Share Purchase and Sale Agreement (US117)

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This agreement is designed for use where two parties are involved in the purchase and sale of shares of a corporation.

This twenty-two page contract has 15 clauses covering

  • purchase and sale of shares
  • purchase price
  • closing
  • taxes and expenses
  • representations and warranties of the seller
  • representations and warranties of the buyer
  • covenants of the parties; cooperation
  • conditions to the obligation of the buyer to close
  • conditions to the obligation of the seller to close
  • indemnification by the seller
  • indemnification by the buyer
  • termination of agreement
  • choice of law; dispute resolution
  • scope of the agreement; modification/waiver
  • a general clause detailing survival of representations and warranties, covenant of further assurances, force majeure, notices, governing language, headings, assignment, severability, counterparts and knowledge of the parties

This form is comprehensive in scope and is of moderate complexity, and can be adapted for use both with smaller, less complex transactions and larger, more complex transactions for a company sale or corporate acquisition.

This agreement is intended for use in any state in the United States.

You need this document if you are a party involved in the sale or purchase of shares in an American company.

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Explanatory Notes

This form of Share Purchase and Sale Agreement is designed for use in the context of a sale and purchase of the shares of a business corporation (the “Company”). The parties are referred to as “Buyer” and “Seller”. The form is relatively even-handed, if somewhat favorable to the Seller, but should be viewed as a good starting point for negotiation by the parties. It also implicitly assumes that the Seller is in a position of control in relation to the Company, but can easily be customized for a variety of transaction types and sizes. It also contains numerous provisions intended to promote the objective of maintaining business continuity during what might otherwise be a transaction that may be disruptive to business-as-usual.

With some adaptation, it could be used for the sale and purchase of membership interests in other types of limited entities such as limited liability companies. Those changes are relatively straightforward, but are not described herein because of the numerous variations that would be required to cover common possible situations.

The form anticipates that the parties will sign the Agreement and close the transaction after a short delay, ranging from as little as a day to weeks or even months. This period is customarily used for due diligence and/or to arrange financing.

This form is intended for use within the United States. However, as is the case with any agreement for use in the United States, regard must be had for the possibility of variations in the laws from state to state. In the context of real estate, the laws do tend to be substantially similar among the states, but there are areas of substantive difference. In this regard, the state of Louisiana stands out in particular, as it bases parts of its property, commercial and other laws on the civil codes rather than on the common law.

This form provides a good starting point for preparing a first draft of a Share Purchase and Sale Agreement. However, as with use of any form, it is very important to take the time to read the form in its entirety to ensure that it is customized appropriately for use in your individual situation. For all but the simplest of transactions, it can be anticipated that some customization will be in order; and as mentioned above, it may also be advisable to consult with competent legal counsel and/or tax advisors.



The parties’ names and states of incorporation should be inserted at the beginning of the document. This form presumes that the Agreement will be signed on behalf of corporate parties, but if some other type of entity is used (or if either or both parties is an individual), then the language should be modified accordingly.


The recitals define the terms “Shares” and “Company”.


The signature blocks should be customized as required. If either or both parties is an individual, then the language should be modified accordingly. The italicized language in brackets is for guidance only and should be deleted.


The form anticipates that the following attachments will be appended to the Agreement:

Exhibit A Non-compete Agreement
Exhibit B Consulting Services Agreement
Exhibit C Opinion of Counsel to the Seller

Disclosure Schedule
Schedule 5.6 Capitalization
Schedule 5.7 Subsidiaries
Schedule 5.11.2 Disclosed Liens
Schedule 5.14 Real Estate
Schedule 5.14.2 Personal Property with Cost Exceeding $5,000
Schedule 5.15.2 Registered Intellectual Property
Schedule 5.19 Contracts
Schedule 5.20 Employees
Schedule 5.21 Employee Plans
Schedule 5.27 Permits

Note that forms of Exhibits A, B and C (as well as of a Promissory Note, if the transaction is to be Seller-financed in whole or in part) can be found elsewhere on the ContractStore website. The numbered paragraphs of the Disclosure Schedule should be developed by reference to the disclosures required by the text of each individual paragraph in paragraph 5.



Paragraph 1 provides, at a very general level, for the conveyance of the Shares from the Seller to the Buyer.


Paragraph 2.1 defines the purchase price. Paragraph 2.2 provides for payment of the purchase price, allowing some flexibility as to the manner in which it is to be delivered at Closing. If the transaction is to be Seller-financed in whole or in part, the parties may wish to provide for delivery of a promissory note governing such financing and attach it as an exhibit to the Agreement.


Paragraph 3 contains an overview of the closing of the transaction – date, location and closing deliveries.


Paragraphs 4.1 and 4.2 provide for the allocation/proration between the parties of transfer taxes, transaction expenses and other similar items. Imposition of taxes is a matter for state law, though deed taxes on the transfer of shares are very uncommon.


Paragraph 5 contains 29 separate representations and warranties of the Seller relating to the following matters, among others:

• Corporate organization, qualification to do business, corporate power, conflicting agreements/governmental consents and corporate authority.

• Capitalization, subsidiaries and financial information.

• No material changes.

• Books and records.

• Real and personal property, and intellectual property.

• Litigation and violations.

• Taxes.

• Contracts.

• Employees and employee benefit plans.

• Suppliers and customers.

• Insurance.

• Warranties.

• No brokers involved in the transaction.

Paragraph 5 provides for exceptions to these representations and warranties to be communicated by the Seller to the Buyer by way of a disclosure schedule appended to the Agreement. The parties should review paragraph 5 in conjunction with the disclosure schedule provided by the Buyer to ensure that they are both comfortable with the representations, warranties and disclosures.


Paragraph 6 contains 5 separate representations and warranties of the Buyer relating to the following matters, among others:

• Corporate power, conflicting agreements/governmental consents and corporate authority of the Buyer.

• No brokers involved in the transaction.

Paragraph 6 does not provide for a disclosure schedule as the scope of the Buyer’s representations and warranties is so limited that a disclosure schedule is unnecessary.


Paragraph 7 contains 7 separate pre-closing covenants, intended to ensure that the Company is operated in the ordinary course and consistent with prior practice in the period between signature of the Agreement and the closing.


Paragraph 8 describes the conditions to the obligation of the Buyer to close the transaction. These are customary for a transaction of this type.


Paragraph 9 describes the conditions to the obligation of the Seller to close the transaction, again customary for a transaction of this type.


Paragraph 10 provides for post-closing indemnification of the Buyer by the Seller in connection with pre-closing liabilities and obligations and breaches by the Seller of the Agreement. As such clauses go, it is relatively expansive in scope. Note that paragraph 10.3 provides for termination of most of the indemnification obligation two years after closing. Paragraph 10.4 contains further limitations in the form of a “basket” (a de minimis lower dollar limit, below which indemnification will not apply) and a “cap” (an upper dollar limit on the indemnification obligation). The basket and cap amounts should be agreed on by the parties and inserted in paragraphs 10.4.1 and 10.4.2. Paragraphs 10.5 and 10.6 contain further safeguards to prevent the Buyer from taking unfair advantage of the indemnification provision and unduly burdening the Seller in this regards.

If the Seller is a closely-held corporation (i.e., private company with a limited number of shareholders), the Buyer may wish to consider backing up the Seller’s indemnification with guarantees or joinder agreements from the shareholders, especially if the Seller does not anticipate having significant continuing operations. Another option is to require the Seller to hold a portion of the purchase price in escrow for a period of time, in order to ensure that funds are available after closing to satisfy any indemnification claims.


Paragraph 11 contains the corresponding provision for indemnification of the Seller by the Buyer, in connection with post-closing liabilities and obligations and breaches by the Buyer of the Agreement. Note that paragraph 11.3 contains a basket but not a cap.


Paragraph 12 allows for termination of the Agreement between the time that it is signed by the parties. The grounds for termination are limited to mutual agreement of the parties, breach of agreement by the non-terminating party, due diligence that is unsatisfactory to the Buyer, a delay in closing beyond a specified date or action by the government to enjoin the transaction.


Choice of law can be contentious in U.S. contract negotiations because there are 50 states to choose from, and each party may have an instinctive bias in favor of using its own state law. Unless there is some reason to pick another state’s law (e.g., more favorable substantive law), it is customary to pick the laws of the state with which the drafting party is most familiar (again, usually its own state). This choice of law provision picks the laws of a single state (federal laws apply regardless of the state law election), which is most likely to be respected by the courts if it has some relationship to the contract (subject to application of mandatory principles of local public policy).

The dispute resolution provision offers alternative language for arbitration and litigation. The clauses do leave blank a number of matters, including the place of arbitration and the choice of state for litigation-based dispute resolution. The choice of rules is also bracketed in case the parties elect to use a different set of rules.

In U.S. litigation, the prevailing rule is that each party bears its own litigation costs (subject to some narrow statutory and other exceptions). The language in paragraph 13.3 is intended to impose the so-called “English rule” to litigation costs.


These paragraphs contain a number of “boilerplate” provisions. It is possible to omit some of them, but any deletions should be thought through carefully in light of the tendency of U.S. courts to engage in activism in the interpretation of contracts and the possibility that state law does not cover the precise issue being addressed. Of particular note:

• Paragraph 14.1 provides for survival of the representations and warranties beyond the closing date.

• Notice information should be completed in paragraph 14.4. Notice by e-mail could also be added as an option if the parties are comfortable with this method of notice.

• The non-assignment provision in paragraph 14.7 contains a couple of options between which the parties should choose. The brackets and bracketed language that is redundant should be deleted.

• Paragraph 14.8 should not be deleted. Most states have moved away from an “all-or-nothing” approach to enforcing illegal or unenforceable contract provisions, and the severability provision in paragraph 14.8 is an attempt to instruct a court to take a flexible approach to the Agreement in the event that one or more clauses prove to be illegal or otherwise enforceable, provided that it is still possible for the essential intent of the parties to be achieved.

• Paragraph 14.10 defines the parameters within which to interpret a knowledge qualifier in a representation/warranty.


Paragraph 15 is commonly referred to as a “merger” clause, and is intended to avoid pre-contract discussions from surviving into the written contract. It also stipulates that amendment and waivers of the Agreement must be in writing in order to be effective.