Disclosure Schedule
The document in which the seller in an M&A transaction identifies specific facts, contracts, and circumstances that qualify or carve out exceptions to the seller's representations and warranties. Delivered with the purchase agreement.
A disclosure schedule (or "schedules of exceptions") is the document in which the seller identifies specific facts, contracts, and circumstances that qualify or carve out exceptions to the seller's representations and warranties. The disclosure schedule is delivered with the purchase agreement and is generally negotiated in parallel with the reps and warranties themselves.
Structure
Disclosure schedules are typically organized by reference to the section number of the corresponding rep, e.g., Schedule 4.10 (Material Contracts) lists the contracts being disclosed under § 4.10 of the agreement. Each scheduled item operates as an express carve-out: the rep is true except as disclosed on the schedule.
Cross-reference effect
Most modern Texas M&A agreements include a "general cross-reference" provision, under which an item disclosed on any schedule is deemed disclosed on every other schedule to which the disclosure is reasonably apparent on its face. This protects the seller from being deemed to have made an inaccurate rep merely because the disclosure landed under one heading instead of another.
Hidden disclosure problem
Sellers occasionally use voluminous disclosure schedules to bury material adverse information among routine disclosures. Sophisticated buyers respond with: (1) requirements that disclosures be sufficiently detailed to make the disclosed matter reasonably apparent; (2) "data-room dump" exclusions that exclude items merely uploaded to the data room; and (3) anti-sandbagging-resistance clauses preserving claims regardless of disclosure.
The disclosure schedule is the locus of most pre-closing negotiation hostility, every item the seller wants to disclose, the buyer wants to either reject (forcing a stronger rep), require a special indemnity for, or extract a purchase-price concession against. A well-drafted disclosure schedule simultaneously protects the seller from indemnification exposure and is sufficiently transparent to satisfy the buyer's diligence.