Right of offset clause samples

The Company operates several notional cash pools around the world with different banks. In the notional cash pooling arrangements, each subsidiary company within the cash pool has its own bank account, but each is part of a wider cash pooling agreement with the bank where the bank has a legal right of offset. The notional cash pools have entities with positive cash positions and other entities with overdrafts, and the Company manages these pooling arrangements on a net basis. For balance sheet presentation purposes, the Company has historically netted the cash and overdraft positions in each cash pool. This reduces the cash and overdraft position reflected on the Company’s balance sheet, while resulting in the same net cash position being reflected. This offset and the amount involved was previously disclosed in note 27 to the Company’s financial statements for the fiscal year ended December31, 2019. However, the Company has since determined that it does not satisfy the conditions in IAS 32 Financial Instruments: Presentation that are necessary to present its cash and overdraft positions on a net basis in its balance sheets.

The Company’s cash pooling agreements with each bank provide each bank with a legal right of offset. In March 2016, the IFRS Interpretations Committee issued a final agenda decision on IAS 32, Offsetting and cash-pooling arrangements. This clarified that “to the extent to which a Company did not expect to settle its subsidiaries’ period-end account balances on a net basis, it would not be appropriate to assert that it had the intention to settle the entire period-end balances on a net basis at the reporting date.” The Company did not settle its subsidiaries’ bank account balances on a net basis at the end of the financial reporting periods to be restated. As a result, the offsetting adjustments made on the balance sheet should not have been made, and the cash and overdrafts should have been disclosed on a gross basis to comply with the IFRS interpretation.

4. Right of Offset. Notwithstanding anything to the contrary herein or in any of the other Transaction Documents, in the event (i) of the occurrence of any Event of Default (as defined in the Company Note) under the Company Note or any other note issued by Company in connection with the Purchase Agreement or the occurrence of any event that would be considered an Event of Default under the Company Note but for the applicable cure period, (ii) of a breach of any material term, condition, representation, warranty, covenant or obligation of Company under any Transaction Document, or (iii) Company sells, transfers, assigns, pledges or hypothecates this Note, or attempts to do any of the foregoing, whether voluntarily or involuntarily, Investor shall be entitled to deduct and offset any amount owing by Company under the Company Note from any amount owed by Investor under this Note, in which event the OID allocated to the Subsequent Tranche and any increase in the Outstanding Balance of the Subsequent Tranche upon exchange of the Warrant shall be forgiven on a pro rata basis (the “Investor Offset Right”). Investor may only elect to exercise the Investor Offset Right by delivering to Company an offset notice to Company. In the event that Investor’s exercise of the Investor Offset Right under this Section 4 results in the full satisfaction of Investor’s obligations under this Note, then Company shall return this Note to Investor for cancellation or, in the event this Note has been lost, stolen or destroyed, Company shall provide Investor with a lost note affidavit in a form reasonably acceptable to Investor.