PANEL: Craig Lilly, Partner, Baker McKenzie Peter K. Rosen, Global Chair of the Insurance Coverage Litigation Practice, Latham & Watkins Patrick Stroth, President, Rubicon M&A Insurance Services Phil Casper, Principal, Euclid Transactional Neil Morganbesser, President, DelMorgan & Co. MODERATOR: Alex Kasdan, Senior Managing Director, DelMorgan & Co. MAJOR TOPICS: Overview of common M&A deal risks Representations and warranties insurance explained Types and transactions covered Reps & Warranties Insurance trends Illustrative terms overview Due diligence and underwriting process Transaction timing and certainty of closing Maximization of seller proceeds at closing Claim history overview

1. Moderator: Alexander B. Kasdan, Senior Managing Director, DelMorgan & Co.
Panel:
• C. Craig Lilly, Partner, Baker & McKenzie LLP
• Peter K. Rosen, Partner, Latham & Watkins LLP
• Patrick Q. Stroth, CEO, Rubicon M&A Insurance Services, Inc.
• Phil Casper, Founding Principal, Euclid Transactional, LLC
© Copyright 2017 Expert Webcast – All Rights Reserved
M&A RISK ALLOCATION: REPRESENTATIONS
AND WARRANTIES INSURANCE
June 20, 2017

2. 1
Expert Webcast is a sophisticated source of expertise for the
professional and the business communities locally, nationally and
cross-border.
Producing the industry’s leading webcast panels covering corporate,
M&A, restructuring and finance topics, Expert Webcast features
foremost experts in law accounting and finance, and addresses timely
and relevant issues faced by general counsel, C-level executives,
boards of directors, business owners and their advisors, as well as
institutional investors.
We welcome you to join our upcoming video webcasts or visit our on-
demand library to access recorded programs: www.expertwebcast.com.

3. 2
MODERATOR: Alexander B. Kasdan, Senior Managing Director,
DelMorgan & Co., brings more than twenty years of senior-level Wall Street
advice to middle market companies, entrepreneurs and institutional investors.
He has extensive experience in investment banking, corporate law and
restructuring at world’s leading firms, including Credit Suisse First Boston,
O’Sullivan Graev & Karabell LLP (now O'Melveny & Myers LLP), Battle
Fowler LLP (now Paul Hastings LLP) and Schlumberger Ltd., and as a
founding partner of Convergence Capital Partners. Alex has worked on more
than 100 domestic and cross-border transactions in North America, Europe and
Africa.
Alex is a Senior Advisor to Governance and Transactions LLC, an advisory firm
established in 2003 by Mr. James L. Gunderson, former Secretary and General
Counsel of Schlumberger Limited, to assist boards, management and owners
with corporate governance, compliance, structuring and strategic transactions.
Alex is a frequent moderator and an interviewer at Expert Webcast roundtable
discussions attracting business leaders and leading professionals from around
the world.
Alex graduated magna cum laude from Middlebury College with a B.A. degree
in Economics and Italian and was elected to Phi Beta Kappa during his junior
year. In addition, he holds a J.D. degree from Columbia University Law School
and has studied at the University of Florence in Italy.
100 Wilshire Blvd.
Suite 750
Santa Monica, CA 90401
+1 310 980 1718 mobile
+1 310 935 3826 office
ak@delmorganco.com
www.delmorganco.com

4. 3
Panelist: Craig Lilly is a M&A partner in Baker
McKenzie’s Palo Alto and San Francisco offices. His
practice focuses on complex cross-border and domestic
acquisitions, divestitures and joint ventures. Mr. Lilly has
wide ranging experience in advising strategic and private
equity clients on a wide variety of transactions including stock
and asset acquisitions, divestitures, recapitalizations, auctions,
leveraged buyouts and equity/venture financings. Mr. Lilly
also represents fund sponsors in connection with the
structuring and private placement of investment funds.
Mr. Lilly is a frequent author and lecturer on legal and
business issues regarding mergers and acquisitions, private
equity investments and corporate finance. He has been quoted
in, or contributed to, articles and features in Bloomberg, The
Wall Street Journal, Dow Jones events, The Deal Magazine
and CFO.com. He is the former California reporter for the
American Bar Association Committee on State Regulation of
Securities (2006 to 2010).
660 Hansen Way
Palo Alto, CA 94304-1044
USA
Tel: +1 650 251 5947
Fax: +1 650 856 9299
craig.lilly@bakermckenzie.com

5. 4
Panelist: Peter Rosen is a partner in the Los Angeles office of Latham &
Watkins LLP. He is the global Chair of the Insurance Coverage Litigation
Practice.
He represents insurance policyholders in matters involving commercial general
liability policies, cyber insurance, directors' and officers' liability insurance policies,
environmental insurance, fidelity insurance, professional liability policies, property
disputes, representations and warranties insurance, and surety bonds.
Most recently, Mr. Rosen was the lead lawyer for the retail leaseholder at the World
Trade Center in the massive insurance coverage litigation arising out of the 9/11
attacks. His role in the World Trade Center insurance coverage litigation gained him
worldwide recognition.
Mr. Rosen's practice also includes broker-dealer matters, private securities disputes,
securities litigation and special investigations.
Additionally, he counsels boards of directors and senior management on directors’
and officers' litigation, compensation and benefits agreements, corporate governance
issues, employment practices, insurance strategies, indemnification and bylaws and
agreements.
Mr. Rosen is recognized by Chambers USA as a leading lawyer in the insurance
area.
355 South Grand Avenue
Los Angeles CA 90071
+1.213.891.8778
Peter.Rosen@lw.com
www.lw.com

6. 5
Panelist: Patrick Q. Stroth is the CEO of Rubicon M&A
Insurance Services, LLC.
His practice involves harnessing niche insurance tools to empower
Sellers of companies to secure a clean exit from their M&A
transactions faster, and with significantly more cash at closing. This
keen focus in the M&A space has earned Patrick the title
“Champion of the Clean Exit”.
Patrick has been an Executive Liability specialist for the past
21years with an emphasis on transaction related insurance solutions,
including Directors & Officers Liability, Accounts Receivable
Insurance (Trade Credit Liability), and Cyber Security and Privacy
Liability. Patrick is also a developer and Industry leading provider
of Medical Professional Liability, HIPAA, and Medical Billing
Regulatory policies for the Healthcare Industry.
Patrick is a graduate of Loyola Marymount University and holds an
Associate in Risk Management designation.
101 Jefferson Drive
Menlo Park, CA 94025
(650) 931-2321 office
(415) 806-2356 mob
pstroth@rubiconins.com
www.rubiconins.com

7. 6
Panelist: Phil Casper is a founding Principal of
Euclid Transactional. Prior to joining Euclid
Transactional in April 2016, Phil was a Vice President
and Regional Underwriting Manager at a large global
insurance company, where he worked for five years,
developing, underwriting and marketing transactional
insurance products across the Americas.
Prior to that, Phil was an attorney in the business
transactions group at Schulte Roth & Zabel LLP,
where he advised private equity clients on mergers
and acquisitions and securities law related matters.
Phil holds a B.S. from Washington University in St.
Louis and a J.D. from Boston University School of
Law. In 2014, Phil was named as one of the winners
of M&AAdviser’s 40 Under 40 Awards.
33 Irving Pl., Suite 9009
New York NY 10003
(646) 517-8810 office
(917) 566-1738 cell
pcasper@euclidtransactional.com
www.euclidtransactional.com

8. 7
Panelist: Neil Morganbesser is co-Founder and President & CEO of DelMorgan & Co.
where he provides senior leadership within the firm and helps oversee all client engagements. Mr.
Morganbesser is also CEO of Globalist Capital LLC, DelMorgan’s broker-dealer affiliate. Mr.
Morganbesser has over 25 years of experience providing financial and strategic advice to a full
range of clients, including entrepreneurs, large corporations, governments, family businesses,
private equity funds, and special committees of public companies.
Mr. Morganbesser has been affiliated with some of the leading institutions in the world, and his
experience ranges from representing the offshore owners in the sale of a small, private U.S.
company for $10 million to representing the special committee of a large, public company in a $9
billion negotiated management buyout with a highly complex financial structure.
Mr. Morganbesser has truly global experience with the most sophisticated transactions, across a
broad range of industries and in a large number of jurisdictions, as the lead banker on a wide
variety of transactional and other advisory assignments, including domestic and cross-border
mergers, acquisitions, joint ventures, sales and divestitures, restructurings, special committee
assignments, unsolicited acquisitions and hostile defense. With transactional experience in over
30 countries, Mr. Morganbesser has successfully advised on over 100 transactions.
Until May 2008, Mr. Morganbesser was the head of West Coast and Asia Mergers & Acquisitions
at Bear Stearns & Co., as a Senior Managing Director based in Los Angeles. Prior to joining
Bear Stearns in May 2001, Mr. Morganbesser was an investment banker in the Mergers,
Acquisitions and Restructuring Department at Morgan Stanley (in New York and Los
Angeles). From 1990-1993, Mr. Morganbesser was a corporate and M&A attorney at Wachtell,
Lipton, Rosen & Katz.
Mr. Morganbesser graduated with an A.B. magna cum laude in Applied Mathematics /
Economics from Harvard University (Phi Beta Kappa) in 1986 and received his J.D. and M.B.A.
degrees (Order of the Coif, with honors) from Stanford University in 1990.
100 Wilshire Blvd.
Suite 750
Santa Monica, CA 90401
(310) 319-2000
nm@delmorganco.com
www.delmorganco.com

9. 8
MAJOR TOPICS:
• Overview of common M&A deal risks
• Representations and warranties insurance explained
• Types and transactions covered
• Reps & Warranties Insurance trends
• Illustrative terms overview
• Due diligence and underwriting process
• Transaction timing and certainty of closing
• Maximization of seller proceeds at closing
• Claim history overview

10. 9
©2017 Baker & McKenzie
Expert Webcast:
Representation & Warranty
Insurance
June 20, 2017
C. Craig Lilly, Partner, Baker & McKenzie LLP

11. 10
2BAKER & MCKENZIE |
Leaders in
Cross-Border M&A
*2016 Thomson Reuters data
77 offices 47 countries 4,200+ lawyers
K E Y F A C T S A N D F I G U R E S
Baker & McKenzie has done more cross-border deals than any other law firm in the world*. (2012 - 2016)
M&A
in Cross-Border
#1
by volume in
US$100M-1BN CROSS-BORDER DEALS*
by volume
FOR ALL CROSS-BORDER DEALS*
by volume in
M&A INVOLVING EMERGING MARKETS*
Also #1…

12. 11
3BAKER & MCKENZIE |
What is Representation and Warranty Insurance ?
Representation and warranty insurance (also know as “RWI”) protects the
insured against unintentional and unknown breaches of a seller's
representations and warranties made in a stock purchase, merger or similar
agreement. It can extend indemnification rights or serve as the buyer's sole
source of recovery.
RWI allows a seller to distribute a greater portion of the purchase price to its
shareholders or investors while reducing the prospects risk of clawback
(and thus may allow for a “clean exit”).
RWI may reduce or eliminate seller indemnity, escrow or holdback.
Annual premiums for transactional insurance exceed $1B in the U.S.1
– 1 “Rep and Warranty Insurance Claims Study Analysis”, Law360, 12/7/2016.

13. 12
4BAKER & MCKENZIE |
An Example of a “Clean Exit” with RWI Policy
Traditional Offer Offer using RWI Policy
Price $500M $500M
Indemnity Cap $100M Replaced by $100M policy
Survival Period 18 months 36 months1
Escrow $50M2 $10M2
Closing
Proceeds
$400M $490M
1 Insurance would generally include additional coverage for fundamental and tax representations.
2 Sample escrow amount for 10% of purchase price (or reduced due to RWI).

14. 13
5BAKER & MCKENZIE |
Two Types of Policies
TYPE BUYER SIDE
(Buyer is the Insured)
SELLER SIDE
(Seller is the Insured)
Primary Benefit Removes the Seller from the
indemnification claim process.
(After the policy retention is
satisfied.)
Protects a significant portion of
the purchase price from
possible indemnification claims.
(When the Buyer is unwilling to
accept RWI.)
Indemnification POTENTIAL REPLACEMENT:
Protects against losses suffered
as a result of breaches of the
Seller’s representations and
warranties in the acquisition
agreement.
BACKSTOP: Protects against
losses suffered as a result of the
Buyer bringing a valid claim for
indemnification against Seller
(with respect to breaches of the
Seller’s representations and
warranties in the acquisition
agreement).

15. 14
6BAKER & MCKENZIE |
Benefits of a Buyer Side Policy
Ninety percent (90%) of policies are “buy side” policies. Policy provides the seller
with a “clean exit” by reducing or eliminating the need to establish escrows or
purchase price holdbacks.
Offers additional protection to the buyer beyond the negotiated indemnity cap and
survival limitations in a purchase agreement
Protects buyers against the collectability or solvency risk of an unsecured indemnity
provided by a seller (e.g., if seller files for bankruptcy)
Enables the seller to reduce the amount of funds held back in escrow
Distinguishes a buyer’s bid in a competitive auction process by requiring a seller to
provide short survival periods, modest liability caps and reduced escrow amounts for
breaches
Preserves key relationships by mitigating the need for a buyer to pursue claims
against management sellers working for the buyer

16. 15
7BAKER & MCKENZIE |
Benefits of a Seller Side Policy
• Allows for accelerated and certain deal proceeds
• Backstops negotiated indemnity obligations — a key benefit for private equity or
venture capital funds at the end of their life cycle
• Protects minority/passive sellers concerned with joint and several liability for
indemnifying the buyer
• Provides additional comfort for individual or family sellers
• May attract better offers by maximizing indemnity (especially in auctions).
• More deal certainty to close

17. 16
8BAKER & MCKENZIE |
Costs and Fees
Underwriting Fee: $25,000 - $50,000
Policy Premium (USA): Average is 2.5% - 3.5% of the insured amount.
Retentions: Average is 1% – 2% of the purchase price (as provided in the
acquisition agreement).
Insurers may require that the Seller bear a portion of the retention liability
(i.e., “skin in the game”) or may propose a higher premium, if the Seller has
no liability.

18. 17
9BAKER & MCKENZIE |
Policy Coverages
OVERALL COVERAGE: Generally, covers buyer-favorable representations and warranties
breaches, subject to certain exclusions.
SILENT ON CONSEQUENTIAL DAMAGES: Insurers will generally accept a "neutral" loss
definition (which neither expressly includes nor excludes punitive, consequential, lost profit or
multiple damages).
BASKETS SERVE AS MATERIALITY THRESHOLDS: Insurers will also generally accept a
materiality "double-scrape" so that materiality and MAE qualifications in the Seller's
representations and warranties are disregarded for purposes of determining the existence of a
breach and the resulting losses.
EXPANDED POLICY PERIODS: Policy periods during which claims may be made under the
policy are generally three years, with an extended claim period (five to six years) for tax and
fundamental representations.

19. 18
10BAKER & MCKENZIE |
Policy Coverages
Covered “Loss” typically matches definition included in purchase agreement.
Commonly includes liabilities, damages, and expenses resulting from breach, plus
defense costs. Adjusted for tax benefit and other recoveries
If purchase agreement “Loss” definition is silent as to consequential or multiple
damages, and policy does not specifically exclude, such damages can be recovered.
Even if “Loss” definition excludes consequential or multiple damages, some insurers
may cover these damages.

20. 19
11BAKER & MCKENZIE |
Comparison of Indemnity versus Insurance Coverage
Coverage Typical Indemnity R&W Insurance Policy
Survival
Period
12-24 month survival period for
general reps and 36 months and
beyond for fundamental reps
Typically can obtain three year survival
period for general reps and six years
for fundamental reps
Limits 5%-20% of the purchase price Can insure up to 100% of the purchase
price (frequently done for IP/Patent
reps)
Materiality
Scrape
Materiality scrape either heavily
negotiated or not included in final
documentation
Possible to achieve a materiality
scrape both for determining existence
of breaches and for calculating loss
Definition of
Loss
Agreement may preclude recovery
of consequential damages, lost
profits, multiplied damages and
diminution in value
Underwriters may entertain inclusion of
consequential damages, and at a
minimum can “go silent” on both
consequential damages and multiplied
damages/diminution in value as a
measure of loss

21. 20
12BAKER & MCKENZIE |
Four Areas of Policy Exclusions
1. Regulatory / enforcement concerns
2. Future transactions
3. Known matters
4. Fraud and other matters not insurable by law

22. 21
13BAKER & MCKENZIE |
I. Exclusions – Regulatory & Enforcement Concerns
Asbestos and PCBs
Transfer pricing
Pension underfunding
Environmental liabilities for properties where Phase I environmental surveys are not
available, or where surveys identify specific contamination or other problems.
Cyber-breach and failure to comply with data privacy or confidentiality laws
Failure to comply with the FCPA or similar anti-corruption or anti-bribery laws
Regulatory risk
Medicare / Medicaid
Construction defects

23. 22
14BAKER & MCKENZIE |
II. Exclusions – Future Transactions
Purchase price adjustments, earn outs and contingent payments of purchase price
Forward-looking statements or warranties (e.g., collection of accounts receivable)
Amendment of the Acquisition Agreement without the approval of the Insurer
Underfunded pensions
Covenants

24. 23
15BAKER & MCKENZIE |
III. Exclusions – Known Matters
Known tax liabilities, loss of deferred tax assets and transfer tax liabilities
Breach of which the deal team members had actual knowledge prior to the effective
date of the policy
Actual or potential liabilities in diligence reports (i.e., the “insuring the burning house”
exclusion)
Items listed on Disclosure Schedules to the acquisition agreement

25. 24
16BAKER & MCKENZIE |
IV. Exclusions – Legal Limits
Fraud - deliberate non-disclosure by the Insured/ actual knowledge
Fines and penalties that may not be legally insured (e.g., fines for violation of the
antitrust laws)
Non-monetary injunctive or equitable relief
Criminal fines and penalties (where uninsurable by law)

26. 25
17BAKER & MCKENZIE |
Additional Types of Coverage (for purchase)
1. CFIUS risk coverage – this coverage insures foreign bidders for break-up fees as a
result of U.S. regulations rejecting an acquisition
2. Coverage for certain tax liabilities – this enables the insured to reduce/eliminate
contingent tax exposure arising from the tax treatment of a transaction
3. Contingent liabilities such as successor liability, contractual consents, governmental
approvals, pending litigation, etc.
4. Environmental liabilities.
5. Workers compensation, D&O, EL and bundle.

27. 26
18BAKER & MCKENZIE |
Trends in RWI
Pricing is lower and more competitive: 2% - 4% (versus 5% plus ten years ago).
Underwriting fees have come down slightly.
Underwriting process is faster.
Retentions are lower (e.g., 1% to 2% of purchase price).
Terms generally mirror agreement versus heavy exclusions; however, RWI may have
longer terms for both fundamental and non-fundamental representations.
Aggregate capacity has increased (e.g., up to $500M per transaction).
More frequent use.
More deal certainty to close as a result of RWI; reduces some negotiation.
Claims are easier to be made and paid (more claims paid in recent years).

28. 27
19BAKER & MCKENZIE |
Process for Obtaining RWI
Step 1 – Seek non-binding quotes (2 – 3 business days). Be sure to enter into NDA
before providing any confidential materials to brokers
Step 2 – Select Insurer (1 – 2 days). After reviewing quotes and selecting the insurer,
a non-refundable underwriting fee is paid.
Step 3 – Underwriting Process (5 – 10 days or less). The insurer reviews buy-side
reports, data room and memoranda. Insurer has access to legal, financial, tax and
other reports obtained by the insured party.
Step 4 – Policy Negotiation. There are numerous issues to resolve such as coverage
amount, premium, deductibles/ retentions, definitions (of loss, knowledge, breach,
claims, reps, materiality scrapes, dispute resolution process, etc.), subrogation for
fraud, gap period, etc.
Step 5 – Issuance of Policy. Double check to review for accuracy.

29. 28
20BAKER & MCKENZIE |
The following are available upon request:
Baker & McKenzie LLP’s Customary Issues in Negotiating Cross-Border
Acquisition Agreements is a searchable microsite summarizing Key
acquisition terms across 44 countries.
Baker & McKenzie LLP’s Global M&A Handbook.
Baker & McKenzie LLP’s Cross-Border M&A Institute – a CLE-accredited,
in-house training program that draws upon our decades of experience
developing strategies, processes and precedents to facilitate successful
deals across multiple jurisdictions.
Best Practices – Resources

30. 29
21BAKER & MCKENZIE |
Global
Transactions
Forecast – with
Oxford Economics
Global Private
M&A Handbook
International
Joint Ventures
Handbook
Global Public
M&A Handbook
Post-Acquisitions
Integration
Handbook
M&A By Design:
Timing and
Complexity of
Cross-Border
Acquisitions
Suite of Baker McKenzie - Resources

31. 30
22BAKER & MCKENZIE |
Thank you for attending our webcast!
C. Craig Lilly
Baker & McKenzie LLP
660 Hansen Way
Palo Alto, CA 94304
(650) 251-5947
craig.lilly@bakermckenzie.com
This presentation should not be considered or construed as legal advice on any individual matter or circumstance. The contents of this document are intended for general
information purposes only and may not be quoted or referred to in any other presentation, publication or proceeding without the prior written consent of Baker & McKenzie,
which may be given or withheld at the Firm’s discretion. The distribution of this presentation or its content is not intended to create, and receipt of it does not constitute, an
attorney-client relationship. The views set forth herein are the personal views of the author and do not necessarily reflect those of Baker & McKenzie.