Hidden Indemnification Cap Carve-Out ("Fundamental Representations" Loophole)
Counterparty inserted a subtle cross-reference in Section 8.2(b) excluding "Intellectual Property & Data Privacy Representations" from the $5,000,000 Indemnity Cap. This exposes your client to uncapped 100% purchase-price clawback ($84,000,000) for minor third-party software claims.
✍ AUTO-REDLINE SUGGESTION: Strike "Section 4.14 (IP)" from the Fundamental Carve-Out list in §8.2(b) and apply a 15% Special IP Cap ($12.6M) with a 18-month survival period.
HIGH RISK #2 • EARN-OUT MANIPULATIONCitation: Page 39, Section 2.6(d) & Exhibit C
Unilateral Buyer Accounting Discretion on $18M Post-Closing Earn-Out
Section 2.6(d) calculates EBITDA under "Buyer's then-current corporate allocation policies" rather than GAAP consistency, allowing Buyer to load corporate overhead onto the acquired subsidiary and reduce Seller's $18M earn-out to $0.
✍ AUTO-REDLINE SUGGESTION: Insert affirmative covenant requiring historical GAAP consistency and a hard 3% cap on parent-company SG&A allocations.
Exclusive Delaware Court of Chancery Venue & Jury Waiver Confirmed
Governing law, MAE (Material Adverse Effect) definition under Akorn v. Fresenius standard, and non-reliance clauses match your firm's gold-standard M&A template.
💬 Ask SAGAX Vault OS: "Generate redlined Word clauses for Section 8.2(b) and Section 2.6(d) ready for opposing counsel..."
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