Michael Klausner

Corporations

Basic Forms of Mergers and Acquistions

1. Statutory Merger -- pursuant to DGCL §251(a)-(c)

Procedures and requirements:

1. Board of each company adopts a merger agreement specifying terms.

2. Majority of outstanding shares of each comany are voted in favor.

3. One company (either one) disappears and, as a matter of law, assets and liabilities of the
constituent corporations become those of the surviving corporation.

4. Shareholders may have the right to an appraisal under DGCL §262.

2. Asset Acquisition -- “sale of substantially all assets” under DGCL §271

For cash:

For shares:
Procedures and requirements:

1. Selling corporation board approves.

2. Majority of outstanding shares of selling corporation are voted in favor.

3. Buying corporation’s board (pursuant to fiduciary duty rather than statute) approves the
transaction.

4. Consideration changes hands between the two corporations, and assets of the selling
corporation become those of the acquiring corporation. Liabilities follow as well, unless
allocated differently by contract. Unforeseen liabilities of the selling corporation may not
follow.

5. Under Delaware law, dissenting shareholders of the selling corporation do not get a right
to appraisal. In some states, they do.

6. The asset sale may be followed by a liquidation of the selling corporation, pursuant to
DGCL §275, in which case the consideration (e.g. cash or shares) is distributed to the
shareholders of that corporation and the corporation ceases to exist.
3. Share Acquistion -- tender offer

For cash:

For stock:
Procedures and requirements:

1. Acquiror makes tender offer to shareholders of target corporation (pursuant to the

Williams Act timing and disclosure requirements) for any and all shares.

2. A majority of target shareholders tender their shares.

3. As a result, the acquiror gains control and elects its own board.

4. The acquiror may choose to “cash out” the non-selling shareholders (see cash-out merger
below).

Note: This simple scenario assumes the target does not have a poison pill.
4. Cash-out or Freeze-out Merger -- pursuant to DGCL §251 or 253

If consideration is stock:

If consideration is cash:
Procedures and requirements:

1. Board of each company adopts a merger agreement specifying terms.

2. Majority of A Co. shares are voted in favor of the merger.

3. In order to avoid Weinberger problems, a majority of the minority shares of B Co. are
voted in favor of the merger. If DGCL §253 applies, there is no statutory requirement
that the subsidiary’s shareholders vote.

4. B Co. ceases to exist and the non-selling shareholders receive consideration (e.g. cash or
A Co. shares). If the consideration is stock, the old B Co. shareholders become
shareholders of the surviving corporation, which I have called AB Co. here.