Investment Reps . . .

are written representations (reps) of the conditions under which an investor has purchased company securities. They customarily appear in financing agreements or in separate "subscription agreements."

Investment reps help complete a funding quickly and cheaply. They do so by giving management the information it needs to obtain an exemption from the time-consuming and expensive registration requirements of the federal and state securities laws. Investment reps should always be required when restricted securities are sold outside a public offering. Used in connection with a proper exemption from registration under applicable securities laws, these representations help protect a company and management from serious securities liabilities. Some common investment reps acknowledge that the investor:

• Has purchased the company’s shares for investment only and not with a view of reselling them.
  

• Has made such independent investigation of the company as he has deemed necessary or advisable.
  

• Has been given free access to company information.
  

• Is sufficiently sophisticated about investments to judge the merits of investing in the company or has hired someone who is so sophisticated.
  

• Meets certain minimum wealth standards.
  

• Will not sell the shares purchased without first complying with applicable securities laws in a manner acceptable to company counsel.

See: Blue Sky Laws, Investors, Legend Stock, Private Placements, Reg D, Restricted Securities, 33 Act.