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Form #1258

Basic agreement and plan of reorganization—"C" type

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Basic agreement and plan of reorganization—"C" type.


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Basic agreement and plan of reorganization—"C" type.

Agreement and plan of reorganization (referred to as "agreement"), made the _________ day of _________[year], by and between _________, a _________ corporation (referred to as "purchaser"), and _________, a _________ corporation (referred to as "seller") and the undersigned shareholders of seller (referred to as "shareholders").

Plan of Reorganization

This plan of reorganization shall be a reorganization within the meaning of Section 368(a)(1)(C) as amended. Purchaser, or a newly formed, wholly-owned subsidiary of purchaser, shall acquire substantially all of the properties, assets and business of seller in exchange solely for a part of purchaser's voting common stock. As soon as practical seller will completely liquidate and dissolve and will cause to be distributed to its shareholders, pro rata to stock ownership, all of its right, title and interest in and to the shares of purchaser's voting common stock to be received by seller in exchange for the surrender by shareholders for cancellation of certificates representing all of seller's outstanding common stock.

Agreement

In order to consummate the above plan of reorganization, and in consideration of the mutual benefits to be derived and the mutual agreements contained, the parties approve and adopt this agreement and plan of reorganization and mutually covenant and agree as follows:

1. Assets To Be Transferred, Liabilities To Be Assumed, Shares To Be Issued and Dissolution of Seller.

1.1. Assets To Be Transferred.

On the closing date (defined), seller will convey, transfer, assign and deliver to purchaser (or upon purchaser's request, to a wholly-owned subsidiary of purchaser and designated by purchaser), and purchaser will accept and acquire (or cause its wholly-owned subsidiary to accept and acquire) all the business, property and assets of every kind and wherever situated which are owned by seller, or in which it has any right or interest, as of the closing date, except those provided in subparagraph 1.2.

1.2. Assets To Be Retained.

Seller shall retain:

(a) Cash not to exceed $_____ for expenses incurred by seller arising from or attributable to the sale and exchange provided for by this agreement and arising from or attributable to the dissolution, liquidation and winding up of the affairs of seller,

(b) The consideration which purchaser agrees to pay seller, and

(c) Seller's franchise to be a corporation, its certificate of incorporation, corporate seal, stock books, minute book and other corporate records having exclusively to do with the corporate organization and capitalization of seller. Purchaser or its designated agents may have reasonable access to books and records and may make excerpts.

1.3. Liabilities Not Assumed.

Anything to the contrary notwithstanding, purchaser shall not assume or pay (i) any United States, foreign, state or other taxes applicable to, imposed upon or arising out of the transfer of assets to purchaser contemplated by this agreement, including but not limited to, any income, transfer, sales, use, gross receipts or documentary stamp tax, (ii) any liability of seller insured against, to the extent that liability is or will be payable by an insurer, (iii) any liability, cost, obligation or expense incurred in connection with this agreement and the transactions contemplated, (iv) liabilities of seller for failure to perform any of its covenants contained in this agreement, or (v) any obligations or liabilities of seller to its shareholders as such.

1.4. Consideration To Be Given.

Upon the terms and conditions set forth in this agreement and in exchange for the business, property and assets of seller to be transferred, purchaser (or its designated subsidiary) in addition to assuming all of seller's liabilities, other than those specified in subparagraph 1.3, will issue and deliver to seller certificates representing _________ shares of purchaser's common stock registered in the name of seller.

1.5. Adjustment for Stock Split.

If purchaser shall affect a split of its outstanding common stock or affect a reclassification or combination of its outstanding common stock by way of recapitalization, merger, consolidation or otherwise, or declare a stock dividend payable to its shareholders of record with respect to its common stock on the date or dates prior to the closing date, the number of shares of common stock to be delivered to seller pursuant to subparagraph 1.4 shall in the case of a stock dividend be increased by the number of shares or in the case of a stock split, combination or reclassification be changed into the number of shares of common stock or other voting stock as the seller would have been entitled to receive on account of that dividend, stock split, reclassification or combination had the seller owned of record the shares to be delivered under subparagraph 1.4 on the record date of the stock split, combination, reclassification or payment of such dividend.

2. Representations and Warranties of Seller.

Seller represents and warrants as follows:

2.1. Organization and Authority.

(a). Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of _________ with all requisite corporate power and authority to own, operate and lease its properties and to carry on its business as now being conducted, and is duly qualified and in good standing in every jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes qualification necessary.

(b). Seller owns all of the outstanding stock of the corporations which are listed on exhibit A (called the "subsidiaries"). Subsidiaries are duly organized, validly existing and in good standing under the laws of the states of their incorporation and have all requisite corporate power and authority to own, operate and lease their properties and to carry on their business as now being conducted and are duly qualified and in good standing in every jurisdiction in which the property owned, leased or operated by them or the nature of the business conducted by them makes qualification necessary.

(c). The outstanding shares of seller and the subsidiaries are legally and validly issued, fully paid and nonassessable. The subsidiaries have not issued and do not have outstanding any option, warrant or convertible securities or other right to purchase or convert any obligation into such corporation's securities and have not agreed to issue or sell any additional securities.

(d). Seller does not own 10 percent or more of the outstanding stock of any corporation except those that it owns all of the outstanding stock.

(e). The execution and delivery of this agreement does not, and, subject to the approval and adoption by the shareholders of seller contemplated, the consummation of the transaction contemplated will not violate any provision of seller's certificate of incorporation or bylaws, or any provisions of, or result in the acceleration of any obligation under, any mortgage, lien, lease, agreement, instrument, court order, arbitration award, judgment or decree to which seller or any of its subsidiaries is a party or by which it or any of them is bound and will not violate any other restriction of any kind or character to which it or any of them is subject.

2.2. Financials.

(a). True copies of the financial statements of seller and its subsidiaries consisting of balance sheets as of the close of business December 31, for each of the 5 years ended December 31, [year], and as of the close of business _________[date], and the income statements for the five years and _________ (_________) months ended _________[date], have been delivered by seller to purchaser and are identified by the initials of _________. These financial statements with the exception of those covering the _________ (_________) months ended _________[date], have been examined and certified by _________. All of the financial statements are true and correct in all material respects and present an accurate and complete disclosure of the financial condition of seller and its subsidiaries as of their respective dates, and the earnings for the periods covered, in accordance with generally accepted accounting principles applied on a consistent basis.

(b). All accounts receivable (net of reserves for doubtful accounts) of seller and its subsidiaries shown on the books of account on _________[date], and as incurred in the normal course of business since that date, are collectible in the normal course of business.

(c). On _________[date], the inventories of seller and its subsidiaries included in the balance sheet of that date had a commercial value at least equal to the value shown in the balance sheet, all of which are usable and are valued at cost or market, whichever is lower, and assure a normal margin for each product line when sold.

(d). Seller and its subsidiaries have good and marketable title to all of their assets, business and properties including, without limitation, all properties reflected in the balance sheet as of _________[date], except as disposed of in the normal course of business, free and clear of any mortgage, lien, pledge, charge, claim or encumbrance, except as shown on the balance sheet as of _________[date], and, in the case of real properties, except for rights-of-way and easements which do not adversely affect the use of property.

(e). All currently used property and assets of seller and its subsidiaries, or in which they have an interest or which they have in possession, are substantially in good operating condition and repair subject only to ordinary wear and tear.

(f). The financial statements for seller and its subsidiaries consisting of a consolidated balance sheet as of the close of business December 31, [year], and a consolidated income statement for the year [year] examined and certified by _________ and delivered at the closing shall:

(1) Be true and correct in all material respects and present an accurate and complete disclosure of their financial condition as of December 31, [year], earnings for the year [year];

(2) Satisfy the representation and warranties made in subparagraphs (b), (c) and (d) of this subparagraph 2.2 as of the date the representation and warranties were made with respect to the financial statement;

(3) Disclose a consolidated book net worth in excess of $_____;

(4) Disclose a consolidated net income after taxes of in excess of $_____.

2.3. Changes Since .

Since _________[date], there has not been:

(a). Any material adverse change in the financial condition of seller or its subsidiaries.

(b). Any loss, damage or destruction to the properties of seller or its subsidiaries (whether or not covered by insurance) materially adversely affecting their business or properties.

(c). Any change in the compensation pattern of seller or its subsidiaries as established in preceding years, nor any material increase in the compensation payable or to become payable to any of their officers, directors, employees or agents, except as disclosed to purchaser in writing.

(d). Any labor dispute or disturbance litigation or event or condition of any character which materially adversely affects the business or future prospects of seller or its subsidiaries.

(e). The issuance of additional shares of stock or other securities by seller or its subsidiaries.

(f). Any distribution of assets, by way of dividends or purchase of shares by seller or its subsidiaries except for _________.

(g). Any borrowings from financial institutions except for _________.

(h). Any mortgage, pledge, lien or encumbrance made on any of the properties or assets of seller or its subsidiaries other than mechanics' and materialmen's liens arising in the normal course of business.

(i). Any sale, transfer or other disposition of assets of seller or its subsidiaries, except in the normal course of business.

2.4. Liabilities.

(a). There are no liabilities of seller or its subsidiaries, whether accrued, absolute, contingent or otherwise which arose or relate to any transaction of seller, its subsidiaries, their agents or servants occurring prior to _________[date], which are not disclosed by or reflected in the financial statements, except as disclosed in Exhibit B. There are no liabilities of seller or its subsidiaries which have arisen or relate to any transaction of seller or its subsidiaries, their agents or servants, occurring since _________[date], other than normal liabilities incurred in the normal conduct of seller's or its subsidiaries' business, except as disclosed in Exhibit B. As of this date there are no known circumstances, conditions, happenings, events or arrangements, contractual or otherwise, which may give rise to liabilities, except in the normal course of seller's or its subsidiaries' business, except as disclosed in Exhibit B.

(b). All federal, state, county and local income, ad valorem, excise, sales, use, gross receipts and other taxes and assessments which are due and payable have been duly reported, fully paid and discharged as reported by seller or its subsidiaries, and there are no unpaid taxes which are or could become a lien on the properties and assets of seller or its subsidiaries, except as provided for in the financial statements of _________[date], or have been incurred in the normal course of seller's or its subsidiaries' business since that date. All tax returns of any kind required to be filed have been filed and the taxes paid or accrued. Seller's and its subsidiaries' federal income tax returns have been audited through _________. Seller or its subsidiaries have no knowledge of any possible deficiency assessments in respect to federal income tax returns or other tax returns filed by them, except as disclosed to purchaser in writing.

(c). All parties with whom seller or its subsidiaries have contractual arrangements are in substantial compliance. Seller and its subsidiaries are not in default in any material respect under any contracts to which they are a party. All leases and contracts to which seller is a party are assignable or the other party has consented to assignment.

(d). All corporate acts required of seller and its subsidiaries have been taken and all reports and returns required to be filed by them with any governmental agency have been filed. Seller and its subsidiaries are in substantial compliance with all, and have no notice of any claimed violation of any, applicable federal, state, county and local laws, ordinances or regulations, including those applicable to discrimination in employment, pollution and safety except as disclosed in Exhibit B.

(e). There are no legal, administrative or other proceedings, investigations or inquiries, product liability or other claims, judgments, injunctions or restrictions, either threatened, pending or outstanding against or involving seller or its subsidiaries, or their assets, properties, or business, nor does seller or its subsidiaries know, or have reasonable grounds to know, of any basis for any proceedings, investigations or inquiries, product liability or other claims, judgments, injunctions or restrictions, except as disclosed in Exhibit B.

(f). All of the tangible real and personal properties of seller or its subsidiaries are in substantial compliance with applicable laws, ordinances, rules and regulations of all public authorities having jurisdiction thereover.

(g). Neither seller nor its subsidiaries have any contract with any governmental body which is subject to renegotiation.

(h). The past and anticipated future operations of seller and its subsidiaries do not infringe or violate any patents, patent rights, trademarks, trade names, copyrights and/or licenses of others.

(i). To the knowledge of the officers of seller and its subsidiaries there is no event, condition or trend of any character which might materially and adversely affect the financial condition, business, properties or assets of seller or any of its subsidiaries.

(j). The assets of seller and its subsidiaries are adequately insured and all policies of insurance carried by seller and its subsidiaries are in full force and all premiums are paid to date.

(k). All negotiations relative to this agreement and the transaction contemplated have been carried on directly by seller with purchaser without the intervention of any broker or third party. Seller has not engaged, consented to or authorized any broker, investment banker or third party to act on its behalf, directly or indirectly, as a broker or finder in connection with the transaction contemplated by this agreement.

(l). There are no inquiries, investigations or pending claims or litigation challenging or threatening to challenge seller's or its subsidiaries' right, title and interest with respect to their continued use and right to preclude others from using any patent, patent application, invention, discovery, trademark, trade name and copyright of seller or any of its subsidiaries.

(m). Neither seller nor any of its subsidiaries has granted any license or made any assignment of any of their patents, patent application, invention discovery, trademarks, trade names or copyrights, nor do they pay any royalties or other consideration for the right to use any patents, patent rights, trademarks, trade names or copyrights of others.

(n). To the knowledge of the officers of seller and its subsidiaries, the seller and its subsidiaries are not a party to nor bound by any agreement, deed, lease or other instrument which is so burdensome as to materially affect or impair the operation of seller or its subsidiaries.

2.5. Accuracy of All Statements Made by Seller.

No representation or warranty by seller in this agreement, nor any statement, certificate, schedule or exhibit furnished or to be furnished by or on behalf of seller pursuant to this agreement, nor any document or certificate delivered to purchaser pursuant to this agreement or in connection with actions contemplated, contains or shall contain any untrue statement of material fact or omits or shall omit a material fact necessary to make the statement contained not misleading.

3. Representations and Warranties by Shareholders.

Each shareholder, as an inducement to cause purchaser to enter into this agreement, severally represents and warrants that:

3.1. Ownership of Shares.

He [she] owns of record and beneficially the number of shares set forth opposite his [her] signature to this agreement.

3.2. Cooperation.

He [she] will cooperate in all respects to the end that the transactions contemplated by this agreement will be consummated and he [she] will vote all of his [her] shares in favor of consummating this agreement.

3.3. Contracts with Seller.

He [she] has no contracts or agreements with seller or its subsidiaries.

3.4. Lack of Economic Interest in Competitor.

He [she] does not have (nor does any person who would be his [her] heir or descendant if he [she] were not living or his [her] spouse) any direct or indirect interest (except through ownership of securities listed on a national securities exchange) in (i) any entity which does business with seller or any of its subsidiaries or is competitive with their business or (ii) any property, asset or right which is used by seller or any of its subsidiaries in the conduct of their business.

3.5. Obligations to Seller.

All obligations of any shareholder (or any person who would be an heir or descendant if he or she were not living or his or her spouse), or any entity in which he or she has any interest (except through ownership of securities listed on a national securities exchange), to seller are listed as to amount, payment schedule and obligor on Exhibit C hereto.

3.6. Truth of Representations and Warranties.

To the best of shareholders' knowledge, all of the representations of seller contained in paragraph 2 of this agreement are true and correct.

4. Representations and Warranties of Purchaser.

Purchaser represents and warrants as follows:

4.1. Organization and Good Standing.

Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the state of _________.

4.2. Performance of This Agreement.

The execution and performance of this agreement and the issuance of stock contemplated have been authorized by the board of directors of purchaser.

4.3. Legality of Shares To Be Issued.

The shares of purchaser's common stock to be delivered pursuant to this agreement, when delivered, will have been duly and validly authorized and issued by purchaser and will be fully paid and nonassessable. The shares of purchaser's common stock to be issued will have been listed for trading on the New York Stock Exchange.

4.4. No Covenant as to Tax Consequences.

It is expressly understood and agreed that neither purchaser nor its officers or agents has made any warranty or agreement, expressed or implied, as to the tax consequences of the transactions contemplated by this agreement or the tax consequences of any action pursuant to or growing out of this agreement.

5. Covenants of Seller.

Seller covenants and agrees as follows:

5.1. Documents To Be Furnished.

Within ten days from the date of this agreement seller will furnish to purchaser the following documents, lists and schedules certified by a principal officer of seller as being accurate and complete:

(a) A list of the states of incorporation and states qualified to do business of seller and its subsidiaries;

(b) A list of the authorized and outstanding securities of seller and its subsidiaries;

(c) A list of the officers, directors and shareholders of seller and its subsidiaries;

(d) Copies of the articles of incorporation and bylaws currently in effect of seller and its subsidiaries;

(e) A list of the legal descriptions of all real property owned of record or beneficially, or held under lease, or option, or similar agreements by seller or its subsidiaries;

(f) Copies of all surveys and policies of title insurance relating to real property owned by seller or its subsidiaries;

(g) Copies of all leases to which seller or any of its subsidiaries is a party;

(h) Copies of all contracts, agreements or commitments of seller or any of its subsidiaries, whether involving purchases, sales or otherwise, which expire more than one year from the date of this agreement or which involve an amount or value in excess of $_____;

(i) Copies of all collective bargaining or other union contracts to which seller or any of its subsidiaries is a party;

(j) Copies of all employment contracts to which seller or any of its subsidiaries is a party;

(k) Copies of all pension, retirement and profit sharing plans to which seller or any of its subsidiaries is a party;

(l) A list of all fringe benefit plans and programs applying to employees of seller or its subsidiaries, including but not limited to, pension, profit sharing, life insurance, medical, bonus, incentive and similar plans and the approximate annual cost of each;

(m) A list of all employees of seller and its subsidiaries whose total remuneration for the year ended December 31, [year], exceeded $_____;

(n) A list of all letters patent, patent applications, inventions upon which patent applications have not yet been filed, trade names, trademarks, trademark registrations and applications, copyrights, copyright registrations, both domestic and foreign presently owned by seller or any of its subsidiaries, together with the corporate owner;

(o) Any agreements to which seller or any of its subsidiaries are parties with respect to any letters patent, patent applications, inventions upon which patent applications have not yet been filed, trade names, trademarks, trademark registrations and applications, copyrights and copyright registrations;

(p) A list by major product lines of all distributors and dealers for seller or any of its subsidiaries, together with representative copies of franchise agreements, distribution contracts and policy statements with a description of substantial modifications or exceptions;

(q) Copies of all financing or loan agreements, mortgages or similar agreements to which seller or any of its subsidiaries is a party;

(r) A list of all seller's and its subsidiaries' bank accounts, brokerage accounts, safety deposit boxes, with the authorized signers indicated;

(s) Copies of all powers of attorney granted by seller or any of its subsidiaries;

(t) A list of each insurance policy owned by seller or any of its subsidiaries, with the name of the insurance carrier, the policy number, a brief description of the coverage, the annual premium, the corporate owner and any claims pending;

(u) Sales for the last three (3) fiscal years made to the five largest customers of seller and its subsidiaries;

(v) Purchases from any vendor during the last three (3) fiscal years who accounted for over 10 percent of the purchases made by seller and its subsidiaries;

(w) All sales commissions paid any individual or entity of more than $_____ during the last three years and a description of the present basis of paying sales commissions.

5.2. Actions Prior to Closing.

From and after the date of this agreement and until the closing date:

(a). Purchaser and its authorized representatives shall have full access during normal business hours to all properties, books, records, contracts and documents of seller and its subsidiaries, and seller and its subsidiaries shall furnish or cause to be furnished to purchaser and its authorized representatives all information with respect to its affairs and business of seller and its subsidiaries as purchaser may reasonably request.

(b). Except with the prior written consent of purchaser, seller and its subsidiaries shall carry on their business diligently and substantially in the same manner as before.

(c). Without the prior written consent of purchaser, seller and its subsidiaries will not grant any general or uniform increase in the rates of pay of its employees, nor grant any general or uniform increase in the benefits under any pension plan or other contract or commitment, nor increase the compensation payable or to become payable to officers or key salaried employees, insurance, pension or other benefit plan, payment or arrangement made to, for or with any of the officers, key salaried employees or agents.

(d). Seller and its subsidiaries shall not enter into any contract or commitment or engage in any transaction not in the usual and ordinary course of business and consistent with seller's and its subsidiaries' business practices without the prior written consent of purchaser.

(e). Seller and its subsidiaries shall not create any indebtedness other than that incurred in the usual and ordinary course of business, that incurred pursuant to existing contracts disclosed in the exhibits submitted, and that reasonably incurred in doing the acts and things contemplated by this agreement.

(f). Seller and its subsidiaries shall not declare or pay any dividend or make any distribution in respect of its capital stock; shall not directly or indirectly redeem, purchase or otherwise acquire any of its own stock; shall not grant any stock options; and shall not issue or in any way dispose of any shares of its own stock.

(g). Subsidiaries shall not amend their certificates of incorporation or bylaws or make any changes in authorized or issued capital stock without the prior written consent of purchaser.

(h). Seller and its subsidiaries shall maintain current insurance and any additional insurance in effect as may be reasonably required by increased business and risks; and all property shall be used, operated, maintained and repaired in a normal business manner.

(i). Seller and its subsidiaries shall use their best efforts (without making any commitments on behalf of purchaser) to preserve their business organization intact, to keep available to purchaser the present key officers and employees of seller and its subsidiaries, and to preserve for purchaser the present relationships of seller and its subsidiaries with their suppliers and customers and others having business relations with them.

(j). Seller and its subsidiaries shall not do any act or omit to do any act, or permit any act or omission to act, which will cause a material breach of any material contract, commitment or obligation of seller and its subsidiaries.

(k). Seller and its subsidiaries shall duly comply with all applicable laws as may be required for the valid and effective transfer of property, assets and business contemplated by this agreement, except that purchaser waives compliance with the provisions of any bulk sales act.

(l). Seller and its subsidiaries shall not sell or dispose of any property or assets except products sold in the ordinary course of business.

(m). Seller and its subsidiaries shall promptly notify purchaser of any lawsuits, claims, proceedings or investigations that may be threatened, brought, asserted or commenced against them, their officers or directors involving in any way the business, properties or assets of seller or any of its subsidiaries.

(n). Seller will provide purchaser with interim monthly financial statements and any other management reports as and when they are available.

5.3. Change of Corporate Name.

Seller agrees to change its corporate name to a new name bearing no resemblance to its present name as promptly as practical after the closing so as to permit the use of its present name by purchaser.

6. Conditions Precedent to Purchaser's Obligations.

Each and every obligation of purchaser to be performed on the closing date shall be subject to the prior satisfaction of the following conditions:

6.1. Truth of Representations and Warranties.

The representations and warranties made by seller and shareholders in this agreement or given on its behalf, shall be substantially accurate in all material respects on and as of the closing date with the same effect as though the representations and warranties had been made or given on and as of the closing date.

6.2. Compliance with Covenants.

Seller shall have performed and complied with all its obligations under this agreement which are to be performed or complied with by it prior to or on the closing date including the delivery of its documents specified in subparagraph 5.1 and the closing documents specified in subparagraph 13.2.

6.3. Absence of Suit.

No suit or proceeding shall be threatened or pending in which it will be or it is sought, by anyone, to restrain, prohibit, challenge or obtain damages or other relief in connection with this agreement or the consummation of the transactions contemplated, or in connection with any material claim against seller or any of its subsidiaries not disclosed or in the exhibits.

6.4. Shareholder Authorization.

The sale of the business, property and assets of seller in the manner contemplated by this agreement shall have been duly and validly authorized by the holders of seller's stock issued and outstanding in accordance with the laws of the State of _________.

6.5. No Material Adverse Change.

As of the closing date there shall not have occurred any material adverse change which materially impairs the ability of seller and its subsidiaries to conduct their business or the earning power on the same basis as in the past.

6.6. Accuracy of Financial Statement.

Purchaser and its representatives shall be satisfied as to the substantial accuracy of all balance sheets, statements of income and other financial statements of seller furnished to purchaser.

6.7. Approval of Purchaser's Board of Directors.

This agreement shall have been approved by the board of directors of purchaser.

6.8. Accountants' Comfort Letter.

Purchaser shall receive on or before the closing date the accountants' comfort letter referred to in subparagraph 13.4(a).

6.9. Listing of Shares.

The shares of purchaser's common stock to be issued pursuant to this agreement shall have been duly listed, or listed subject to official notice of issuance, upon the New York Stock Exchange.

6.10. Employment Contracts.

Employment contracts referred to in subparagraph 13.2(e) shall have been executed.

6.11. Time Limit on Closing.

Closing shall have taken place by _________[date].

6.12. Legal Opinion.

Purchaser shall have received an opinion of counsel for seller referred to in subparagraph 13.2(d).

7. Conditions Precedent to Seller's Obligations.

Each and every obligation of seller to be performed on the closing date shall be subject to the prior satisfaction of the following conditions:

7.1. Internal Revenue Service Ruling.

Receipt of a written ruling of the Internal Revenue Service to the effect that the transaction contemplated by this agreement qualifies as a tax-free reorganization and that the shareholders, upon receipt of shares of purchaser pursuant to the agreement and plan of reorganization, will not at that time have any taxable gain or deductible loss (except that gain may be recognized by shareholders to the extent of sales for their account of fractional shares to which they would otherwise be entitled).

7.2. Listing of Shares.

The purchaser's common stock to be delivered shall have been listed, or listed subject to official notice of issuance upon the New York Stock Exchange.

7.3. Truth of Representations and Warranties.

Purchaser's representations and warranties contained in this agreement shall be true at and as of the closing date as though the representations and warranties were made at and as of the transfer date.

7.4. Purchaser's Compliance with Covenants.

Purchaser shall have performed and complied with its obligations under this agreement which are to be performed or complied with by it prior to or on the closing date.

7.5. Time Limit on Closing.

Closing shall have taken place by _________[date].

8. Limitations on Survival and Effect of Certain Warranties, Representations and Covenants.

All statements contained in any certificate, instrument or document delivered by or on behalf of any of the parties pursuant to this agreement and the transactions contemplated shall be deemed representations and warranties by the respective parties.

8.1. Shareholders' Obligations.

The representations and warranties and covenants of shareholders contained in this agreement shall survive the closing date, and any investigation made by purchaser or its agents, and all representations, warranties and covenants surviving shall be deemed joint and several.

8.2. Purchaser's Obligations.

The representations, warranties and covenants of purchaser contained in this agreement shall survive the closing date.

9. Indemnification.

9.1. Requirement of Indemnification.

Shareholders shall indemnify purchaser for any loss, cost, expense or other damage suffered by purchaser resulting from, arising out of, or incurred with respect to the falsity or the breach of any representation, warranty or covenant made by seller or shareholders which survives the closing as provided in paragraph 8.

9.2. Notice.

Purchaser shall assert any right to indemnification by furnishing _________, or any other person as may be designated in writing by shareholders, with a written notice and list of charges detailed by item showing the nature of any breach of any representation, warranty or covenant, date of payment or assertion of claim, summary of settlement or litigation procedures, and the amount of the loss, cost or expense. If the right to indemnification is based on a claim of a third party, purchaser shall give the notice within 120 days after purchaser has notice of any claim and shareholders shall have the right to contest any such claim by a third party but all expenses of the contest shall be borne by shareholders.

9.3. Resolution of Claim.

Except in the event that the claim for indemnification is based upon a claim of a third party and shareholders shall have notified purchaser that it will contest the claim, unless shareholders object to the determination or computation of the total amount of the indemnification shown on the written notice specified in subparagraph 9.2 within 60 days after receipt, the total amount of indemnification shown by notice shall be paid by shareholders to purchaser. If shareholders object to the determination contained in the written notice specified in subparagraph 9.2 within 60 days after receipt, they shall have the right to submit any claim for indemnification not brought by a third party to the American Arbitration Association for binding arbitration in accordance with its rules, and the expenses of the American Arbitration Association shall be borne equally by the parties.

9.4. Effect of Taxes.

The determination of any loss, cost or expense shall take into account any tax benefit derived by purchaser or any affiliated companies. To the extent that any deficiency for federal income taxes which may be established against seller for any year ended on or prior to _________[year], is occasioned by a determination by the Internal Revenue Service that any increase in income for the year gives rise to a deduction or deductions from ordinary income in the aggregate amount of seller for a subsequent taxable year or years, this deficiency shall be assumed by purchaser and shall not be a breach of any of seller or shareholders' warranties, representations and covenants in this agreement.

9.5. Time Limit on Indemnification.

No claim for indemnification may be asserted by purchaser after _________[date], except for (i) income taxes for any period ending on or prior to _________[date], which may be asserted at any time the Internal Revenue Service may still assert a deficiency and (ii) claims arising out of a representation, warranty or covenant that a

shareholder knew at the date of this agreement was false or which arises out of a claim later known to a shareholder which shareholder failed to disclose to an officer of purchaser prior to _________[date].

9.6. Amount Limit on Indemnification.

Notwithstanding any other provision to the contrary, shareholders shall not be charged with any loss, cost or expense which in the aggregate does not exceed $_____.

10. Covenant Not To Compete.

By execution, each shareholder agrees that for a period of five (5) years from the closing date he or she will not either directly or indirectly own, have a proprietary interest (except for less than five percent (5%) of any listed company or company traded in the over-the-counter market) of any kind in, be employed by, or serve as a consultant to or in any other capacity for any firm, other than purchaser and its subsidiaries, engage in the manufacture and distribution of _________, or other products presently made or distributed by seller or any of its subsidiaries, in the area where it is presently engaged in business without the express written permission of purchaser. Each shareholder agrees that compliance with the agreement contained in this paragraph is necessary to protect the goodwill and other proprietary interest of seller and that a breach of this agreement will result in irreparable and continuing damage to purchaser for which there will be no adequate remedy at law and in the event of any breach purchaser shall be entitled to injunctive and other and further relief including damages as may be proper.

11. Security Act Provisions.

11.1. Restrictions on Disposition of Shares.

Shares of purchaser's common stock to be received pursuant to this agreement shall be distributed by seller to the shareholders who covenant and warrant that the shares so received are acquired for their own accounts and not with the present view towards the distribution and will not dispose of shares except (i) pursuant to an effective registration statement under the Securities Act of 1933, as amended, or (ii) in any other transaction which, in the opinion of counsel, acceptable to purchaser, is exempt from registration under the Securities Act of 1933, as amended, or the Rules and Regulations of the Securities and Exchange Commission. In order to effectuate the covenants of this subparagraph 11.1, an appropriate endorsement will be placed on the certificate of common stock of the purchaser at the time of distribution of those shares by the seller pursuant to this agreement, and stop transfer instructions shall be placed with the transfer agent for the securities.

11.2. Evidence of Compliance with Private Offering Exemption.

Seller and shareholders agree to supply purchaser with evidence of the financial sophistication of the shareholders or evidence of appointment of a sophisticated investment representative and any other items as counsel for purchaser may require in order to evidence the private offering character of the distribution of shares made pursuant to this agreement.

11.3. Notice of Limitation Upon Disposition.

Each shareholder is aware that the shares distributed will not have been registered pursuant to the Securities Act of 1933, as amended; and, therefore, under current interpretations and applicable rules, he or she will probably have to retain the shares for a period of at least two years and at the expiration of the two year period sales may be confined to brokerage transactions of limited amounts requiring certain notification filings with the Securities and Exchange Commission and the disposition may be available only if the purchaser is current in his or her filings with the Securities and Exchange Commission and the shareholders are aware of Rule 144 issued by the Securities and Exchange Commission under the Securities Act of 1933, as amended, and the other limitations imposed on their disposition of purchaser's shares.

11.4. Registration Rights on Form S-16.

If any shareholder shall so request in writing within a period of two years beginning with the closing date, purchaser will, after request, proceed at its own expense to prepare and to file with the Securities and Exchange Commission ("SEC") as soon as reasonably practicable after receipt of the request one registration statement upon Form S-16 under the Securities Act of 1933, as amended, with respect to all or part (as so requested) of the shares of common stock of purchaser received by the shareholder, and will use its best efforts to cause the registration statement to become effective. Purchaser will, furthermore, at its own expense, use its best efforts to keep the registration statement current, in accordance with the rules and regulations of the SEC for the period ending upon a date two years subsequent to the closing date or 30 days after the effectiveness whichever occurs later.

11.5. Registration Rights on Other Forms.

In the event that Form S-16 is inappropriate within the meaning of the Securities Act of 1933, as amended, and/or the rules and regulations of the SEC, purchaser will, at the request of any shareholder given in writing between January 31 and May 31 of any year within a period of two years beginning with the closing date, proceed at its own expense to prepare and file with the SEC, as soon as reasonably practicable after receipt of the request, one registration statement upon a form acceptable to the SEC and, further, undertake to keep the registration statement current and effective for a period of 30 days from the effective date of the registration.

11.6. Piggyback Rights.

In the event purchaser files a registration statement under the Securities Act of 1933, as amended, with respect to shares of its common stock, prior to _________[date], on a form appropriate for registering shareholders' common stock, purchaser shall give written notice to shareholders prior to filing, and shareholders shall have the right to request to have included such shares of purchaser's common stock as shall be specified in the request, provided, however, that the inclusion of the shares shall not interfere with purchaser's registration of its shares and that in no event shall purchaser be obligated (i) to file a registration statement at any time other than during the period ended _________[date], or (ii) to keep the prospectus with respect to the stock current for more than 30 days after the effective date of the registration statement; and provided, further, that all shares sold pursuant to the registration statement are effected within the 30 day period. If shareholders do not make a request for registration within 20 days after receipt of notice from purchaser, purchaser shall have no obligation to include any shares of purchaser's common stock owned by those shareholders in the registration statement.

11.7. Payment of Expenses.

In the event of a registration under this paragraph 11, shareholders shall pay and bear the direct selling fees, disbursements and expenses, including without limitation all underwriters' discounts, commissions and expenses, but no other cost of registration.

12. Profit Sharing Plan and Other Employee Benefit Plans.

Purchaser and seller shall before and after the closing take all actions which may be necessary, convenient or appropriate in the opinion of purchaser to transfer to purchaser all the rights and to cause purchaser to assume all the liabilities of seller under its profit sharing plan and trust (including the adoption of amendments to the plan and trust and action as may be necessary to secure approvals of the Internal Revenue Service which may be required or deemed advisable), to the end that the plan may be integrated into seller's profit sharing plan treating employment with seller as employment with purchaser under its plans and preserving the benefits previously accrued to seller's employees. All other employee benefit plans including but not limited to health and accident insurance, major medical insurance, sick pay plans, noninsured maternity benefits, group life insurance, and other employee fringe benefits shall be continued by purchaser subject to the same rights of termination available to seller.

13. Closing.

13.1. Time and Place.

The closing of this transaction ("closing") shall take place at the offices of _________ in _________, _________, at —.m., _________[date], or at any other time and place as the parties shall agree upon. This date is referred to in this agreement as the "closing date."

13.2. Documents To Be Delivered by Seller.

At the closing seller shall deliver to purchaser the following documents:

(a). Deeds of real estate and bills of sale and such other instruments of assignment, transfer, conveyance or endorsement as will be sufficient in the opinion of purchaser and its counsel to transfer to purchaser full, complete and absolute title to all assets of the seller to be transferred.

(b). Title insurance policies in the amount of $_____ covering seller's real estate.

(c). A certificate signed by the officers of seller that the representations and warranties made by seller in this agreement are substantially accurate in all material respects on and as of the closing date with the same effect as though the representations and warranties had been made on or given on and as of the closing date and that seller has performed and complied with all its obligations under this agreement which are to be performed or complied with by or prior to or on the closing date.

(d). A written opinion from counsel for seller dated as of the closing date addressed to the purchaser satisfactory in form and substance to purchaser to the effect that:

(1) The corporate existence and good standing and qualification of seller and its subsidiaries is as stated in subparagraph 2.1;

(2) The ownership of common stock of subsidiaries is as stated in subparagraph 2.1;

(3) This agreement has been duly executed and delivered by seller and constitutes a legal, valid and binding obligation of seller enforceable in accordance with its terms;

(4) Counsel has no knowledge of any of the proceedings stated in subparagraph 2.4(e);

(5) To the best of counsel's knowledge seller is in compliance with all statutes, regulations, rules and executive orders of all government authorities as stated in subparagraph 2.4(d); and

(6) To the best of counsel's knowledge seller's representations and warranties in subparagraphs 2.4(h) and 2.4(l) are true and correct.

(e). Employment agreements between _________, _________, and _________ and purchaser in satisfactory form to purchaser.

(f). A certified copy of the duly adopted resolutions of shareholders and board of directors authorizing the transactions contemplated by this agreement.

(g). A copy of the bylaws of seller certified by its secretary and a copy of the certificate of incorporation of seller certified by the secretary of state.

(h). Incumbency certificate relating to all parties executing documents relating to any of the transactions contemplated.

(i). Certificates or letters from shareholders evidencing the taking of the shares in accordance with the provisions of paragraph 11 and their understanding of the restrictions.

(j). General release in form and substance satisfactory to purchaser and its counsel of all claims that any officer or director of seller may have to the date of closing against seller, purchaser and/or the directors, officers, agents and employees of seller except as may be described in written contracts expressly described and excepted from the releases.

(k). Any other documents of transfer, certificates of authority and other documents as purchaser may reasonably request.

13.3. Documents To Be Delivered by Purchaser.

At the closing purchaser shall deliver to seller the following documents:

(a). Certificates for the number of shares of purchaser's common stock as determined in subparagraph 1.4. These shares are to be registered in the name and denominations as seller may specify.

(b). Opinion of counsel for purchaser dated as of the closing date satisfactory to counsel for seller in form and substance to the effect that:

(1) Purchaser's corporate existence and good standing are set forth in subparagraph 4.1;

(2) This agreement has been duly authorized, executed and delivered by purchaser and is a valid and legally binding obligation of purchaser enforceable in accordance with its terms;

(3) Purchaser has taken the corporate action as is necessary to authorize the performance of the obligation imposed upon it by this agreement.

(c). A certified copy of the duly adopted resolutions of purchaser's board of directors or executive committee authorizing or ratifying the execution and performance of this agreement and authorizing or ratifying the acts of its officers and employees in carrying out the terms and provisions.

13.4. Other Documents To Be Delivered at the Closing.

The following additional documents shall be delivered:

(a). A letter from _________ accountants dated the closing date in form and substance satisfactory to purchaser to the effect that the financial statements of seller and its subsidiaries referred to in subparagraph 2.2 and covered by the opinions and reports of _________ fairly present the financial position of seller and its subsidiaries at the dates mentioned in subparagraph 2.2 and the results of the operation for the years then ended. These letters shall also state that based upon inquiries of the officers of seller responsible for financial and accounting matters and other specified procedures (such procedures not constituting an audit) nothing came to their attention which in their judgment indicated that during the period from _________ to a date not earlier than five days prior to the closing date there was any material adverse change or changes in the financial position of seller and its subsidiaries or the results of their operations. The letter shall also state that they have obtained no knowledge of any matter which would materially increase the liability for federal income taxes provided for the three (3) fiscal years ended prior to the closing date.

(b). A ruling from the Internal Revenue Service as provided in subparagraph 7.1.

14. Meeting of Shareholders and Liquidation of Seller.

Seller will duly call, give notice of and hold a meeting of the holders of its common stock on or before _________[date], for the purpose of authorizing (i) the conveyance, assignment, transfer and delivery of the seller's assets to purchaser upon the terms and conditions provided; (ii) the voluntary dissolution of seller following the distribution to seller's shareholders of purchaser's common stock and complete liquidation of seller; and (iii) an amendment to seller's articles of incorporation to change seller's name at or after the closing date to one which does not include the name of _________ or any variant. Seller shall be dissolved as promptly as practical after the closing and after seller, in complete winding up and liquidation of seller, distributes to the holders of seller's common stock, in exchange for and upon surrender for cancellation of their certificates, shares of purchaser's common stock to be delivered to seller pursuant to paragraph 1. Purchaser shall not be obligated to issue fractional shares of common stock of purchaser in connection with distribution of shares by seller to shareholders. Instead seller shall make appropriate arrangements satisfactory to purchaser for the purchase or sale, for the account of shareholders entitled to fractional interests, of their fractional interests in common stock of purchaser.

15. Law Governing.

This agreement may not be modified or terminated orally, and shall be construed and interpreted according to the laws of the State of _________.

16. Assignment.

This agreement shall not be assigned by any party without the written consent of the others.

17. Amendment and Modification.

Purchaser and seller may amend, modify and supplement this agreement in any manner as may be agreed upon by them in writing.

18. Termination and Abandonment.

This agreement may be terminated and the transaction provided for by this agreement may be abandoned without liability on the part of any party to any other, at any time before the closing date:

(a) By mutual consent of purchaser and seller;

(b) By purchaser:

(1) If any of the conditions provided for in paragraph 6 of this agreement have not been met and have not been waived in writing by purchaser;

(c) By seller:

(1) If any of the conditions provided for in paragraph 7 of this agreement have not been met and have not been waived in writing by seller.

In the event of termination and abandonment by any party as provided above in this paragraph 18, written notice shall be given to the other party, and each party shall pay its own expenses incident to preparation for the consummation of this agreement and the transactions contemplated.

19. Notices.

All notices, requests, demands and other communications shall be deemed to have been duly given, if delivered by hand or mailed, certified or registered mail with postage prepaid:

(a) If to seller to _________ at _________[address], or to any other person and place as seller shall furnish to purchaser in writing; or

(b) If to purchaser, to _________ at _________[address], or to any other person and place as purchaser shall furnish to seller in writing.

20. Announcements.

Announcements concerning the transactions provided for in this agreement by either seller or purchaser shall be subject to the approval of the other in all essential respects, except that seller's approval of form shall not be required as to any statements and other information which purchaser may submit to the Securities and Exchange Commission, the New York Stock Exchange or purchaser's shareholders or be required to make pursuant to any rule or regulation of the Securities and Exchange Commission or New York Stock Exchange.

21. Entire Agreement.

This instrument embodies the entire agreement between the parties with respect to the transactions contemplated, and there have been and are no agreements, representations or warranties between the parties other than those set forth or provided for.

22. Counterparts.

This agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

23. Headings.

The headings in the paragraphs of this agreement are inserted for convenience only and shall not constitute a part.

24. Further Documents.

Purchaser and seller agree to execute any and all other documents and to take any other action or corporate proceedings as may be necessary or desirable to carry out the terms.

In witness of, the parties have caused this agreement to be duly executed all as of the day and year first written above.

[Corporate seal]

_________

Attest _________, Secretary

By _________, President

[Corporate seal]

_________

Attest _________, Secretary

By _________, President

Shareholders

_________

_________

_________

Contributed by
Pam
 
Total Forms Contributed 41
 

See All Pam 's Forms
 

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