A stock purchase agreement template is an agreement signed between two parties when one of them either buying or selling the shares of a company. Small corporations who sell the stock generally use these agreements. Either the company or shareholders in such corporations can sell the stock to the buyers. The agreement is typically meant to protect both the buyer and the seller.
Table of Contents
Elements of a stock purchase agreement template:
There are multiple things that make up a stock purchase agreement template;
- Name of the company
- Buyer’s name
- Par value of shares
- The total number of shares that are being sold
- The time and place where the transaction is occurred
- Warranties and representatives that are made by both the buyer and the seller
- Any potential employee problems like bonuses and other benefits
- Over unforeseen costs, indemnification agreement
The aforementioned information is usually divided into a variety of sections. They help in defining what certain concepts mean and describes how the transaction process works. Here are the different sections of a stock purchase agreement template;
It is the first section of a stock purchase agreement template. This section includes a precise definition of the agreement, the parties involved, and the date of the contract.
This section highlights all the multiple definitions to be used in the contract in alphabetical order. The terms in this section are generally capitalized to indicate the significance of such terms in the agreement. Some of the terms to include are;
- Seller’s knowledge
- Material adverse effect
Here, you have to clearly specify the terms of the sale of the stock. It also contains the prices and any adjustments made to the purchase price. Also, they have any other items that are to be shared among the parties after closing the deal. Include the following things here; You may also like asset purchase agreement templates.
- Legal options
- Escrow agreement
- Purchase price
- Share certificates
- Employment agreement
- Other ancillary documents
Warranties and representations of the seller
This section of a stock purchase agreement states and defines the warranties from the seller. The statements regarding both past and present facts are included here that directly relate to the business like;
- Operations and prospects
- Operating results
Warranties and representations of the buyer
It is almost the same as sellers’ representation and warranties. The representations and warranties in this section are coming from the side of the buyer.
Since most deals have a set period between the times the parties sign and close the deal so a covenants section is made to define the activities that each party is barred from doing during the period.
This section of the template consists of the conditions that require to either be taken care of or waived before closing the deal. This generally contains both parties performing pre-closing covenants and all regulatory approvals being accomplished.
In this section, you have to outline the terms under which the other party will be compensated in case the one party breaches the contract. Include the following things here;
- For indemnification, the time limits
- The method to calculate the losses for recovery
- The specified period in which the claims against representations and warranties can’t be taken
- In indemnification, which degree is the key remedy for a breach
- How to use escrow funds for indemnification
This section of stock purchase agreement has a detailed explanation of the conditions that may convince either party to terminate the agreement.
It is the last section of the agreement. This part touches the following variety of subjects;
- Government laws
- Dispute resolution
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In conclusion, a stock purchase agreement template is an important document that prevents any misunderstandings that may lead to litigations. The agreement enables the seller to indicate and emphasize that they are the owner(s) of the stock being sold. Additionally, it gives specific information on the transfer of stock.