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Representations and Warranties

1.      Basic Representations

a.      Organization (Party is duly organized and in good standing)

b.      Authority (Party has authority to execute agreement)

c.      No Conflict or Violation (Agreement does not conflict with or breach any law or obligation)

2.     Consents and Approvals

a.      Board Approval (Party has or will seek Board approval)

b.      Stockholder Approval (Party has or will seek stockholder approval)

c.      Governmental Approval (Party has or will seek all governmental approvals and consents)

d.      Third Party Approval (Party has or will seek any third party approvals)

3.     Corporate Documents and Organizational Structure

a.      Charter documents (Party has delivered or made available organizational documents)

b.      Subsidiaries (Party has disclosed all subsidiaries and ownership)

c.      Books, Records and Minutes

4.     Securities Matters

a.      Capitalization (Describes all capital interests and any debt instruments with voting rights; all validly issued, fully paid and non-assessable)

b.      SEC Reports (Party has filed all forms, reports, statements, certifications and other documents required by SEC)

c.       Shareholder Agreements

d.      Change in Control Agreements

5.     Financial Matters

a.      Financial Statements (Provision of financial statement; prepared in accordance with GAAP and/or fairly represent financial condition)

b.      Assets

o       Title to Assets

o       Real Property

o       Tangible Assets

o       Accounts Receivable

o       Inventory

o       Intellectual Property

c.       Liabilities

o       Indebtedness

o       Litigation

o       No Undisclosed Liabilities

d.      Insurance

e.      Opinion of Financial Advisor

6.     Products and Customers

a.      Customers and Suppliers

b.      Material Contracts

c.      Product Warranties

7.     Personnel Matters

a.      Officers and Directors

b.      Employees

c.      Labor and ERISA

8.    Regulatory and Compliance Matters

a.      Permits

b.      Tax Matters

c.      Compliance

o       Compliance with Laws

o       Environmental Matters

o       State Takeover Statutes

o       Export Compliance

o       FIRPTA

o       SOX Compliance

o       Internal Controls

d.      Restrictions on Business Practices

o       Conflicts of Interest

o       Related Party Transactions

o       Illegal or Unethical Practices

o       Foreign Corrupt Practices

o       Restrictions on Business Activities

9. Buyer's Representations

a.      Sufficient Funds

a.      Solvency   

10. General Warranties

o       No Brokers

o       Absence of Changes or Events

o       Full Disclosure

o       Information Supplied

o       No Other Representations

11. Product or Performance Warranties

 Comments

The proposed organizing theme for the Representations section is based on the concept of a due diligence checklist used for assessing a business, product or service.

Individual Representations

1. Basic Representations

1.1. Authority
[Party] is fully authorized to enter into and perform its obligations under this Agreement.

The execution and delivery of this Agreement by [Party] and the performance by [Party] of its obligations hereunder will not: (i) result in a violation of any law, judgment or order applicable to [Party], or (ii) conflict with or breach any contract to which [Party] is a party.


Entity Representations

1. Basic Representations

1.1. Organization.
(a) [Party] is a [corporation/partnership/LLC, etc.] duly incorporated, validly existing and in good standing under the laws of its States of [__________].
(b) [Party] has full power to own their properties and to conduct their business as presently conducted.
(c) [Party] is duly qualified or licensed to own, lease and operate its properties and to carry on its business as now being conducted in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary

[Party] [is fully authorized / has corporate authority] to enter into and perform its obligations under this Agreement, and its execution, delivery and performance of this Agreement has been duly and validly authorized.

The execution and delivery of this Agreement by [Party] and the performance by [Party] of its obligations hereunder will not:
(a) result in a violation of [Party]'s certificate of incorporation or bylaws, each as amended to date,
(b) result in a violation of any law, judgment or order applicable to [Party],
(c) conflict with, result in a breach of, or constitute a default, or give rise to any right of termination, acceleration or cancellation, under any material contract to which [Party] is a party.

2. Consents and Approvals

The Board of Directors of [Party] has approved this Agreement and the transactions contemplated hereby and will submit it to the Stockholders for their approval. 

The affirmative vote of the holders of [a majority / two-thirds / other percentage] of the outstanding shares of Common Stock entitled to vote on this Agreement is the only vote of the holders of securities of the Company necessary to approve this Agreement.

No consent, authorization, order or approval of, or filing or registration with, or notification to any court, administrative agency or commission or other governmental authority or instrumentality is required by the Seller in connection with the execution, delivery and performance by the Seller of this Agreement or the consummation by the Seller of the transactions contemplated hereby.

3. Corporate Documents and Organization Structure

The Company has delivered or made available to [Party] true, correct, and complete copies of the certificate of incorporation and bylaws of the Company, including all amendments thereto. The Company is not in violation of its certificate of incorporation or bylaws[ or equivalent organizational documents].

(a) Disclosure. The Disclosure Schedule lists each Subsidiary and identifies the jurisdiction of formation and names of the officers and directors of each Subsidiary.

(b) Ownership. The Company owns, directly or indirectly, of record and beneficially all of the outstanding equity interests of each Subsidiary, free and clear of all Encumbrances.

(c) Organization, Qualification and Authority. Each Subsidiary is duly incorporated, validly existing and in good standing under the Laws of its jurisdiction of formation and is duly qualified and in good standing in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification or authorization necessary [other than where the failure to be qualified, authorized or in good standing would not have a Material Adverse Effect].

3.3. Books and Records.
The minute books, books of account, stock records, and other corporate and financial records of the Seller [all of which have been made available to the Buyers] are [to the knowledge of Seller] complete and correct [in all material respects], have been maintained in accordance with reasonable business practices for companies similar to the Seller, 
[and are stated in reasonable detail and accurately and fairly reflect the transactions and dispositions].

4. Securities Matters

4.1 Capitalization

(a) Description of Stock. The authorized capital stock consists of [______] shares of Common Stock [and [______] shares of Preferred Stock, par value $[____] per share].

As of [DATE]:

(i) [______] shares of Common Stock were issued and outstanding;

(ii) [no/______] shares of Preferred Stock were issued or outstanding;

(iii) [no/______] shares of Common Stock were held in treasury; and

(iv) [______] shares of Common Stock were reserved for issuance pursuant to Company Stock Options.

(b) Ownership. The Disclosure Schedules sets forth, as of [DATE], each Stockholder and the number of shares of Common Stock owned by, and the number of shares of Common Stock subject to Options and Warrants owned by, such Stockholder and the exercise price per share of any such Options or Warrants.

(c) Due Authorization. All issued and outstanding shares of Common Stock are [and all shares of Common Stock which may be issued pursuant to the exercise of a Company Stock Option will be, when issued in accordance with the terms thereof], duly authorized, validly issued, fully paid and non-assessable, [and were issued in compliance with all applicable state and federal securities Laws].

4.2. SEC Reports

(a) Filed. [Seller] has [timely] filed all forms, reports, statements, certifications and other documents (including all exhibits, amendments and supplements thereto) required to be filed by it with the SEC pursuant to the Exchange Act or other applicable United States federal securities Laws (“SEC Reports").

(b) Compliant. As of their respective filing dates, [except as disclosed in the Disclosure Letter] the SEC Reports complied as to form in all material respects with the applicable requirements of the Securities Act and Exchange Act.

(c) Accurate. [Except as disclosed in the Disclosure Letter], none of the SEC Reports when filed with the SEC and, if amended, as of the date of such amendment contained any untrue statement of a material fact or omitted to state a material fact required to be stated or incorporated by reference therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

5. Financial Matters

5.1 Financial Statements

(a) Information Supplied. The Disclosure Schedule sets forth [accurate and complete] audited consolidated financial statements [for the period] and unaudited consolidated interim financial statements [for the period].

(b) Preparation. The Financial Statements are prepared [in accordance with GAAP applied] on a consistent basis for all periods presented [except as may be indicated in the notes to such financial statements].

(c) Accuracy. The Financial Statements [accurately set out / fairly present, in all material respects] the financial condition and operating results as of the dates, and for the periods, indicated therein, subject to normal year-end audit adjustments.

5.2. Assets

(a) Title to Assets[To the Seller's knowledge], the [Seller] [is the sole and exclusive owner and] has good and marketable [and indefeasible] title to, or a valid leasehold interest in, the properties and assets it uses, located on its premises, shown on the Financial Statements, or acquired after the date thereof, free and clear of all Encumbrances, except for properties and assets disposed of in the Ordinary Course of Business since the date of the Financial Statements.

(b) Real PropertyNeither the Company nor any of its Subsidiaries currently own [or in the past have owned] any real property.

(c) Tangible Assets.  [Except as explicitly set forth in the Tangible Asset Schedule], the Company owns or leases all buildings, machinery, equipment, and other tangible assets necessary for the conduct of its business as currently conducted and as currently proposed to be conducted by the Company. [To the Seller's knowledge] Each such tangible asset [has been maintained in accordance with normal industry practice,] is free from material defects (patent and latent), is in good operating condition and repair (subject to normal wear and tear), and is suitable for the purposes for which it currently is used and currently is proposed to be used by the Company.

5.5. Financial Opinion

(a) Receipt of Opinion. The Board of Directors of {Seller] has received the [written] opinion of [Financial Advisor], dated the date of this Agreement, to the effect that, as of such date, [and subject to the various assumptions and qualifications set forth therein], the Merger Consideration is fair, from a financial point of view, to such holders [and such opinion has not been modified or withdrawn].

(b) Use of Opinion. A correct and complete copy of the Opinion has been delivered to [Buyer]. [Seller] has been authorized by the Financial Advisor to include such opinion in its entirety in the Proxy Statement.

6. Products and Customers

6.1 Customers ans Suppliers

(a) Disclosure. The Customer and Supplier Disclosure Schedule sets forth a complete and accurate list of:

(i) Customers.  the (certain number of) largest customers, measured by the revenue generated over the [12-month] period preceding the Agreement Date (collectively "Major Customers"), and sets forth the approximate total revenue to the Company for this period for each Major Customer.

(ii) Suppliers. the (certain number of) largest suppliers, measured by the dollar amount of purchases over the [12-month] period preceding the Agreement Date (collectively, "Major Suppliers"), and sets forth approximate total purchases by the Company for this period for each Major Supplier.

(b) No Material Decrease or Termination.  During the [12-month] period preceding the Agreement Date, no Major Customer or Major Supplier has (i) materially reduced [or materially and adversely modified] its relationship with the Company, (ii) cancelled or otherwise terminated its relationship with the Company, or (iii) [to the Company's knowledge] notified the Company of its intention to materially reduce, cancel or otherwise terminate its relationship with the Company.

6.2. Material Contracts

(a) Disclosure. The Material Contracts Disclosure Schedule contains a list of all contracts which are material to the Company ("Material Contracts").

(b) Representations

(i) No Breach. The Company [or any of its Subsidiaries] or [, to the knowledge of the Company,] any other party is not in breach or violation of, or in default under, any Material Contract.

(ii) No Notice of Default. As of the date of this Agreement, the Company [or any of its Subsidiaries] has not received any written notice of default under any Material Contract.

(iii) No Event Causing Breach. [To the Company's knowledge, ] No event has occurred which would result in a breach or violation of, or a default under, any Material Contract. 

(iv) No Cancellation. No Material Contract has been cancelled by the Company or any other party. 

(v) No Claims. [To the Company's knowledge, ] there are no claims by any parties pending under any Material Contract. 

(vi) Fully Enforceable. Each "Material Contract" is legal, valid, binding, enforceable and in full force and effect with respect to the Company and, to the Company's knowledge, the other parties to the contract.

6.3. Product Warranties.

(a) Disclosure. The Warranty Disclosure Schedule sets forth a complete and accurate statement [including all terms and conditions] of all written warranties, warranty policies, service, and maintenance agreements of the Company to any of its services or products.

(b) Representations. No products previously sold, delivered or leased nor any services performed by the Company are subject to any guarantee, warranty or other indemnity, other than those sold, delivered, leased or performed in accordance with the standard terms and conditions of sale or lease of the Company.

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