Doing the Definitive Agreement - Templates, Tools, and Guides
The definitive agreement is the contract that governs the terms and conditions that binds the parties in a merger, acquisition, divestiture, joint venture, or strategic alliance transaction where one company combine its business with one or more other companies through a sale of the company or a sharing of resources. Sample agreements are shown below.
The principal segments of a typical agreement for the sale of a business include:
(1) Introductory material (i.e., opening paragraph and recitals);
(2) The price and mechanics of the business combination;
(3) Representations and warranties of the buyer and seller;
(4) Covenants of the buyer and seller;
(5) Conditions to closing;
(6) Indemnification;
(7) Termination procedures and remedies; and
(8) Miscellaneous (boilerplate) clauses.
There are many basic legal and business considerations for the draftsman involved in the preparation of agreements for the sale of a business. These include federal income taxes; state sales, use and transfer taxes; federal and state environmental laws; federal and state securities laws; the accounting treatment (pooling or purchase); state takeover laws; problems involving minority shareholders; the purchaser's liability for the seller's debts and contingent liabilities; insolvency and creditors' rights laws; problems in transferring assets (mechanical and otherwise); state corporation laws; stock exchange rules; pension, profit-sharing and other employee benefit plans; antitrust laws; foreign laws; employment, consulting and non-compete agreements; union contacts and other labor considerations; the purchaser's security for breach of representations and warranties; insurance; and a myriad of other considerations.
There are three basic forms of business acquisitions:
i. Statutory business combinations (e.g., mergers, consolidations and share exchanges);
ii. Purchases of shares; and
iii. Purchases of assets.
The joint venture agreement, licensing agreement, or strategic alliance agreement should be outlined in a formal document that sets out what each party expects to bring to the alliance. There are two approaches to the agreement. The approach that fits your company probably will depend on your company’s size, your partner’s size, how long you’ve been in business, and the type of product or service being offered through the alliance.
- Loosely defined agreements. "Young" or small businesses may prefer to have an agreement that is broad and loosely defined to allow the partnership to grow in new directions as their business evolves.
- Tightly defined agreements. Larger or older businesses, or those in evolving technology fields, may fare better with an agreement that spells out the precise scope of the alliance and all the details of how it will be accomplished.
Whichever type of agreement fits your business, all agreements should include:
- your common goal
- a strategy to define the role of each partner to accomplish that goal
- the parameters of working toward that common goal.
A tightly defined agreement may also:
- identify key steps that each partner will take to meet the requirements of the agreement
- include a time frame for achieving those key steps
- outline each partner’s accountability by including consequences for "worst-case scenarios" such as missed deadlines, budget overruns, or products not delivered as promised or in the format expected
- provide a framework for resolving conflicts if they occur.
There are many examples of definitive merger agreements, joint venture agreements, distribution agreements, and licensing agreements below.
Mergers, Acquisitions, and Divestitures (Buying & Selling Businesses)
Click Link To Preview Document
Guides
|
Agreement Tools and Templates
Board of Director Resolutions
|
Joint Ventures and Strategic Alliances (Partnering)
Click Link To Preview Document
Guides
|
Agreement Tools and Templates
Board of Director Resolutions
General Business
|
Search Deal Information Databases and Businesses For Sale Listings