KRAUTER & COMPANY

P r o d uc t s
REPRESENTATIONS & WARRANTIES

UNDERSTANDING REPRESENTATIONS & WARRANTIES

Representations and Warranties Insurance is designed to protect against losses that

arise out of corporate representations and warranties in conjunction with a variety of
business transactions, especially mergers, acquisitions, spin-offs, etc. The objective of
Representations and Warranties Insurance is to provide the parties to a transaction with
a commercially viable insurance alternative to the existing "security" arrangements
contained in the deal documents.

A Seller’s side policy reimburses the seller or pays the buyer on behalf of the seller, for
losses resulting from claims made by the buyer for an inaccuracy of the reps and
warranties made by the seller about the acquired company or business, thereby
protecting the seller from having to return a portion of the purchase price. A seller may
desire this coverage 1) if they want to avoid contingent liabilities and make a clean
break – avoid the possibility of being subject to indemnification claims by the buyer for
an extended period of time after the deal closes 2) if the seller is motivated by liquidity
concerns and wants to get full proceeds from the sale to distribute to investors or pay
debt for instance. A policy can be put in place to replace or reduce an escrow
requirement.

WHY KRAUTER REPRESENTATIONS & WARRANTIES?

A Buyer’s side policy reimburses the buyer for losses resulting from an inaccuracy in the
reps and warranties made by the seller about the acquired company or business,
thereby enabling the buyer to recover its losses directly from the insurer without having
to first locate and then pursue the seller and its assets. A buyer may desire this
coverage 1) if buyer is unable to obtain seller indemnification 2) buyer is unable to
obtain a desired level of seller indemnification (policy can supplement indemnification)
3) buyer is concerned about its ability to collect on the indemnity from the seller.

HIGHLIGHTS:

Both Buyer-based and Seller-based policies available

Policy is generally manuscripted to apply to particulars of a transaction
Ability to cover all reps. and warranties contemplated in a transaction (including,
but not limited to; tax matters, environmental matters, financial statements,
etc.)
Premium is generally 4-6% of the limit purchased, $100k minimum premium
Retention is generally 1-3% of the transaction value
KRAUTER & COMPANY
P r o d uc t s
Policy Period can match survival period of reps & warranties

INFORMATION REQUIRED TO PROVIDE INITIAL INDICATION:

Copy of contract or agreement which contains the representations and

warranties, including all exhibits + addendums
Copy of all disclosure schedules to the above contract or agreement
Copy of the seller's audited financial statements with notes and any other
document(s) that describe the business or the assets

Detailed description of the proposed transaction or situation (such as an offering

memorandum or due diligence memorandum).

MORE INFORMATION? CONTACT US.

For more information about Krauter & Company’s Representations & Warranties
capabilities or professionals, send your request to: info@krautergroup.com.