Typically used when a company or an insider sells stock to a non-insider buyer

• Buyer waives any subsequent claims based on
  seller's failure to disclose non-public information
• Buyer is often a sophisticated investor
  with an unfettered ability to investigate

May be unenforceable per Exchange Act § 29(a)

Statute

Has been invoked to strike down contractual provisions which would have otherwise have limited the
ability of parties to bring securities fraud claims

AES Corp v Dow Chemical  3d Cir 2003

• Held that § 29(a) prohibits the enforcement of a preliminary agreement related to receipt of an M&A offering memorandum which required the buyer to waive any potential 10b-5 securities fraud claims and limited the buyer solely to representations and warranties in a later definitive purchase agreement

Citibank v Itochu International  SDNY 2003

• Denied a motion to dismiss securities fraud claim,
  invoking § 29(a)

Law firm client alerts

• Cleary Gottlieb  2007
• Nixon Peabody  2004
• Kirkland & Ellis  2003

Agreements

Representations & Warranties