fiduciary out
An exception to the no-shop covenant in a merger agreement. Generally, the board of directors of a public target company is subject to a heightened duty of care in a merger transaction and is charged with obtaining the highest value reasonably available to stockholders in a cash deal (see Practice Note, Fiduciary Duties of the Board of Directors: Sale of Control). Therefore, directors need the ability to consider superior offers without being fully locked up by the terms of the merger agreement. A fiduciary out permits the target company to negotiate and complete a transaction with a third party and for the board to change its recommendation if failing to do so would breach the fiduciary duties of the target company's board. In the case of a merger of equals, a fiduciary out may be provided to both parties.
For more information on fiduciary outs see Practice Note, What's Market: Fiduciary Out (
Related terms

Practical Law Dictionary. Glossary of UK, US and international legal terms. . 2010.

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