Warranty insurance, survival and the indemnity cap
How is a platform investor compensated for a breach of warranty?
Macquarie agreed to try to buy warranty and indemnity insurance at its own cost, with a premium cap of $3m. General warranties survive 18 months and fundamental ones three years. Claims must pass a deductible and are capped, except for fundamental warranties and fraud, and materiality qualifiers are read out when deciding breach and loss. Losses go first to the insurance policy, and only then to Applied Digital or the platform. For in-house teams: on a platform deal the policy carries most of the warranty risk, so the sponsor’s own exposure turns on the deductible, the cap and the exclusions.
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What the filed contracts say
Contract
What the filed wording says
Macquarie–Applied Digital unit purchase agreement
The investor buys warranty and indemnity insurance at its own cost, with a premium cap of $3m.
Macquarie–Applied Digital unit purchase agreement
General warranties survive 18 months and fundamental ones three years.
Macquarie–Applied Digital unit purchase agreement
Claims must pass a deductible and are capped, except for fundamental warranties and fraud.
Macquarie–Applied Digital unit purchase agreement
Materiality qualifiers are read out when deciding breach and loss.
Macquarie–Applied Digital unit purchase agreement
Losses go first to the insurance policy, then to the sponsor or the platform.
The filed wording
5.11 R&W Policy. Prior to the Closing, the Purchaser shall use reasonable best efforts to obtain a stand-alone representation and warranty insurance policy (the “R&W Policy”) that insures, in accordance with its terms, the Purchaser and its Affiliates and Representatives (as applicable) for Losses deriving from a breach, or any failure to be true, of the representations and warranties given by the Issuer and APLD, as applicable, to the Purchaser under this Agreement and, if available, the APLD Closing Certificates or the Issuer Closing Certificates; provided, that, in no event shall the Purchaser be required to expend for the R&W Policy an aggregate premium in excess of Three Million Dollars ($3,000,000).
Macquarie preferred equity in Applied Digital’s HPC platform: amended and restated unit purchase agreement (up to $450m), section 5.11 · Applied Digital 8-K, Exhibit 10.1
Each extract is quoted from the contract as filed with the SEC, checked against the filed text when it was added; “…” marks words left out. Filers redact commercial terms, so a [***] or [*] is the filer's, not ours. The summaries describe the wording, not how a court would read it, and each contract's defined terms and other clauses can change the effect. General information drawn from public filings. It is not legal advice on any transaction, and using this page does not create a lawyer-client relationship. Views are personal.
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