Stock Purchase Agreement (New York)

STOCK PURCHASE AGREEMENT (NEW YORK)

For the sale and purchase of shares of a New York business corporation, or of a non-New York corporation with significant New York operations, governed by New York substantive law under GOL § 5-1401.

NEW YORK DRAFTING NOTES

1. BCL appraisal rights. If the target is a New York corporation and the transaction would trigger appraisal rights under BCL § 910 (certain mergers, share exchanges, and dispositions of assets), the procedures under BCL § 623 must be followed. Shareholders who comply with § 623 are entitled to be paid the "fair value" of their shares. In Matter of Cawley v. SCM Corp., 72 N.Y.2d 465 (1988), the Court of Appeals explained that fair value excludes any appreciation or depreciation attributable to the transaction itself.
2. Exclusive remedy and sandbagging. New York is pro-sandbagging: a buyer may recover for breach of representations even if it knew of the breach at closing, unless the seller proves the buyer actively knew the facts and the representations were not intended to be factual. See CBS Inc. v. Ziff-Davis Pub. Co., 75 N.Y.2d 496 (1990), and Galli v. Metz, 973 F.2d 145 (2d Cir. 1992). The parties may override this default by contract.
3. Efficient breach and liquidated damages. New York enforces liquidated damages clauses only if (a) actual damages are difficult to ascertain and (b) the stipulated amount is not disproportionate to probable actual damages. Truck Rent-A-Center v. Puritan Farms 2nd, 41 N.Y.2d 420 (1977).
4. Commercial Division. Transactions over $500,000 (in most counties) qualify for the Commercial Division under 22 NYCRR § 202.70, which has specialized M&A and appraisal judges.
5. Merger clause protection. Under Danann Realty Corp. v. Harris, 5 N.Y.2d 317 (1959), a specific disclaimer of reliance may bar a fraud claim; a generic merger clause will not. Consider adding a specific anti-reliance clause if the parties want to foreclose fraud-in-the-inducement claims.
6. Real estate transfer tax. If the target owns NY real property, the sale may trigger a "controlling interest transfer" under Tax Law § 1402(b), with transfer tax of 0.4% (plus 0.25% to 2.9% additional tax in NYC under NYC Admin. Code § 11-2102).

1. DOCUMENT HEADER

THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of [__/__/____] (the "Effective Date") by and among:

[SELLER NAME], a [________________________________] ("Seller");

[BUYER NAME], a [________________________________] ("Buyer"); and

[COMPANY NAME], a [New York / ______________] corporation (the "Company").

Recitals

A. The Company is a corporation organized under the [N.Y. Business Corporation Law / other state law], having its principal place of business at [________________________________];

B. Seller owns [______] shares of the Company's common stock (the "Shares"), representing [____]% of the Company's issued and outstanding capital stock;

C. Buyer desires to purchase, and Seller desires to sell, all of the Shares on the terms set forth herein;

D. The parties intend this Agreement to be governed by New York law under N.Y. General Obligations Law § 5-1401 and to be litigated exclusively in New York under GOL § 5-1402; and

E. If the Company is a New York corporation, the sale of all of Seller's Shares has been approved by Seller's directors (or members/managers as applicable) and, where required by BCL § 909 or § 1001, by any applicable Company board action.

NOW, THEREFORE, in consideration of the mutual covenants herein, the parties agree as follows.

2. DEFINITIONS

"BCL" means the N.Y. Business Corporation Law.

"Basket" means $[____________] (tipping basket).

"Cap" means an amount equal to [____]% of the Purchase Price, subject to carve-outs in Section 8.5.

"Closing" means the consummation of the purchase and sale of the Shares pursuant to Section 3.

"Closing Date" means [__/__/____] or such other date as the parties agree.

"Commercial Division" means the Commercial Division of the Supreme Court of the State of New York under 22 NYCRR § 202.70.

"Encumbrance" means any lien, security interest, pledge, mortgage, charge, or similar restriction (other than restrictions on transfer under federal or state securities laws).

"Fair Value" means, solely in reference to a dissenting shareholder's appraisal right, the value determined pursuant to BCL § 623(h), excluding any appreciation or depreciation directly or indirectly caused by the transaction itself (Matter of Cawley v. SCM Corp., 72 N.Y.2d 465 (1988)).

"Fundamental Representations" means the representations and warranties set forth in Sections 4.1 (Organization), 4.2 (Authority), 4.3 (Capitalization), 4.4 (Title to Shares), 4.5 (No Conflicts), 4.12 (Taxes), and 4.14 (No Brokers).

"Losses" means any and all losses, damages, liabilities, deficiencies, judgments, fines, penalties, costs, and expenses (including reasonable attorneys' fees), but excluding punitive damages except as to third-party claims.

"Martin Act" means N.Y. General Business Law Article 23-A.

"Material Adverse Effect" means any change, event, or circumstance that has, or would reasonably be expected to have, a material adverse effect on the business, financial condition, or results of operations of the Company, excluding effects from: (a) general economic conditions; (b) industry-wide developments; (c) changes in law or GAAP; (d) the announcement of this Agreement; or (e) acts of war, terrorism, pandemic, or natural disaster (except to the extent disproportionately impacting the Company).

"Purchase Price" has the meaning in Section 3.1.

3. PURCHASE AND SALE; CLOSING

3.1 Purchase Price

Buyer shall purchase the Shares from Seller for an aggregate purchase price of $[____________] (the "Purchase Price"), subject to adjustment under Section 3.5, payable as follows:

(a) $[____________] in cash at Closing via wire transfer;
(b) $[____________] deposited into escrow with [escrow agent] for indemnification purposes, to be released per the Escrow Agreement;
(c) [$__________ in the form of a promissory note, if any].

3.2 Closing Mechanics

The Closing shall occur on the Closing Date by electronic exchange of documents. Under N.Y. UCC § 8-302, transfer of the Shares shall be effected by (a) delivery of the stock certificates (or uncertificated securities evidence), (b) endorsement or stock power, and (c) recording on the Company's stock ledger.

3.3 Seller's Closing Deliveries

(a) Stock certificates for the Shares, duly endorsed or accompanied by stock powers;
(b) Secretary's certificate certifying corporate approvals and good standing (from NY DOS if the Company is a NY corporation);
(c) Bring-down certificate;
(d) Resignations of officers and directors;
(e) IRS Form W-9 and any required Form 8594;
(f) FIRPTA certificate (if Company is not a USRPHC);
(g) If the Company owns real property in New York, completed NY TP-584 (combined real estate transfer tax return) and, if applicable, NYC RPT-1; and
(h) Evidence of payment of or provision for NY State sales tax clearance under Tax Law § 1141(c).

3.4 Buyer's Closing Deliveries

(a) Wire transfer of the Closing Payment;
(b) Escrow Agreement;
(c) Secretary's certificate;
(d) Director/manager resolutions.

3.5 Working Capital Adjustment

The Purchase Price shall be adjusted dollar-for-dollar based on the Closing Date Net Working Capital compared to the Target Net Working Capital of $[____________], per the procedures in Schedule 3.5. Disputes shall be referred to [accounting firm] whose determination shall be binding absent fraud or manifest error.

3.6 Withholding

Buyer may withhold from any payment required by this Agreement any amounts required to be withheld under federal, NY State, or NY City tax law.

4. REPRESENTATIONS AND WARRANTIES OF SELLER

Seller represents and warrants to Buyer that, as of the Effective Date and as of the Closing Date, except as disclosed on the Disclosure Schedules:

4.1 Organization

If Seller is an entity, Seller is duly organized, validly existing, and in good standing in its jurisdiction of formation.

4.2 Authority

Seller has all requisite power and authority to execute this Agreement, which constitutes a valid and binding obligation enforceable in accordance with its terms, subject to applicable bankruptcy and equitable principles.

4.3 Capitalization

The authorized capital stock of the Company consists of [____] shares. Exactly [____] shares are issued and outstanding, all of which are validly issued, fully paid, and non-assessable, and constitute [____]% of the Company's outstanding capital stock. Seller owns [____] of those Shares. There are no outstanding options, warrants, convertible securities, or rights to acquire capital stock of the Company, except as disclosed on Schedule 4.3.

4.4 Title to Shares

Seller is the record and beneficial owner of the Shares and has good and marketable title to the Shares, free of any Encumbrance, except restrictions under federal and state securities laws. Upon Closing, Buyer will acquire good and marketable title to the Shares under N.Y. UCC § 8-302.

4.5 No Conflicts

Seller's execution and performance of this Agreement do not (a) violate the Company's certificate of incorporation or bylaws (or, if a NY corporation, BCL requirements), (b) breach any material agreement, (c) violate any law or order, or (d) require any material consent, except as disclosed on Schedule 4.5.

4.6 Financial Statements

The Company's financial statements (a) have been prepared in accordance with GAAP consistently applied and (b) fairly present, in all material respects, the Company's financial position.

4.7 Absence of Changes

Since [balance sheet date], the Company has operated in the ordinary course and there has been no Material Adverse Effect.

4.8 Real Property

All real property owned or leased by the Company is listed on Schedule 4.8. If any real property is located in New York State, Seller has disclosed all New York property tax liabilities and any Mechanics' Liens under NY Lien Law Art. 2.

4.9 Intellectual Property

The Company owns or has valid licenses to use all Intellectual Property material to its business. IP claims are subject to NY trade secret common law (Ashland Mgmt. v. Janien, 82 N.Y.2d 395 (1993)).

4.10 Employees

Schedule 4.10 lists employees and compensation. The Company complies with N.Y. Labor Law (including § 195 wage notices, § 740 whistleblower, § 198-c non-payment penalties, and the NY Human Rights Law, Exec. Law § 296). No labor disputes are pending.

4.11 Benefit Plans

All employee benefit plans comply with ERISA and the Code. If any plan covers NY employees, it also complies with NY insurance law requirements.

4.12 Taxes

The Company has timely filed all required tax returns and paid all taxes shown due, including NY State franchise tax (Tax Law Art. 9-A), NY State sales tax (Tax Law Art. 28), NYC General Corporation Tax (if applicable), and NY State withholding. There are no pending or threatened audits disclosed.

4.13 Litigation

Except as disclosed on Schedule 4.13, there is no pending or threatened litigation, administrative proceeding, or investigation against the Company, including any action by the NY Attorney General under the Martin Act or GBL § 63(12).

4.14 No Brokers

No broker or finder is entitled to a fee from Seller or the Company based on arrangements made by Seller.

4.15 Compliance with Laws

The Company is in material compliance with all applicable laws, including Martin Act, NY Environmental Conservation Law, NY labor laws, and NY tax laws.

4.16 Environmental

The Company has no liabilities under CERCLA or NY Navigation Law Art. 12 (the NY Oil Spill Act), ECL Art. 27 (solid and hazardous waste), or NY Superfund Law.

4.17 Related Party Transactions

Schedule 4.17 discloses all transactions between the Company and its affiliates.

4.18 Full Disclosure

No representation or warranty in this Agreement contains any untrue statement of material fact or omits a material fact necessary to make the statements not misleading.

5. REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to Seller that: (a) it is duly organized and validly existing; (b) it has authority to enter this Agreement; (c) no conflicts arise from its entry into this Agreement; (d) it has sufficient funds to pay the Purchase Price; (e) it is acquiring the Shares for investment and not for public resale in violation of securities laws; and (f) no broker fees are payable based on its arrangements.

6. COVENANTS

6.1 Conduct Between Signing and Closing

Between the Effective Date and Closing, Seller shall cause the Company to operate only in the ordinary course consistent with past practice, and to refrain from: (a) declaring dividends; (b) issuing additional securities; (c) incurring material debt; (d) entering into material contracts outside the ordinary course; (e) making capital expenditures above $[____________]; (f) amending organizational documents; (g) changing accounting methods; or (h) taking any action triggering BCL § 909 or BCL § 910 appraisal rights.

6.2 Access

Seller shall provide Buyer with reasonable access to the Company's books, records, facilities, and personnel, subject to a confidentiality agreement.

6.3 Consents

Seller shall use reasonable best efforts to obtain any consents required by Section 4.5.

6.4 Exclusivity / No Shop

Until the earlier of Closing or termination, Seller shall not directly or indirectly: (a) solicit, initiate, encourage, or entertain any proposal or offer regarding the Company; (b) engage in discussions with any other prospective buyer; or (c) provide information to any third party in connection with a competing transaction. This exclusivity provision is enforceable under Texaco, Inc. v. Pennzoil Co. principles and NY contract law.

6.5 BCL Compliance

If the Company is a NY corporation and the transaction triggers BCL § 909 (sale of all or substantially all assets), § 910 (appraisal rights), or § 1001 (dissolution), Seller shall cause the Company to comply with all applicable notice, approval, and filing requirements.

6.6 Appraisal Rights Procedures (BCL § 623)

If any Shareholder of the Company asserts appraisal rights under BCL § 623, Seller shall promptly notify Buyer and cooperate in any Supreme Court proceeding to determine Fair Value.

6.7 Tax Matters

(a) Allocation. The parties shall allocate the Purchase Price for tax purposes as set forth on Schedule 6.7.
(b) Cooperation. The parties shall cooperate on tax return preparation and audits.
(c) NY Tax Clearance. Buyer may condition Closing on receipt of satisfactory evidence of NY State sales and use tax clearance under Tax Law § 1141(c) (bulk sale notification) and NY State corporate franchise tax good standing.
(d) Real Property Transfer Tax. If the Company owns real property in New York, the parties shall prepare and file NY TP-584 within 15 days after Closing, with a "controlling interest" transfer subject to NY State transfer tax at 0.4% (plus NYC additional tax if applicable, potentially including the mansion tax and the additional "Progressive Mansion Tax" of up to 3.9%).

6.8 Further Assurances

Each party shall execute additional documents as reasonably necessary to consummate the transaction.

7. CONDITIONS TO CLOSING

7.1 Buyer's Conditions

Buyer's obligation to close is subject to: (a) accuracy of Seller's representations at the Effective Date and Closing Date (except those qualified by materiality or MAE, which shall be true in all respects); (b) Seller's performance of covenants; (c) absence of any Material Adverse Effect since the Effective Date; (d) delivery of all closing deliverables; (e) receipt of all consents on Schedule 4.5; (f) absence of any order restraining the transaction; (g) satisfactory completion of Buyer's due diligence; (h) if applicable, receipt of NY State tax clearance; and (i) the absence of any shareholder appraisal claim under BCL § 623 exceeding $[____________].

7.2 Seller's Conditions

Seller's obligation to close is subject to: (a) accuracy of Buyer's representations; (b) Buyer's performance of covenants; (c) delivery of the Purchase Price; and (d) absence of any order restraining the transaction.

8. INDEMNIFICATION

8.1 Survival

The representations and warranties of Seller in Section 4 (other than Fundamental Representations) shall survive for [18] months after Closing. Fundamental Representations shall survive indefinitely, or until the end of the applicable statute of limitations (CPLR § 213 for contract-based claims, § 214 for tort-based claims, and § 213(8) for fraud claims).

8.2 Indemnification by Seller

Seller shall indemnify and hold harmless Buyer and its affiliates (the "Buyer Indemnitees") from any Losses arising out of: (a) any breach of Seller's representations or warranties; (b) any breach of Seller's covenants; (c) pre-closing taxes of the Company; (d) any Martin Act or securities law violations pre-closing; and (e) any matter disclosed on Schedule 8.2.

8.3 Indemnification by Buyer

Buyer shall indemnify Seller from Losses arising out of breaches of Buyer's representations or covenants, and from any post-closing operations of the Company.

8.4 Procedures

(a) An Indemnified Party shall give notice within [____] days of a claim, describing the claim with reasonable specificity.
(b) For third-party claims, the Indemnifying Party may assume defense with counsel of its choice, subject to the Indemnified Party's right to participate at its own expense.
(c) No settlement of a third-party claim shall be made without the Indemnified Party's consent (not unreasonably withheld).

8.5 Basket and Cap

(a) Basket. Seller shall not be liable for breaches of Section 4 representations until aggregate Losses exceed the Basket, at which point Seller shall be liable for all Losses (tipping basket), subject to the Cap.
(b) Cap. Seller's aggregate indemnification liability shall not exceed the Cap, except that: (i) breaches of Fundamental Representations are capped at the Purchase Price; (ii) tax indemnification is capped at the Purchase Price; and (iii) indemnification for fraud is uncapped.
(c) Sandbagging. Buyer's right to indemnification for breaches of Seller's representations shall NOT be impacted by any knowledge Buyer had prior to Closing, consistent with the default rule of CBS Inc. v. Ziff-Davis Pub. Co., 75 N.Y.2d 496 (1990). This provision overrides any "anti-sandbagging" default.

8.6 Exclusive Remedy

Except for (a) fraud, (b) intentional misrepresentation, (c) specific performance/injunctive relief, and (d) appraisal rights under BCL § 623, the indemnification provisions of this Section 8 are the exclusive remedy for breach of this Agreement.

8.7 Mitigation

The Indemnified Party shall use commercially reasonable efforts to mitigate Losses.

9. TERMINATION

9.1 Termination Events

This Agreement may be terminated prior to Closing: (a) by mutual written consent; (b) by either party if Closing has not occurred by [__/__/____] (the "Outside Date") through no fault of the terminating party; (c) by Buyer for material breach by Seller not cured within [____] days; or (d) by Seller for material breach by Buyer not cured within [____] days.

9.2 Effect of Termination

Termination shall not affect the parties' liability for breach prior to termination, or any surviving obligations (confidentiality, governing law, dispute resolution, expenses).

10. DISPUTE RESOLUTION

10.1 Governing Law

This Agreement shall be governed by the substantive laws of the State of New York, without regard to conflict-of-laws principles. The parties invoke N.Y. General Obligations Law § 5-1401 as the Purchase Price exceeds $250,000.

10.2 Exclusive Forum

All disputes shall be heard exclusively in: (a) the Commercial Division of the Supreme Court of the State of New York, County of [New York / ____________], under 22 NYCRR § 202.70; or (b) the United States District Court for the [Southern / Eastern] District of New York. The parties invoke GOL § 5-1402 to preclude forum non conveniens objections. Personal jurisdiction is consented to under CPLR § 301 and § 302.

10.3 Jury Waiver

THE PARTIES WAIVE JURY TRIAL PURSUANT TO CPLR § 4102(c). EACH PARTY HAS HAD OPPORTUNITY TO CONSULT COUNSEL.

10.4 Specific Performance

The parties agree that money damages may be inadequate for breaches of this Agreement and that specific performance is an available remedy under New York law (EQT Infrastructure Ltd. v. Smith, 861 F. Supp. 2d 220 (S.D.N.Y. 2012)).

10.5 Prejudgment Interest

Any monetary judgment shall bear prejudgment interest at 9% per annum under CPLR §§ 5001 and 5004.

11. MISCELLANEOUS

11.1 Entire Agreement; No Extrinsic Evidence

This Agreement (together with the Disclosure Schedules, Exhibits, and Ancillary Agreements) constitutes the entire agreement and supersedes all prior agreements. The parties expressly disclaim reliance on any representation or statement not contained herein. This disclaimer is intended to foreclose reliance-based fraud claims per Danann Realty Corp. v. Harris, 5 N.Y.2d 317 (1959).

11.2 Amendments

Amendments require written consent, consistent with GOL § 15-301.

11.3 Assignment

No party may assign without written consent, except Buyer may assign to an affiliate (provided Buyer remains liable) or to a lender as collateral.

11.4 Notices

Notices shall be delivered to the addresses in the preamble by certified mail, overnight courier, or email with confirmation.

11.5 Severability

Invalid provisions shall be reformed to the maximum extent permissible under the NY blue-pencil doctrine.

11.6 Counterparts; Electronic Signature

This Agreement may be executed in counterparts and by electronic signature pursuant to N.Y. State Technology Law Art. 3 (ESRA). New York is the only state that has not adopted UETA, but ESRA (STL §§ 301-309) validates electronic signatures for all purposes except those excluded under STL § 307.

11.7 Expenses

Each party shall bear its own expenses, except that the Company shall not bear Seller's transaction expenses.

11.8 Drafting

The parties participated jointly in drafting, and no presumption against the drafter shall apply.

11.9 Confidentiality

The terms of this Agreement shall remain confidential except to the extent required by law, court order, or applicable securities disclosures.

12. EXECUTION

IN WITNESS WHEREOF, the parties have executed this Stock Purchase Agreement as of the Effective Date.

SELLER: [________________________________]

By: [________________________________]
Name: [________________________________]
Title: [________________________________]
Date: [__/__/____]

BUYER: [________________________________]

By: [________________________________]
Name: [________________________________]
Title: [________________________________]
Date: [__/__/____]

COMPANY (solely with respect to Sections 4, 6, and 8): [________________________________]

By: [________________________________]
Name: [________________________________]
Title: [________________________________]
Date: [__/__/____]

SOURCES AND REFERENCES

• N.Y. Business Corporation Law §§ 623, 909, 910, 1001-1002: https://www.nysenate.gov/legislation/laws/BSC
• N.Y. UCC § 8-302: https://www.nysenate.gov/legislation/laws/UCC/A8
• N.Y. Tax Law §§ 1141, 1402: https://www.nysenate.gov/legislation/laws/TAX
• N.Y. General Obligations Law § 5-1401, § 5-1402, § 15-301
• N.Y. CPLR §§ 213, 214, 5001, 5004
• 22 NYCRR § 202.70 (Commercial Division)
• CBS Inc. v. Ziff-Davis Pub. Co., 75 N.Y.2d 496 (1990) — NY sandbagging default
• Galli v. Metz, 973 F.2d 145 (2d Cir. 1992) — sandbagging application
• Matter of Cawley v. SCM Corp., 72 N.Y.2d 465 (1988) — Fair Value in appraisal
• Danann Realty Corp. v. Harris, 5 N.Y.2d 317 (1959) — specific disclaimer / fraud
• Hooper Assocs. v. AGS Computers, 74 N.Y.2d 487 (1989) — fee-shifting clarity
• Truck Rent-A-Center v. Puritan Farms 2nd, 41 N.Y.2d 420 (1977) — liquidated damages
• N.Y. Martin Act (GBL Art. 23-A): https://www.nysenate.gov/legislation/laws/GBS/A23-A