HANDOUT 1
COMPENSATION,
CONDUCT OF CLAIMS
AND LIMITS ON THE
SELLER'S LIABILITY
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1.
COMPENSATION BY THE SELLER IN THE CASE OF BREACH OF WARRANTIES OR
OBLIGATIONS
1.1
Subject to the Buyer’s duty to mitigate and the liability limitations set out below, the
Seller agrees to compensate the Buyer from and against Loss which the Buyer suffers or
incurs due to any breach by the Seller of any representation, warranty, covenant or
obligation under this Agreement.
1.2
The right to compensation based on a breach of warranties shall not extend to matters
which are clearly disclosed in the Disclosed Information.
1.3
In the case of any claim made by the Buyer against the Seller arising out of a breach of
the Seller's representations and warranties or obligations under this Agreement, the Loss
shall be calculated net of (a) any Tax benefit realised by the Buyer by reason of
deductibility of such Loss and the estimated fair value of any deferred Tax benefit
attributable to such Loss, (b) insurance compensation received by the Company and (c)
any compensation pursuant to recourse claims for the Company.
1.4
Where the matter giving rise to a breach of any warranty can be remedied, the breach
shall not entitle the Buyer to compensation unless written notice of the breach is given to
the Seller within the time limits set out in Clause 1.9 (Time Limitations) below, and the
matter is not remedied within 30 Business Days after the date on which such notice is
served. In the event of a breach of the representation and/or warranty set out in the first
paragraph of Clause ●Error! Reference source not found. (Business and Equipment) as
a result of the Company using assets or enjoying the benefit of any right belonging to the
Seller otherwise than pursuant to an agreement with the Seller, the Seller shall
compensate such breach by granting the Company the right to continue to use such
asset or enjoy the benefit of such right on an unaltered basis for no consideration other
than such consideration as has historically been paid by the Company to the Seller in
respect thereof. Except as provided above, nothing contained herein shall be interpreted
to imply any obligation on the Seller to remedy any breach of the representations and
warranties other than by paying compensation in accordance with the express provisions
of this Clause 1.
1.5
No claim shall be made by the Buyer against the Seller, and the Seller shall have no
liability in respect of any Loss:
(i)
which arises as a result of an act of or omission by the Buyer or the Company after
the Closing Date, except as required by law;
(ii)
to the extent that the Loss occurs as a result of any legislation not in force at the
Signing Date or any change of law or administrative practice which comes into force
after the Signing Date, or any increase in the rates of Taxes in force at the Signing
Date;
(iii)
which is contingent unless and until such contingent liability becomes a
unconditional liability, provided that this shall not be interpreted so as to prevent
the Buyer from meeting the time limitations set out in Clause 1.9 (Time Limitations)
by notifying the Seller of a potential claim relating to any such contingent liability.
1.6
The limitations set out in Clauses ● (Compensation by the Seller in the case of Breach of
Warranties or Obligations), 1.9 (Time Limitations), 1.10 (Limitations on Payments by the
Seller) and 1.11 (General Limitation on Payments by the Seller) shall not apply to any
claim based on fraud or willful misconduct on the part of the Seller.
1.7
Compensation Procedures with Respect to Third Party Claims
If the Company [or the Buyer] receives notice of any claim by a third party which may
qualify for compensation pursuant to Clause 1 (Compensation by the Seller) (a "Claim"),
the Buyer shall give the Seller written notice of such Claim within 60 Business Days after
the point in time when the Buyer first acquired knowledge of such potential claim, and the
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Seller shall, at the Seller's option, have the right to participate in the defence of that claim
at the Seller's own cost and expense. If the Seller acknowledges in writing its obligation to
compensate the Buyer fully against Losses that may result from a Claim, the Seller shall
be entitled to assume and control the defence (and any possible settlement) of such Claim
("Seller Claim") at its own cost and expense and using professional advisers of its own
choice. The Seller may settle any Seller Claim on whatever terms the Seller may deem fit,
without any obligation to consult the Buyer, except that any settlement requiring part
fulfilment by the Buyer or any of the Group Companies will require prior written approval
of the Buyer. No Seller Claim shall be settled by the Buyer without the prior written
consent of the Seller, and before any settlement by the Buyer of any Claim the Buyer
shall in writing request whether the Seller wish to use its right set out above to convert
the Claim to a Seller Claim. Unless the Seller confirms in writing that the Claim shall be
converted to a Seller Claim within one week after the Seller has been notified of the Claim
the Buyer can, subject to Clause 1.1 (Compensation by the Seller - mitigation), settle
such Claim without any consent from the Seller. The Seller shall have no obligation to
compensate the Buyer for any Losses resulting from the settlement of Claims or Seller
Claims in violation of the provisions in this Clause 1.7.
If the Seller converts a Claim to a Seller Claim as set out above, the Seller undertakes to
behave as the Seller were a responsible owner of the Group and take reasonable
consideration to the Group’s business when the Seller Claim is defended. The Seller
further undertakes in such an event to provide the Buyer with any information and
documentation reasonably required by the Buyer regarding Seller Claims.
1.8
Recovery from Third Parties
If payment is made by the Seller to the Buyer under this Clause 1, and the Buyer or any
Group Company recovers from a third party (including under a policy of insurance) an
amount that is referable to the Loss in respect of which the Seller has made the said
payment, then the Buyer shall repay or procure the payment to the Seller of the amount
recovered from the third party less an amount in respect of any reasonable expenses of
such recovery incurred by the Buyer or any Group Company.
1.9
Time Limitations
The Buyer shall give written notice to the Seller of any claim under this Agreement within
30 Business Days after the point in time when the Buyer first acquired or should have
acquired knowledge of such potential claim, whether or not the claim was then contingent
as a result of the provisions set out in Clause 1 (Compensation by the Seller) or
otherwise.
The Seller shall have no liability with respect to any claim for any Loss arising from a
breach of the terms of this Agreement, unless, subject to the terms set out above in this
Clause 1.9, the Buyer on or before [two] years after the Closing Date has notified the
Seller of such claim specifying the factual basis for the claim in reasonable detail, except
in the case of a claim under Clause ● (Taxes) [or Clause ● (Environmental)] in which case
claims can be made by the Buyer up to the date which is [3] months after the last
statutory or legal date on which any Governmental Body or Tax authority may claim
against the Company. [Subject to compliance with the provisions set out above in this
Clause 1.9, claims based on a breach of a warranty set out in Clauses ● (Share Capital;
Title), [● (Taxes) and ● (Environmental)] may be notified by the Buyer without limitation
in time.
1.10
Limitations on Payments by the Seller
The Seller shall have no liability for breach of any representation or warranty under this
Agreement:
(i)
with respect to any single Loss that does not exceed NOK [
of the same nature shall be regarded as one claim; and
], and several claims
(ii)
until the aggregate amount of all Losses (excluding the Losses for which the Seller
have no liability pursuant to paragraph (i) above) exceeds the amount set out in
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paragraph (i) above) exceeds NOK [
the whole amount.
1.11
], in which case the Seller shall be liable for
General Limitation on Payments by the Seller
The Seller shall have no liability for aggregated claims under this Agreement, whether
with respect to any Losses or otherwise, in excess of NOK [ ].
1.12
No Other Remedies
The remedies provided for in this Clause 1 shall exclude any other claim for damages,
reduction of the Purchase Price or any other remedy against the Seller which could
otherwise be available by law in respect of any breach of any representation, warranty,
covenant or obligation of the Seller contained in this Agreement.
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