Common use of Limitations on Warranty Claims Clause in Contracts

Limitations on Warranty Claims. The limitations set out in this clause 6 shall not apply to any Claim which is: the consequence of fraud, dishonesty, wilful concealment or wilful misrepresentation by or on behalf of the Warrantors; or which is a result of a breach of warranty statements 1.1 and 1.2 (share capital) and 2.4 (questionnaires) of [part 1 of] schedule 5. No Claim may be made against the Warrantors unless written notice of such Claim is served on the Warrantors giving reasonable details of the Claim by (i) no later than the date which is six months after the date on which the Company delivers to the Investors the Board approved audited accounts of the Company for the Financial Year of the Company ending [insert date]; or (ii) two years after the Warranties were last given, whichever is the later. [Note: consider extending term for second tranche warranties] Failure to give reasonable details of any Claims shall not prevent the Investors from proceeding with any Claim otherwise made properly under this agreement. The aggregate liability of the Warrantors in respect of all and any Claims shall be limited to: in the case of the Company, an amount equal to the aggregate amount subscribed by the Investors pursuant to this agreement; and in the case of each of the Founders, £[ ] [Note: insert amount] [together with the proper and reasonable costs of recovery in respect of any Claim incurred by or on behalf of the Investors.] The Warrantors shall not be liable in respect of any Claim unless the aggregate liability for all Claims exceeds £ [Note: insert amount], in which case the Warrantors shall be liable for the entire amount and not merely the excess. [In calculating liability for Claims for the purposes of clause 6.4 above, any Claim which is less than £ (excluding interest, costs and expenses) shall be disregarded. For these purposes, a number of Claims arising out of the same or similar subject matter, facts, events or circumstances shall be aggregated and form a single Claim.] No liability of the Warrantors in respect of any breach of any Warranty shall arise: if such breach occurs by reason of any matter which would not have arisen but for the coming into force of any legislation not in force at the Completion Date or by reason of any change to HMRC’s practice occurring after the Completion Date; to the extent that specific allowance, provision or reserve has been made in the Accounts or in the Management Accounts in respect of the matter to which such liability relates; to the extent that such breach or claim arises as a result of any change in the accounting bases or policies in accordance with which the Company values its assets or calculate its liabilities or any other change in accounting practice from the treatment or application of the same used in preparing the Accounts (save to the extent that such changes are required to correct errors or because relevant generally accepted accounting principles have not been complied with). The Investors shall be entitled to make a Claim in respect of liability which is contingent or unascertained provided that written notice of the Claim (giving as far as practical the amount and details of the Claim) is given to the Warrantors before the expiry of the relevant periods specified in clause 6.2. The Warrantors shall not be liable for any Claim if the alleged breach which is the subject of the Claim is capable of remedy and is remedied to the reasonable satisfaction of the Investors by the Warrantors within 30 days of the date on which the notice in clause 6.2 is received by the Warrantors and no Investor suffers any losses in connection with the alleged breach. Nothing in this agreement shall prejudice each Investor’s duty under common law to mitigate any loss or liability which is the subject of a Claim. [At the option of each Founder but at all times subject to Investor Majority Consent, any liability in respect of any Claims may be settled (in whole or in part) in Shares held by the relevant Founder, whereby the number of Shares is calculated by dividing the value of the Claim by the [lower of (i) the Fair Value [Note: add definition] of such Shares at the time of the settlement of the Claim; and (ii) the] Subscription Price [Note: add definition]. [Any Shares so transferred to the Investors shall, if they are Ordinary Shares, be re-designated as Series A Shares and each of the parties (other than the Company) hereby irrevocably agrees to approve such re-designation and waives any pre-emption rights on transfer he or his nominees may have pursuant to the Company's articles of association or otherwise so as to enable the transfer of any Shares in the capital of the Company contemplated by this clause 6.10 to proceed free of any such pre-emption rights.] The transfer of the adequate number of Shares (or, where Shares are transferred in partial settlement, the adequate number of Shares together with the adequate cash payment) to the Investors by a relevant Founder shall fully and finally discharge such Founder from any liability for a Claim.] [Note: Authority for re-designation and transfer to be added to New Articles if not all shareholders party to the agreement.]

Limitations on Warranty Claims. The limitations set out in this clause 6 shall not apply to any Claim which is: the consequence of fraud, dishonesty, wilful concealment or wilful misrepresentation by or on behalf of the WarrantorsCompany; or which is a result of a breach of warranty statements 1.1 and 1.2 (share capital) and 2.4 (questionnaires) of [part 1 of] schedule Schedule 5. No Claim may be made against the Warrantors Company unless written notice of such Claim is served on the Warrantors Company, giving reasonable details of the Claim by (i) no later than Claim, within the date which is six months after the date on which the Company delivers to the Investors the Board approved audited accounts of the Company for the Financial Year of the Company ending [insert date]; or (ii) two years 18] month period after the Warranties were last given, whichever is the later. [Note: consider extending term for second tranche warranties] Failure to give reasonable details of any Claims shall not prevent the Investors from proceeding with any Claim otherwise made properly under this agreement. The aggregate liability of the Warrantors Company in respect of all and any Claims shall be limited to: in the case of the Company, (subject to clause 5.6) to an amount equal to the aggregate amount subscribed for the New Shares by the Investors pursuant to this agreement; and in the case of each of the Founders, £[ ] [Note: insert amount] agreement [together with the proper and reasonable costs of recovery in respect of any Claim incurred by or on behalf of the Investors.] The Warrantors Without prejudice to the overall cap set out in clause 6.3 above, in respect of any Claim(s) that is or are brought by only some Investors, the aggregate liability of the Company in respect of all such Claims shall not be liable the aggregate amount subscribed for the New Shares pursuant to this agreement by those Investors bringing the Claim(s) [together with the proper and reasonable costs of recovery in respect of any Claim unless the aggregate liability for all Claims exceeds £ [Note: insert amount], in which case the Warrantors shall be liable for the entire amount and not merely the excess. [In calculating liability for Claims for the purposes incurred by or on behalf of clause 6.4 above, any Claim which is less than £ (excluding interest, costs and expenses) shall be disregarded. For these purposes, a number of Claims arising out of the same or similar subject matter, facts, events or circumstances shall be aggregated and form a single Claimsuch Investors.] No liability of the Warrantors Company in respect of any breach of any Warranty shall arise: if such breach occurs [or to the extent that the liability is increased] by reason of any matter which would not have arisen but for the coming into force of any legislation not in force at the Completion Execution Date or by reason of any change to existing legislation, HMRC’s practice (or that of any other Taxing Authority) or in rates of taxation occurring after the Completion Execution Date; to the extent that specific allowance, provision or reserve has been made in the Accounts or in the Management Accounts in respect of the matter to which such liability relates; to the extent that such breach or claim arises as a result of any change in the accounting bases or policies in accordance with which the Company values its assets or calculate its liabilities or any other change in accounting practice from the treatment or application of the same used in preparing the Accounts (save to the extent that such changes are required to correct errors or because relevant generally accepted accounting principles have not been complied with). The Investors shall be entitled to make a Claim in respect of liability which is contingent or unascertained provided that written notice of the Claim (giving as far as practical the amount and details of the Claim) is given to the Warrantors Company before the expiry of the relevant periods specified in clause 6.2. The Warrantors 6.2 and the Company shall not be liable for to make any payment in respect of such Claim if unless and until the alleged breach which is liability becomes an actual liability or (as the subject of the Claim is case may be) becomes capable of remedy and is remedied to the reasonable satisfaction of the Investors by the Warrantors within 30 days of the date on which the notice in clause 6.2 is received by the Warrantors and no Investor suffers any losses in connection with the alleged breachbeing quantified. Nothing in this agreement shall prejudice each Investor’s duty under common law to mitigate any loss or liability which is the subject of a Claim. [At the option of each Founder but at all times subject to Investor Majority Consent, any liability in respect of any Claims may be settled (in whole or in part) in Shares held by the relevant Founder, whereby the number of Shares is calculated by dividing the value of the Claim by the [lower of (i) the Fair Value [Note: add definition] of such Shares at the time of the settlement of the Claim; and (ii) the] Subscription Price [Note: add definition]. [Any Shares so transferred to the Investors shall, if they are Ordinary Shares, be re-designated as Series A Shares and each of the parties (other than the Company) hereby irrevocably agrees to approve such re-designation and waives any pre-emption rights on transfer he or his nominees may have pursuant to the Company's articles of association or otherwise so as to enable the transfer of any Shares in the capital of the Company contemplated by this clause 6.10 to proceed free of any such pre-emption rights.] The transfer of the adequate number of Shares (or, where Shares are transferred in partial settlement, the adequate number of Shares together with the adequate cash payment) to the Investors by a relevant Founder shall fully and finally discharge such Founder from any liability for a Claim.] [Note: Authority for re-designation and transfer to be added to New Articles if not all shareholders party to the agreement.]

Limitations on Warranty Claims. The limitations set out in this clause 6 7 shall not apply to any Claim which is: the consequence of fraud, dishonesty, wilful concealment or wilful misrepresentation by or on behalf of the Warrantors; or which is a result of a breach of warranty statements 1.1 and 1.2 (share capital) and 2.4 (questionnaires) of [part 1 of] schedule 5. No Claim may be made against the Warrantors unless written notice of such Claim is served on the Warrantors giving reasonable details of the Claim by (i) no later than the date which is six months after the date on which the Company delivers delivery to the Investors of the Board approved audited accounts of the Company for the Financial Year of the Company ending [insert date]]; or (ii) two years after the Warranties were last given, whichever is the later. [Note: consider extending term for second tranche warranties] Failure to give reasonable details of any Claims shall not prevent the Investors from proceeding with any Claim otherwise made properly under this agreement. The aggregate liability of the Warrantors in respect of all and any Claims shall be limited to: in the case of the Company, an amount equal to the aggregate amount subscribed by the Investors pursuant to this agreement; and in the case of each of the FoundersManagersFounders, £[ ] [Note: insert amount] [together with the proper and reasonable costs of recovery in respect of any Claim incurred by or on behalf of the Investors...] The Warrantors shall not be liable in respect of any Claim unless the aggregate liability for all Claims exceeds £ [Note: insert amount], in which case the Warrantors shall be liable for the entire amount and not merely the excess. [In calculating liability for Claims for the purposes of clause 6.4 7.4 above, any Claim which is less than £ (excluding interest, costs and expenses) shall be disregarded. For these purposes, a number of Claims arising out of the same or similar subject matter, facts, events or circumstances shall be aggregated and form a single Claim.] No liability of the Warrantors in respect of any breach of any Warranty shall arise: if such breach occurs by reason of any matter which would not have arisen but for the coming into force of any legislation not in force at the Completion Date or by reason of any change to HMRC’s HM Revenue & Customs' practice occurring after the Completion Date; to the extent that specific allowance, provision or reserve has been made in the Accounts or in the Management Accounts specifically in respect of the matter to which such liability relates; to the extent that such breach or claim arises as a result of any change in the accounting bases or policies in accordance with which the Company values its assets or calculate its liabilities or any other change in accounting practice from the treatment or application of the same used in preparing the Accounts (save to the extent that such changes are required to correct errors or because relevant generally accepted accounting principles have not been complied with). The Investors shall be entitled to make a Claim in respect of liability which is contingent or unascertained provided that written notice of the Claim (giving as far as practical the amount and details of the Claim) is given to the Warrantors before the expiry of the relevant periods specified in clause 6.27.2. The Warrantors shall not be liable for any Claim if the alleged breach which is the subject of the Claim is capable of remedy and is remedied to the reasonable satisfaction of the Investors by the Warrantors within 30 days of the date on which the notice in clause 6.2 7.2 above is received by the Warrantors and no Investor suffers any losses in connection with the alleged breachWarrantors. Nothing in this agreement shall prejudice each Investor’s duty under common law to mitigate any loss or liability which is the subject of a Claim. Employee share options [At the option of each Founder but at all times subject to Investor Majority Consent, any liability in respect of any Claims may be settled (in whole or in part) in Shares held by the relevant Founder, whereby the number of Shares is calculated by dividing the value of the Claim by the [lower of (i) the Fair Value [Note: add definition] of such Shares at the time of the settlement of the Claim; and (ii) the] Subscription Price [Note: add definition]. [Any Shares so transferred to the Investors shall, if they are Ordinary Shares, be re-designated as Series A Shares and each of the parties (other than the Company) hereby irrevocably agrees to approve such re-designation and waives any pre-emption rights on transfer he or his nominees may have pursuant to the Company's articles of association or otherwise so as to enable the transfer of any Shares in the capital of the Company contemplated by this clause 6.10 7.10 to proceed free of any such pre-emption rights.] The transfer of the adequate number of Shares (or, where Shares are transferred in partial settlement, the adequate number of Shares together with the adequate cash payment) to the Investors by a relevant Founder shall fully and finally discharge such Founder from any liability for a Claim.] [Note: Authority for re-designation and transfer to be added to New Articles if not all shareholders party to the agreement.]

Limitations on Warranty Claims. The limitations set out in this clause 6 shall not apply to any Claim which is: the consequence of fraud, dishonesty, wilful concealment or wilful misrepresentation by or on behalf of the Warrantors; or which is a result of a breach of warranty statements 1.1 and 1.2 (share capital) and 2.4 (questionnaires) of [part 1 of] schedule 5. No Claim may be made against the Warrantors unless written notice of such Claim is served on the Warrantors giving reasonable details of the Claim by (i) no later than the date which is six months after the date on which the Company delivers to the Investors the Board approved audited accounts of the Company for the Financial Year of the Company ending [insert date]; or (ii) two years after the Warranties were last given, whichever is the later. [Note: consider extending term for second tranche warranties] Failure to give reasonable details of any Claims shall not prevent the Investors from proceeding with any Claim otherwise made properly under this agreement. The aggregate liability of the Warrantors in respect of all and any Claims shall be limited to: in the case of the Company, an amount equal to the aggregate amount subscribed by the Investors pursuant to this agreement; and in the case of each of the Founders, £[ ] [Note: insert amount] [together with the proper and reasonable costs of recovery in respect of any Claim incurred by or on behalf of the Investors.] The Warrantors shall not be liable in respect of any Claim unless the aggregate liability for all Claims exceeds £ • [Note: insert amount], in which case the Warrantors shall be liable for the entire amount and not merely the excess. [In calculating liability for Claims for the purposes of clause 6.4 above, any Claim which is less than £ • (excluding interest, costs and expenses) shall be disregarded. For these purposes, a number of Claims arising out of the same or similar subject matter, facts, events or circumstances shall be aggregated and form a single Claim.] No liability of the Warrantors in respect of any breach of any Warranty shall arise: if such breach occurs by reason of any matter which would not have arisen but for the coming into force of any legislation not in force at the Completion Date or by reason of any change to HMRC’s practice occurring after the Completion Date; to the extent that specific allowance, provision or reserve has been made in the Accounts or in the Management Accounts in respect of the matter to which such liability relates; to the extent that such breach or claim arises as a result of any change in the accounting bases or policies in accordance with which the Company values its assets or calculate its liabilities or any other change in accounting practice from the treatment or application of the same used in preparing the Accounts (save to the extent that such changes are required to correct errors or because relevant generally accepted accounting principles have not been complied with). The Investors shall be entitled to make a Claim in respect of liability which is contingent or unascertained provided that written notice of the Claim (giving as far as practical the amount and details of the Claim) is given to the Warrantors before the expiry of the relevant periods specified in clause 6.2. The Warrantors shall not be liable for any Claim if the alleged breach which is the subject of the Claim is capable of remedy and is remedied to the reasonable satisfaction of the Investors by the Warrantors within 30 days of the date on which the notice in clause 6.2 is received by the Warrantors and no Investor suffers any losses in connection with the alleged breach. Nothing in this agreement shall prejudice each Investor’s duty under common law to mitigate any loss or liability which is the subject of a Claim. [At the option of each Founder but at all times subject to Investor Majority Consent, any liability in respect of any Claims may be settled (in whole or in part) in Shares held by the relevant Founder, whereby the number of Shares is calculated by dividing the value of the Claim by the [lower of (i) the Fair Value [Note: add definition] of such Shares at the time of the settlement of the Claim; and (ii) the] Subscription Price [Note: add definition]. [Any Shares so transferred to the Investors shall, if they are Ordinary Shares, be re-designated as Series A Shares and each of the parties (other than the Company) hereby irrevocably agrees to approve such re-designation and waives any pre-emption rights on transfer he or his nominees may have pursuant to the Company's articles of association or otherwise so as to enable the transfer of any Shares in the capital of the Company contemplated by this clause 6.10 to proceed free of any such pre-emption rights.] The transfer of the adequate number of Shares (or, where Shares are transferred in partial settlement, the adequate number of Shares together with the adequate cash payment) to the Investors by a relevant Founder shall fully and finally discharge such Founder from any liability for a Claim.] [Note: Authority for re-designation and transfer to be added to New Articles if not all shareholders party to the agreement.]

Limitations on Warranty Claims. The clause 7 Typically, warrantors will seek to limit their liability in respect of a claim, at least: • as to the amount that can be claimed (clause 7.3); and • as to the period of time during which a claim can be brought (clause 7.2). It may be possible to negotiate other limitations (for example, to exclude matters of which the investors have knowledge (either because they have been discovered by due diligence or disclosed), matters which are covered by insurance and to agree who shall have the conduct of claims). These will vary from transaction to transaction and will be a matter for negotiation between the parties. Clause 7.1 This clause is for the investors’ benefit and provides a carve-out from the limitations set out in this clause 6 shall 7. The limitations in clause 7 of the BVCA model investment agreement do not apply to any Claim which is: where claims under the consequence warranties arise as a result of the warrantors’ fraud, dishonesty, wilful concealment or wilful misrepresentation by or on behalf gross negligence. In addition, the warranty relating to the share capital of the Warrantors; or which is a result company (paragraph 1, part 1, schedule 5 of a breach of warranty statements 1.1 and 1.2 (share capitalthe BVCA model investment agreement) and 2.4 the warranty as to the accuracy of the manager’s questionnaires (questionnairesin relation only to his own replies) (paragraph 2.4, part 1, schedule 5 of [part 1 of] schedule 5the BVCA model investment agreement) are carved out of these general limitations. No Claim may be made against the Warrantors unless written notice of such Claim is served on the Warrantors giving reasonable Clause 7.2 This clause sets out details of the Claim by (i) no later than time periods during which warranty claims can be made. The time limit for bringing claims under the date which warranties is six months after the date on which the Company delivers to the Investors the Board delivering board approved audited accounts of the Company for the Financial Year of the Company ending [insert date]; a given year or (ii) two years after the Warranties warranties were last given, whichever is the later. [Note: Generally, the warranties will survive for between 12 and 24 months, but the precise time period included here will be a matter for negotiation between the parties. If there is a second round of investment, consider extending term the time period during which warranty claims may be brought. Also, consider whether any tax, environmental or health and safety warranties should have a longer time period in which to bring claims as it may take longer for second tranche warranties] Failure these types of issue (such as the statutory entitlement of HM Revenue & Customs to re-open assessments for a period of up to six years after the end of a company’s accounting period and soil contamination or work- related illnesses) to come to light. The clause also provides that "reasonable details" of a claim should be given to the warrantors but that failure to give such reasonable details of any Claims shall should not prevent the Investors investors from proceeding with any Claim otherwise made properly under this agreementa claim. The aggregate liability of the Warrantors in respect of all and any Claims shall be limited to: in the case of the CompanyConsider whether "reasonable details" is sufficient, an amount equal alternative would be to the aggregate amount subscribed by the Investors pursuant to this agreement; provide "full and in the case of each of the Founders, £[ ] [Note: insert amount] [together with the proper and reasonable costs of recovery in respect of any Claim incurred by or on behalf of the Investors.] The Warrantors shall not be liable in respect of any Claim unless the aggregate liability for all Claims exceeds £ [Note: insert amount], in which case the Warrantors shall be liable for the entire amount and not merely the excess. [In calculating liability for Claims for the purposes of clause 6.4 above, any Claim which is less than £ (excluding interest, costs and expenses) shall be disregarded. For these purposes, a number of Claims arising out of the same or similar subject matter, facts, events or circumstances shall be aggregated and form a single Claim.] No liability of the Warrantors in respect of any breach of any Warranty shall arise: if such breach occurs by reason of any matter which would not have arisen but for the coming into force of any legislation not in force at the Completion Date or by reason of any change to HMRC’s practice occurring after the Completion Date; to the extent that specific allowance, provision or reserve has been made in the Accounts or in the Management Accounts in respect of the matter to which such liability relates; to the extent that such breach or claim arises as a result of any change in the accounting bases or policies in accordance with which the Company values its assets or calculate its liabilities or any other change in accounting practice from the treatment or application of the same used in preparing the Accounts (save to the extent that such changes are required to correct errors or because relevant generally accepted accounting principles have not been complied with). The Investors shall be entitled to make a Claim in respect of liability which is contingent or unascertained provided that written notice of the Claim (giving as far as practical the amount and specific" details of the Claim) is given to the Warrantors before the expiry of the relevant periods specified in clause 6.2. The Warrantors shall not be liable for any Claim if the alleged breach which is the subject of the Claim is capable of remedy and is remedied to the reasonable satisfaction of the Investors by the Warrantors within 30 days of the date on which the notice in clause 6.2 is received by the Warrantors and no Investor suffers any losses in connection with the alleged breach. Nothing in this agreement shall prejudice each Investor’s duty under common law to mitigate any loss or liability which is the subject of a Claim. [At the option of each Founder but at all times subject to Investor Majority Consent, any liability in respect of any Claims may be settled (in whole or in part) in Shares held by the relevant Founder, whereby the number of Shares is calculated by dividing the value of the Claim by the [lower of (i) the Fair Value [Note: add definition] of such Shares at the time of the settlement of the Claim; and (ii) the] Subscription Price [Note: add definition]. [Any Shares so transferred to the Investors shall, if they are Ordinary Shares, be re-designated as Series A Shares and each of the parties (other than the Company) hereby irrevocably agrees to approve such re-designation and waives any pre-emption rights on transfer he or his nominees may have pursuant to the Company's articles of association or otherwise so as to enable the transfer of any Shares in the capital of the Company contemplated by this clause 6.10 to proceed free of any such pre-emption rightsclaim.] The transfer of the adequate number of Shares (or, where Shares are transferred in partial settlement, the adequate number of Shares together with the adequate cash payment) to the Investors by a relevant Founder shall fully and finally discharge such Founder from any liability for a Claim.] [Note: Authority for re-designation and transfer to be added to New Articles if not all shareholders party to the agreement.]

Limitations on Warranty Claims. The limitations set out in this clause 6 7 shall not apply to any Claim which is: the consequence of fraud, dishonesty, wilful concealment or wilful misrepresentation by or on behalf of the Warrantors; or which is a result of a breach of warranty statements 1.1 and 1.2 (share capital) and 2.4 (questionnaires) of [part 1 of] schedule 5. No Claim may be made against the Warrantors unless written notice of such Claim is served on the Warrantors giving reasonable details of the Claim by (i) no later than the date which is six months after the date on which the Company delivers delivery to the Investors of the Board approved audited accounts of the Company for the Financial Year of the Company ending [insert date]; or (ii) two years after the Warranties were last given, whichever is the later. [Note: consider extending term for second tranche warranties] Failure to give reasonable details of any Claims shall not prevent the Investors from proceeding with any Claim otherwise made properly under this agreement. The aggregate liability of the Warrantors in respect of all and any Claims shall be limited to: in the case of the Company, an amount equal to the aggregate amount subscribed by the Investors pursuant to this agreement; and in the case of each of the Founders, £[ ] [Note: insert amount] [together with the proper and reasonable costs of recovery in respect of any Claim incurred by or on behalf of the Investors.] The Warrantors shall not be liable in respect of any Claim unless the aggregate liability for all Claims exceeds £ [Note: insert amount], in which case the Warrantors shall be liable for the entire amount and not merely the excess. [In calculating liability for Claims for the purposes of clause 6.4 7.4 above, any Claim which is less than £ (excluding interest, costs and expenses) shall be disregarded. For these purposes, a number of Claims arising out of the same or similar subject matter, facts, events or circumstances shall be aggregated and form a single Claim.] No liability of the Warrantors in respect of any breach of any Warranty shall arise: if such breach occurs by reason of any matter which would not have arisen but for the coming into force of any legislation not in force at the Completion Date or by reason of any change to HMRC’s HM Revenue & Customs' practice occurring after the Completion Date; to the extent that specific allowance, provision or reserve has been made in the Accounts or in the Management Accounts in respect of the matter to which such liability relates; to the extent that such breach or claim arises as a result of any change in the accounting bases or policies in accordance with which the Company values its assets or calculate its liabilities or any other change in accounting practice from the treatment or application of the same used in preparing the Accounts (save to the extent that such changes are required to correct errors or because relevant generally accepted accounting principles have not been complied with). The Investors shall be entitled to make a Claim in respect of liability which is contingent or unascertained provided that written notice of the Claim (giving as far as practical the amount and details of the Claim) is given to the Warrantors before the expiry of the relevant periods specified in clause 6.27.2. The Warrantors shall not be liable for any Claim if the alleged breach which is the subject of the Claim is capable of remedy and is remedied to the reasonable satisfaction of the Investors by the Warrantors within 30 days of the date on which the notice in clause 6.2 7.2 above is received by the Warrantors and no Investor suffers any losses in connection with the alleged breachWarrantors. Nothing in this agreement shall prejudice each Investor’s duty under common law to mitigate any loss or liability which is the subject of a Claim. [At the option of each Founder but at all times subject to Investor Majority Consent, any liability in respect of any Claims may be settled (in whole or in part) in Shares held by the relevant Founder, whereby the number of Shares is calculated by dividing the value of the Claim by the [lower of (i) the Fair Value [Note: add definition] of such Shares at the time of the settlement of the Claim; and (ii) the] Subscription Price [Note: add definition]. [Any Shares so transferred to the Investors shall, if they are Ordinary Shares, be re-designated as Series A Shares and each of the parties (other than the Company) hereby irrevocably agrees to approve such re-designation and waives any pre-emption rights on transfer he or his nominees may have pursuant to the Company's articles of association or otherwise so as to enable the transfer of any Shares in the capital of the Company contemplated by this clause 6.10 7.10 to proceed free of any such pre-emption rights.] The transfer of the adequate number of Shares (or, where Shares are transferred in partial settlement, the adequate number of Shares together with the adequate cash payment) to the Investors by a relevant Founder shall fully and finally discharge such Founder from any liability for a Claim.] [Note: Authority for re-designation and transfer to be added to New Articles if not all shareholders party to the agreement.]

Limitations on Warranty Claims. The clause 6 Typically, warrantors will seek to limit their liability in respect of a claim, at least: as to the amount that can be claimed (clause 6.4); and as to the period of time during which a claim can be brought (clause 6.3). It may be possible to negotiate other limitations (for example, to exclude matters of which the investors have knowledge (either because they have been discovered by due diligence or disclosed), matters which are covered by insurance and to agree who shall have the conduct of claims). These will vary from transaction to transaction and will be a matter for negotiation between the parties. Clause 6.1 This clause is for the investors' benefit and provides a carve-out from the limitations set out in this clause 6. The limitations in clause 6 shall of the seed investment agreement do not apply to any Claim which is: where claims under the consequence warranties arise as a result of the warrantors' fraud, dishonesty, wilful concealment or wilful misrepresentation by or on behalf gross negligence. In addition, the warranty relating to the share capital of the Warrantors; or which company (paragraph 1, schedule 5 of the seed investment agreement) is a result carved out of a breach of warranty statements 1.1 and 1.2 (share capital) and 2.4 (questionnaires) of [part 1 of] schedule 5these general limitations. No Claim may be made against the Warrantors unless written notice of such Claim is served on the Warrantors giving reasonable Clause 6.3 This clause sets out details of the Claim by (i) no later than time periods during which warranty claims can be made. The time limit for bringing claims under the date which warranties is six months after the date on which the Company delivers to the Investors the Board approved audited accounts of the Company for the Financial Year of the Company ending [insert date]; or (ii) two years after the Warranties warranties were last given, whichever is the later. [Note: Generally, the warranties will survive for between 12 and 24 months, but the precise time period included here will be a matter for negotiation between the parties. Also, consider extending term whether any tax, environmental or health and safety warranties should have a longer time period in which to bring claims as it may take longer for second tranche warranties] Failure these types of issue (such as the statutory entitlement of HM Revenue & Customs to give reasonable details re-open assessments for a period of any Claims shall not prevent up to six years after the Investors from proceeding with any Claim otherwise made properly under this agreementend of a company's accounting period and soil contamination or work-related illnesses) to come to light. The aggregate Clause 6.4 This clause sets out the total liability for the company. Generally, the company's liability is capped at the amount of the Warrantors investment, although this may, in respect some circumstances, be open to negotiation. Clause 6.4 This clause sets out a de minimis limit below which warranty claims cannot be brought. Once the aggregate of all claims reaches this amount, the claims may be made, and any Claims shall be limited to: in the case of the Company, an amount equal to the aggregate amount subscribed by the Investors pursuant to this agreement; and in the case of each of the Founders, £[ ] [Note: insert amount] [together with the proper and reasonable costs of recovery in respect of any Claim incurred by or on behalf of the Investors.] The Warrantors shall not be liable in respect of any Claim unless the aggregate liability for all Claims exceeds £ [Note: insert amount], in which case the Warrantors shall be company is collectively liable for the entire amount and not merely of those claims rather than just the excessamount by which they exceed the amount set out in this clause. [In calculating liability for Claims for Consider whether a separate (or no) de minimis limit should apply to claims made under the purposes of tax warranties. Employee share options: clause 6.4 above, any Claim which 7 An employee share option plan (the "Share Option Plan") is less than £ (excluding interest, costs and expenses) shall be disregarded. For these purposes, a number of Claims arising out plan that reserves or allocates a percentage of the same or similar subject matter, facts, events or circumstances shall be aggregated and form a single Claim.] No liability shares of the Warrantors in respect of any breach of any Warranty shall arise: if such breach occurs by reason of any matter which would not have arisen but company for the coming into force of any legislation not in force at the Completion Date or by reason of any change to HMRC’s practice occurring after the Completion Date; share option grants to the extent that specific allowance, provision or reserve has been made company's current and future employees. Share option schemes are commonly implemented following the investment in order to incentivise the company's employees and/or management by allowing them to share in the Accounts or financial rewards resulting from the success of the company. This clause may not be appropriate to all transactions. It provides that, within a specified period from completion, the company will adopt a share option plan in a form that is acceptable to the investor majority. Typically investors will require that approximately 10% of a company' share capital is reserved in a Share Option Plan. The company should then be able to issue shares under the plan without requiring further investor approval. Note that the investors will generally seek to exclude any founders and managers with substantial shareholdings in the Management Accounts in respect of the matter to which such liability relates; to the extent that such breach or claim arises as a result of any change company from participating in the accounting bases or policies in accordance with which Share Option Plan. The Board and the Company values its assets or calculate its liabilities or any other change in accounting practice from Investor Director: clause 8 The objective of this clause is to ensure that the treatment or application of investors are kept properly informed about the same used in preparing company's business. Clause 8.1 This clause identifies the Accounts board immediately following completion as the managers and the investor director (save to the extent that such changes are required to correct errors or because relevant generally accepted accounting principles have not been complied withif appointed). The Investors clause also requires that board meetings are held at regular intervals. The number of board meetings and their frequency will depend on the corporate governance of each company and will be a matter for negotiation between the parties. Clause 8.2 The investors will require a company to have an appropriate board of directors, including non-executive directors. It is common for the investors to seek the right to appoint a director to the board. This clause provides that for so long as the investors hold a specified percentage of shares in the company, the investors shall have the right to appoint whomever the investor majority choose as an investor director. Consider whether some form of consultation should take place with the management team before the investor director is appointed. Under the Act, a director is required to act in a way he considers, in good faith, would be entitled most likely to make a Claim in respect of liability which is contingent or unascertained provided that written notice promote the success of the Claim Company for the benefit of its members as a whole, rather than to act as a representative of (giving and in the interests of) the funds that the director manages. In order to avoid conflicts of interest, venture capitalists often separate the investment decisions for the funds invested in the companies from the investor director's decisions. This is often achieved by having another investment executive representing the funds' interests when dealing with the company with respect to those matters that require investor consent (as far as practical opposed to investor director consent). Under the amount and details Act section 175 codifies that a director must avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the Claimcompany. This applies to conflicts arising on or after 1 October 2008. There are two main categories of interest which an investor director may have with the potential to conflict with the interests of the company, namely: (1) is given his duties to the Warrantors before investor who nominated him (and any personal investment interest he may have in the expiry of the relevant periods specified in clause 6.2. The Warrantors shall not be liable for any Claim if the alleged breach which is the subject of the Claim is capable of remedy and is remedied to the reasonable satisfaction of the Investors by the Warrantors within 30 days of the date on which the notice in clause 6.2 is received by the Warrantors and no Investor suffers any losses in connection with the alleged breach. Nothing in this agreement shall prejudice each Investor’s duty under common law to mitigate any loss or liability which is the subject of a Claim. [At the option of each Founder but at all times subject to Investor Majority Consent, any liability in respect of any Claims may be settled (in whole or in part) in Shares held by the relevant Founder, whereby the number of Shares is calculated by dividing the value of the Claim by the [lower of (i) the Fair Value [Note: add definition] of such Shares at the time of the settlement of the Claiminvestment); and (ii2) the] Subscription Price [Note: add definition]. [Any Shares so transferred his duties to any competing portfolio/investee companies of which he is a director, in which the Investors shall, if they are Ordinary Shares, be re-designated as Series A Shares and each of the parties (other than the Company) hereby irrevocably agrees to approve such re-designation and waives any pre-emption rights on transfer he investor or his nominees may its associates have pursuant to the Company's articles of association or otherwise so as to enable the transfer of any Shares in the capital of the Company contemplated by this clause 6.10 to proceed free of any such pre-emption rightsinterests.] The transfer of the adequate number of Shares (or, where Shares are transferred in partial settlement, the adequate number of Shares together with the adequate cash payment) to the Investors by a relevant Founder shall fully and finally discharge such Founder from any liability for a Claim.] [Note: Authority for re-designation and transfer to be added to New Articles if not all shareholders party to the agreement.]