Draft Stock Purchase Agreement

Skill: Comprehensive SPA Drafting from Term Sheet and Diligence

2. Failure modes the skill is correcting

• The agreement is assembled from precedent language without first translating the term sheet into the operative economics, signing/closing mechanics, and post-closing allocations the buyer actually bargained for.
• Diligence findings are noted informally but not converted into the right mix of representations, covenants, closing conditions, special indemnities, disclosure schedule exceptions, or purchase-price mechanics.
• Capitalization complexity is flattened, causing the capitalization representation, schedule structure, and closing deliverables to miss issued equity, rights to acquire equity, vesting, repurchase rights, and other equity-linked instruments.
• Change-of-control risk is under-addressed, so material contracts, debt, equity, benefit, tax, and real estate consents are not tied to the closing conditions and covenant package.
• The agreement recites standard boilerplate without aligning survival, basket, cap, escrow, and exclusive-remedy mechanics to the actual risk profile.
• Ancillary documents needed at closing are not coordinated with the agreement, producing a draft that looks complete but cannot be closed as written.

3. Legal frameworks / domain conventions that apply

• A buyer-side stock purchase agreement should implement the term sheet through standard articles on purchase and sale, price, adjustments if any, representations and warranties, covenants, closing conditions, indemnification, termination, and miscellaneous provisions.
• The purchase mechanics should be consistent with the defined asset being acquired: outstanding shares, class distinctions, rollover equity if any, and any equity retained or cancelled at closing.
• The capitalization representation should track the company’s equity structure with precision, including authorized capital, issued and outstanding shares, treasury shares, options, warrants, convertible securities, phantom equity, profits interests, preemptive rights, voting agreements, and any commitments to issue equity.
• Closing conditions should be paired with bring-down standards that match negotiated qualifiers and the actual diligence risk profile; conditions should not be left generic where the record shows a deal-specific dependency.
• Material contract, financing, tax, benefit, litigation, IP, privacy, environmental, and labor risks are ordinarily handled through a combination of disclosure, targeted covenants, closing conditions, and special indemnities rather than one undifferentiated “true and correct” representation.
• Escrow, holdback, or deferred-payment mechanics should be drafted with clear claim procedures, survival periods, offset rights, release timing, and the relationship between general indemnity and special indemnities.
• Known issues disclosed in diligence should be allocated deliberately: either carved out on schedules, addressed through a covenant, or backed by a special indemnity or purchase-price adjustment.
• If the source materials indicate cross-border, tax, regulated-business, or entity-authorization constraints, the SPA should incorporate the governing corporate, tax, and regulatory formalities rather than assuming generic U.S. corporate practice.
• Use ordinary M&A drafting conventions: defined terms should be stable, schedules should be internally keyed, and operative provisions should not depend on narrative explanations outside the agreement.

4. Analytical scaffolds

• Start by extracting the term sheet into the core deal architecture: parties, securities sold, purchase price, adjustments, escrows, rollover or earnout features, closing timing, and any special closing conditions.
• Build the agreement around the diligence findings: for each identified risk, decide whether the issue belongs in a representation, covenant, condition, indemnity, schedule disclosure, or closing deliverable.
• Reconstruct the capitalization table from the diligence set before drafting the capitalization representation and related schedules; do not rely on a precedent’s generic equity description.
• Review all third-party agreements and financing documents for consent, notice, acceleration, repurchase, change-of-control, anti-assignment, or payment-trigger provisions, and wire those consequences into the closing conditions and pre-closing covenants.
• Review employment, benefit, tax, IP, privacy, litigation, and compliance materials for known exposure; draft narrowly tailored reps for what the seller and company can actually support, and reserve special treatment for the known exceptions.
• Align indemnification with the identified risk allocation: set the indemnity basket, cap, survival periods, exclusive remedies, escrow mechanics, and any fundamental-rep or special-issue treatment so the remedies match the diligence profile.
• Check whether any entity-level approvals, equityholder consents, third-party waivers, governmental filings, or payoff/release documents are required to make closing legally and practically executable.
• Draft schedules as operative disclosure tools, not attachments for later cleanup; every schedule should correspond to an article, representation, covenant, or closing deliverable that the record requires.
• If multiple classes of risk or closing dependencies exist, treat each category separately rather than collapsing them into a single generic coverage pass.
• Confirm the final draft reads as a closed transaction package: the agreement, exhibits, and schedules should work together without unstated assumptions.

5. Vertical / structural / temporal relationships

• Distinguish signing obligations from closing obligations, and distinguish both from post-closing covenants and indemnity claims.
• Where a pre-closing covenant is meant to cure a closing condition, make the linkage explicit so the drafting does not leave the buyer with an unfillable condition.
• Where a representation is only true at signing but must be updated at closing, use a bring-down standard that matches the negotiated temporal scope.
• Where a diligence issue is known before signing but tolerable only if later cured, draft it as a closing deliverable or interim covenant rather than a generic disclosure.
• Where a contract consent, payoff, release, or regulatory approval is needed, tie the document, timing, and responsible party to the closing checklist and the operative covenant article.
• Where a remedy is intended to survive closing, ensure survival, limitation, and escrow provisions are internally consistent across the agreement.
• Where multiple packages of documents are required at closing, sequence them so the primary transaction documents are executed first and the ancillary forms support, rather than replace, the core agreement.

6. Output structure conventions

• Produce a single buyer-side stock purchase agreement as the primary deliverable.
• Use conventional SPA architecture and naming; do not invent idiosyncratic section labels when ordinary M&A headings cover the subject.
• Include the operative articles, definitions, schedules, and exhibits needed to make the agreement executable from the source materials.
• Include disclosure schedules keyed to the representations and covenants, plus any ancillary forms required by the term sheet or diligence record, such as escrow, officer certificate, and closing certificate forms where appropriate.
• Draft the agreement so it stands on its own as operative contract language, not as a memorandum about what the contract should say.
• Prioritize completion of the agreement file itself; any companion material is secondary to the executed transaction document.
• Before finishing, confirm the primary deliverable exists, is non-empty, and contains operative contractual text rather than placeholders or descriptive notes.