Stock Purchase Agreements –  Houston Law Firm

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Stock Purchase Agreements –  Houston Law Firm

A stock purchase agreement is an agreement that finalizes all the terms and conditions in the purchase and sale of a company’s shares. This not to be confused with an asset purchase agreement, in which the assets of a company are sold. We at RunRex would like to give you a bit of insight into this agreement. That way, if you are preparing to draft one, you will know what to do.  

The agreement covers these sections:


In this section, a definition of all the major terms included in the agreement is included. 

Purchase and sale of stock 

This section itemizes the purchase price, and price adjustments, purchase prices allocation for taxation, and a dispute resolution mechanism. 

Representation warranties

This section contains all the statements that both the seller and buyer have signed off to be true. 

Employee issues

This section defines how employee benefits and any bonuses accrued are to be handled after the transaction goes through. 


In this section, you provide details on indemnifications to be provided by the buyer or seller for costs that may arise after the transaction. This usually covers costs for conditions that existed prior to the closing of the deal.  


This part specifies any special tax treatment that either the seller or buyer is entitled to receive. 

While the SPA needs to be carefully checked, a seller has to focus on two areas; the purchase and sale section and the representations and warranties section. The purchase/sale section has to match the terms that were stipulated in the letter of intent. If any differences arise, they result from the buyer’s due diligence. These issues have to be resolved before the completion of the SPA. 

The representation and warranties section has to be scrutinized too.  This is to ensure that no statement, which is untrue, is included. This is recourse for legal action if it is found out later that some of the statements made there were not true. This is true even after the agreement goes through. The courts may compel the seller to reimburse the buyer for misrepresentations. 

Other things to consider in the SPA

Stocks to be sold

In the draft by the buyer, he or she needs to define what he or she is buying. He or she should also define what the seller would retain. As the seller, you want to ensure that all the descriptions are accurate. Ensure that all the excluded assets are specifically listed before the signing takes place. 

On the side of liabilities, it is important that all liabilities, which the buyer will take, be listed. In this case, the agreement will define which liabilities the seller will retain and which ones he or she will not. Liabilities that they assume include accounts payable and obligations under assigned contracts. A stock deal will usually not need to go into details about this. However, ensure that the description of all the stock sold is accurate. 

The purchase price

The terms of the purchase price are one of the first things handled. It should state what portion of the purchase price would be paid on closing. It should also state any other portion that will be paid via a promissory note. It should also state which portion is to be paid via an earn-out. In most cases, there is usually an adjustment to the purchase price. Some of these adjustments are made at closing or post-closing. All of these adjustments will need to be clearly defined. In some cases, it may be necessary to attach documents to define these adjustments. 


Closing has to be clearly defined in the stock purchase agreement. Most modern deals usually close via the electronic exchange of documents. The originals are usually sent overnight via mail. In most deals, a specific date for closing needs to be set. This is something that both buyers and sellers have to insist on before negotiations start. 

There is also usually a specific time set for the closing, down to the minute. This usually helps to avoid any confusion on events that may occur or conditions that apply on closing but before the closing happens.

Creating a purchase agreement is a straightforward process. There is usually no need for extensive negotiations. However, it is also very important since it contains all the important terms used by the business. Thus, be sure to review it carefully via a lawyer. In most cases, you will also need to speak with a CPA. 

Even in the case of a small company, it is not advisable to take a template off the internet and try to customize it. Always seek legal services to draft an SPA for you. The rules are always changing, and you want to have an airtight document with you. Otherwise, you will be leaving yourself open for litigation in the future, especially if the other party hires a professional team to handle their transaction.