Merger refers to the situation where one of the constituent corporations remains in being and absorbs into itself the other constituent corporation. It refers to the case where no new corporation is created, but where one of the constituent corporations ceases to exist, being absorbed by the remaining corporation.
Generally, statutes authorizing the combination of corporations prescribe the steps by which consolidation or merger may be effected. The general procedure is that the constituent corporations make a contract setting forth the terms of the merger or consolidation, which is subsequently ratified by the requisite number of stockholders of each corporation.
Washington Checklist of Matters that Should be Considered in Drafting a Merger Agreement is a comprehensive guide that provides an outline of important factors to consider when preparing a merger agreement in the state of Washington. It covers various aspects that need to be addressed to ensure a smooth and legally compliant merger process. Here are some key points to consider while drafting a merger agreement in Washington: 1. Formation and Structure: The merger agreement should clearly outline the legal structure of the transaction, including the identification of the merging entities, their respective corporate status, and the intended form of the merger (e.g., statutory merger, consolidation, or share exchange). 2. Authorized Capital: It's essential to specify the authorized capital structure of the surviving entity resulting from the merger, such as the number and classes of shares, their rights, preferences, limitations, and voting rights. 3. Consideration: The merger agreement should describe the type and value of consideration to be given to the shareholders of the merging entities, whether in the form of cash, stock, or a combination. Appropriate pricing mechanisms and adjustment provisions should also be included. 4. Representations and Warranties: Both parties must disclose and warrant certain information regarding their financial, legal, and operational status, ensuring the accuracy and completeness of the provided information. 5. Covenants and Conditions: This section outlines the obligations and commitments of each party before and after the merger completion, along with any conditions precedent to closing the transaction. 6. Governing Law and Jurisdiction: It is crucial to specify that the merger agreement will be governed by and interpreted under the laws of the state of Washington, and any disputes arising from the agreement will be settled within the jurisdiction of Washington. 7. Regulatory Approvals: Depending on the nature of the merger, it may be subject to various regulatory approvals and notifications. Ensure that any necessary consents, permits, or filings required by relevant state and federal authorities are addressed and obtained. 8. Employee Matters: Consideration should be given to the treatment of employees from both merging entities, including employee benefits, stock options, and any potential labor or employment law issues. 9. Indemnification and Liability: The agreement should outline the indemnification provisions, specifying the allocation of liabilities and obligations, and the limitations and procedures for making claims related to breaches of representations, warranties, and covenants. 10. Termination and Survival: The merger agreement should include provisions regarding termination rights, the consequences of termination, and the survival of certain provisions beyond termination. In Washington, various types of merger agreements exist, such as mergers between corporations, partnerships, limited liability companies (LCS), nonprofit organizations, and other entities. Each type may have specific legal requirements and considerations that should be accounted for when drafting the merger agreement. By following the Washington Checklist of Matters for drafting a merger agreement, parties can ensure that all relevant aspects are addressed, minimizing the risk of legal challenges and setting clear expectations for the merging entities.
