of an outside compensation consultant.


120. Musk initially failed to respond at all to the June 20 consent request. (It would soon become clear that he had fired Swan.) After a follow-up request for consent, Musk’s counsel stated tersely that “Elon is not supportive of this program and has declined to grant consent for it.” Twitter offered to arrange a meeting between Musk and Lane Fox to explain the importance and utility of the proposed programs. Musk’s counsel repeated that Musk “doesn’t believe a retention program is warranted in the current environment,” and said Musk was unwilling to consider the advice of compensation consultants, but left open the possibility of speaking with Lane Fox.


121. On June 28, 2022, following further stonewalling from Musk’s counsel, Twitter urged that a discussion would be fruitful. After initially suggesting Musk might be “amenable to a call next week,” Musk’s counsel replied, “Elon already gave his response but I’ll remind him of Martha’s request for a call.” The call never happened — Musk has continued to duck it — and neither retention program has been implemented due to defendants’ unexplained and unreasonable withholding of consent. Employee attrition, meanwhile, has been on the upswing since the signing of the merger agreement.


122. Defendants have unreasonably withheld consent in other domains as well. On June 14, 2022, Twitter sought consent to terminate Twitter’s existing revolving credit facility, noting that no amounts were presently drawn under the facility and that the facility would have to be terminated in connection with the merger’s consummation. Maintaining the facility requires Twitter to incur ongoing monthly costs. After initially saying he would consent to the termination, Musk withdrew it the next day without explanation.

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