Agreement and Plan of Merger
(Public Target, Cash, Two Step Tender Offer) (Pro-Buyer) (DE)

Summary

This template is an Agreement and Plan of Merger (Two-Step Cash Tender Offer) (Pro-Buyer) (DE) for use in the acquisition of a public company in two steps: a tender offer followed by a back-end, reverse-triangular merger. This template includes practical guidance, drafting notes, alternate clauses, and optional clauses. This template contemplates a friendly tender offer in which the board of directors of the target company and the acquirer have negotiated the terms of a merger agreement and the target board will recommend that its stockholders tender their shares. A merger agreement is the operative agreement governing a statutory merger. The agreement addresses merger mechanics, the merger consideration, and the post-merger surviving entity (including its charter, by-laws, and management). In order to address business and risk allocation issues, the merger agreement also includes representations and warranties, covenants, and termination provisions. Important ancillary documents are typically included as exhibits to public company merger agreements, including tender and support agreements, forms of charter and bylaws for the surviving entity that will become effective when the merger is consummated, and other ancillary documents that might be necessary to consummate the transaction. Delaware law requires that two merging Delaware entities must include the following in a merger agreement: 1. The terms and conditions of the merger 2. The mode of carrying the merger into effect 3. Any amendments to be made to the charter of the surviving company 4. The manner of cancelling the shares of the target and acquirer companies, or of converting them into shares of the surviving company –and– 5. Any other material terms deemed desirable to include (see 8 Del. C. § 251(b)) A merger involving a public target company presents different drafting issues than those for a private company merger. Public filings eliminate the need for extensive representations due to the extent of company information filed with the SEC. There are generally no indemnification provisions in public merger agreements (other than the purchaser's obligation to indemnify the target's directors and officers for a period post-closing), as the target company is merged into the buyer and the stockholders of the public target are too numerous to hold to indemnification obligations, nor are they parties to the merger agreement. The benefits of a merger are much the same as a stock purchase in that effectively all of the assets and liabilities transfer to the buyer (generally, contracts transfer to the surviving entity by operation of law, so there are fewer third-party consents and transfer approvals required ("change of control" provisions may still be triggered, however)). There is no need for the buyer to get 100% of the stockholder vote to control the company, as once it has complied with the state law and company voting requirements, the buyer controls the company. Drawbacks to a merger are similar to a stock purchase transaction in that the acquiring company cannot pick and choose the assets and liabilities to acquire; the acquisition is subject to the approval by the requisite percentage of stockholders (in a tender offer, this is achieved by such percentage of stockholders tendering their shares). Tax treatment for the transaction will depend on the merger structure selected. The regulatory schemes that are addressed in this template are those that are generally applicable without regard to industry, such as anti-trust, tax, ERISA, environmental, anti-corruption, and federal securities regulation. This template is generally pro-buyer. For more detailed discussion of the considerations in drafting a public agreement and plan of merger and for additional background on mergers, see Public Merger Agreement Basics; Public Merger Transaction Resource Kit; Two-Step Acquisitions Benefits and Drawbacks; and Asset Purchase, Stock Purchase, and Merger Structures: Benefits and Drawbacks.