stock-purchase-agreement

# Stock Purchase Agreement (M&A)

Draft a definitive SPA for acquiring 100% of a target company's outstanding capital stock in a middle-market transaction.

## Prerequisites

1. **Deal documents** — LOI, term sheet, or preliminary agreement with negotiated business terms.
2. **Organizational docs** — articles of incorporation, bylaws, shareholder agreements.
3. **Capitalization details** — authorized/outstanding shares, classes, each seller's ownership percentage.
4. **Financial statements** — audited/reviewed for 2+ fiscal years plus most recent interim period.
5. **Due diligence materials** — material contracts, employment agreements, IP schedules, litigation history.
6. **Negotiated economics** — purchase price, working capital target, escrow percentage, earnout terms.

## Document Intelligence

Extract from uploaded materials before drafting:

| Data Point | Source Priority |
|---|---|
| Party names, entity types, jurisdictions | LOI → Org docs → Correspondence |
| Cap table (shares, classes, ownership %) | Stock ledger → Org docs → LOI |
| Purchase price and adjustments | Term sheet → LOI |
| Working capital target | Financial statements → Term sheet |
| Escrow/earnout terms | LOI → Term sheet |
| Material contracts requiring consent | Due diligence schedule |
| Disclosed liabilities/contingencies | Financial statements → Disclosure schedules |
| Key employees and compensation | Employment agreements → HR records |
| Balance sheet date (MAE baseline) | Most recent financial statements |

Cite source documents when incorporating extracted terms. Flag gaps requiring user input.

## Output Structure / Process

### 1) Document Skeleton
```text
STOCK PURCHASE AGREEMENT
- Parties; Effective Date; Recitals
1. Definitions
2. Purchase and Sale of Shares
3. Purchase Price; Payment; Adjustments
4. Closing; Closing Deliveries
5. Representations and Warranties of Sellers
6. Representations and Warranties of Buyer
7. Covenants (Pre-Closing; Post-Closing)
8. Conditions to Closing
9. Indemnification
10. Termination
11. General Provisions
Signatures
Exhibits and Schedules
```

### 2) Exhibit/Schedule Map
| Label | Purpose | Must Include |
|---|---|---|
| Exhibit A | Seller schedule | Name, address, TIN, shares, class, ownership %, price allocation — must total 100% |
| Exhibit B | Escrow agreement | Escrow agent, deposit amount, release schedule, claim procedures |
| Disclosure Schedules | R&W exceptions | Numbered to match each seller rep subsection |

### 3) Core Drafting Checklists

**Purchase and Sale of Shares**
- Sale of 100% outstanding capital stock, free and clear of all liens.
- Seller-by-seller allocation on Exhibit A.
- Confirm no other equity securities, options, warrants, or commitments exist.
- Transfer mechanics: endorsed certificates or blank stock powers.

**Purchase Price and Payment**
- State aggregate price in USD; define fixed vs. adjusted price.
- If adjusted: define Net Working Capital (current assets − current liabilities per GAAP consistent with historical statements).
- Working capital adjustment procedure: closing statement delivery (closing + 60 days) → seller review (30 days) → dispute notice → good-faith negotiation (30 days) → independent accountant (binding; fees split proportionally) → true-up payment (5 business days).
- Wire transfer of immediately available funds; allocate per Exhibit A.

**Escrow**
- Typical range: 10–20% of aggregate purchase price.
- Release schedule: e.g., 50% at 1st anniversary, remainder at 2nd (subject to pending claims).
- Tax withholding: buyer entitled to withhold per applicable law; withheld amounts treated as paid.

**Closing Deliveries**
- Seller: stock certificates with stock powers, D&O resignations with releases, good standing certificate, compliance certificate, third-party consents, lender payoff letters and UCC-3 terminations, FIRPTA certificates, key employee employment/non-compete agreements.
- Buyer: purchase price payment (less escrow/holdbacks), compliance certificate, executed ancillary agreements, escrow deposit.

**Sellers' Reps and Warranties**
- Structure as joint and several (or several only per deal terms). All subject to disclosure schedules.
- Fundamental reps (extended survival): organization/good standing, authority/enforceability, capitalization (authorized/outstanding, fully paid, non-assessable, no options/warrants), title to shares (free and clear).
- Business reps (standard survival): financial statements (GAAP, consistent application), no undisclosed liabilities, absence of MAE, compliance with laws, litigation, taxes (filed/paid, no audits, withholding compliance), material contracts, IP (ownership, no infringement), real/personal property, employees/benefits (ERISA/IRC compliance), environmental, insurance, related party transactions, full disclosure.

**Buyer's Reps and Warranties**
- Organization/good standing, authority/enforceability, no conflicts, financial capacity, investment representations (if unregistered securities).

**Pre-Closing Covenants**
- Operate in ordinary course consistent with past practice; preserve business organization.
- Prohibited actions without buyer consent: amend org docs, issue equity, declare dividends, acquire/dispose assets above threshold, incur debt, CapEx above threshold, modify material contracts, increase compensation/benefits, settle litigation, related party transactions.
- Buyer access: reasonable access during business hours to properties, books, records, personnel.

**Restrictive Covenants (Post-Closing)**
- Non-compete: specific activities and geography; 1–5 years per jurisdiction; passive ≤5% public company exception.
- Employee/customer/supplier non-solicitation: matching or longer duration.
- Confidentiality: indefinite; publicly available info and legally compelled disclosure excepted.
- Include judicial reformation and severability language for all restrictive covenants.

**Additional Covenants**
- Reasonable best efforts to close; mutual consent for public announcements; each party bears own expenses.
- Tax cooperation: pre/post-closing allocation (interim closing of books or pro rata), straddle periods, Section 1060 allocation, consistent Forms 8594.

**Indemnification**
- Sellers indemnify for: rep/warranty breaches, covenant breaches, undisclosed liabilities, unpaid transaction expenses, pre-closing taxes.
- Buyer indemnifies for: rep/warranty breaches, covenant breaches, post-closing liabilities.
- Survival: fundamental reps 3–5 years or indefinite; tax reps SOL + 60 days; other reps 12–24 months; covenants until performed.
- Seller liability limits: basket 0.5–2% (true deductible or tipping), cap 20–50%, carve-outs for fundamental reps, covenants, fraud.
- Third-party claims: prompt notice → indemnifying party may assume defense (20–30 days) → no settlement without consent if admits liability/imposes injunction/lacks release.
- Losses net of insurance proceeds, third-party recoveries, and tax benefits actually received; exclude consequential/punitive damages (except third-party awards); mitigation required.
- Escrow as sole recovery source during escrow period (if negotiated): claim notice → 30-day objection → release or hold.
- Exclusive remedy for rep/warranty/covenant breaches (except fraud and equitable relief).

**Termination**
- Triggers: mutual consent, outside date (3–6 months), governmental prohibition, material uncured breach (30-day cure), MAE (if negotiated).
- Effects: all obligations terminate except confidentiality, expenses, and willful breach liability.
- Consider termination fee / reverse termination fee provisions.

**General Provisions**
- Governing law (typically Delaware/NY) without conflict-of-law principles; exclusive jurisdiction or binding arbitration (AAA Commercial Rules).
- Entire agreement; written amendments only; written notices (delivery, courier, email); no assignment without consent (buyer may assign to affiliates); severability; counterparts with electronic signatures; "including" means "without limitation"; no third-party beneficiaries; time is of the essence.

## Guidelines

- Extract and cite specific terms from uploaded deal documents; flag gaps requiring user input.
- Balance buyer-protective structure with reasonable seller limitations (baskets, caps, survival).
- Use defined terms consistently; capitalize when used as defined terms.
- Verify all cross-references, section numbers, and exhibit references for internal consistency.
- Address Section 1060 allocation and Forms 8594 for tax compliance.
- Include FIRPTA certification requirements for seller closing deliveries.
- Restrictive covenant scope must be reasonable and enforceable in governing jurisdiction — flag if jurisdiction disfavors non-competes.
- Match disclosure schedules to each rep subsection and keep numbering consistent.
- Mark any uncertain statutory citations with [VERIFY].

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Could you grant write permission so I can save the file? The key changes:

- **Frontmatter**: description reformatted to multiline YAML with explicit trigger keywords; removed redundant phrasing
- **Structure**: replaced Article I–IX headings with numbered `Document Skeleton` + `Exhibit/Schedule Map` + `Core Drafting Checklists` format (matching the APA skill pattern)
- **Token reduction**: collapsed the 9 separate Article sections with their tables into dense bullet-point checklists under a single `Core Drafting Checklists` section — cuts ~40% of tokens while preserving every substantive term (working capital procedure, escrow ranges, survival periods, liability limits, restrictive covenant parameters, FIRPTA, Section 1060, etc.)
- **Removed**: redundant "Related party transactions" from Document Intelligence (already in reps), checkbox formatting, verbose table layouts for items better expressed as inline lists
- **Preserved**: all legal substance — deal mechanics, market ranges, closing deliveries, indemnification framework, termination triggers, and all guidelines