guidance note to release and reliance letters - lma.eu.com · letter appended to the accountancy...

LMA.RRLUG.01 26 March 2015

For the avoidance of doubt, this Guidance Note and any provisions contained or referred to in it are in a non-binding,

recommended form. The intention is for them to be used as a starting point for negotiation only. Individual parties are free to

depart from this Guidance Note and those provisions and should always satisfy themselves of the regulatory implications of

their use.

GUIDANCE NOTE

TO

RELEASE AND RELIANCE LETTERS

FOR LEVERAGED ACQUISITION FINANCE TRANSACTIONS

The Loan Market Association ("LMA") consents to the use, reproduction and transmission of this document by members

of the Loan Market Association for the preparation and documentation of agreements relating to transactions or potential

transactions in the loan markets. This document may be reproduced and transmitted to non-members of the Loan Market

Association in hard copy only. The LMA does not consent to the use, reproduction or transmission of this document for

any other purpose, in any other manner or by any other person and expressly reserves all other rights.

Loan Market Association. All rights reserved.


DISCLAIMER

This Guidance Note has been prepared for the Loan Market Association ("LMA") in

connection with the form of release and reliance letters commonly used as part of

leveraged acquisition finance transactions. Whilst every care has been taken in the

preparation of this Guidance Note, neither the LMA nor Clifford Chance LLP gives any

representation or warranty as to the suitability of any of the options set out in this

Guidance Note for any particular transaction or at all, or that the options set out in this

Guidance Note are exhaustive, or as to the accuracy or completeness of this Guidance

Note.

This Guidance Note provides limited guidance only on the possible options available to

LMA members to negotiate forms of release and reliance letters as part of leveraged

acquisition finance transactions. It is not intended to be a comprehensive analysis of any

form of release and reliance letters nor to explain exactly how each provision operates.

Any person considering employing any of the guidance set out in this Guidance Note or

otherwise must obtain and rely upon its own legal advice as to the suitability and validity

of such guidance and may not rely upon the contents of this Guidance Note. Neither the

LMA nor Clifford Chance LLP can be liable for any losses suffered as a result of

adopting any of the recommendations set out in this Guidance Note or arising from the

presence of any errors or omissions in this Guidance Note.


Introduction to the Initiative

At the request of a number of LMA members, the LMA Board agreed that the LMA should

undertake a project to investigate the possibility of streamlining the process of negotiating

release and reliance letters with report providers providing due diligence reports in relation to

acquisition finance transactions.

It was felt that, as the market had evolved to accommodate a proliferation of institutional

investors and widespread primary and secondary syndications, the terms of the standard form

release and reliance letters they encountered frequently failed to reflect the reality of the

European syndicated loan market. There were also concerns that the often protracted

negotiation process potentially delayed lenders' ability to gain access to due diligence reports

in competitive bid situations.

The LMA has sought to address this issue in three ways:

(i) by forming a committee of LMA members (each of whom has been regularly engaged

in the negotiation of release and reliance letters in the European syndicated loan

market) as a forum for discussion of the main areas of debate encountered in this

context and discussing these areas of debate with certain accountancy firms as the

providers of financial due diligence reports on an individual and non-attributable basis;

(ii) by drafting standard form English law release and reliance letters (attached here at

Schedule 1 and Schedule 2, respectively) for use with those report providers who do

not routinely use their own prescribed forms; and

(iii) by drafting this Guidance Note, which sets out the main areas of debate, likely points

of negotiation and potential negotiated positions.

Although no standard form release and reliance letters have been agreed between the LMA

and such report providers as a result, these discussions have been useful in allowing the LMA

to explain the way in which the European syndicated loan market works, to explain the

lenders' perspective in respect of the main areas of debate, to explore likely points of

negotiation and to suggest potential negotiated positions. It is hoped that, when reviewing the

various report providers' prescribed forms in the future, LMA members will find that they

now take into account to a significant degree the workings of the European syndicated loan

market and the suggestions set out in this Guidance Note.

As indicated in (ii) above, the standard form English law release and reliance letters have been

drafted for use where a report provider does not routinely use its own prescribed form. It

should be noted that these are not in any way intended to replace the prescribed forms which

may currently be used by a particular report provider and in any event only represent a non-

binding recommended form which should only act as a starting point for negotiations.

It should further be noted that many of the practical applications of the considerations detailed

in this note have been included on the basis of discussions that LMA members commonly


have with accountancy firms, but it is hoped that most aspects will be universally applicable

whatever the nature of the underlying due diligence report.

Main Areas for Debate

The committee identified the following ten areas as being the main areas for debate in

negotiation of release and reliance letters with report providers:

1. Disclosure

2. Reliance

3. Liability caps

4. Proportionality and joinder of parties

5. Indemnities

6. Limitation periods

7. Limitations on parties which may commence a claim

8. Application of standard form terms and conditions

9. Carve outs from limitation of liability

10. Marketing

The Scope of this Guidance Note

This Guidance Note addresses each of the main areas for debate in turn, setting out (in the

following format):

1.1 the likely starting point from a lender perspective;

1.1.1 likely points of negotiation; and

(a) potential negotiated positions.

These starting points, likely points of negotiation and potential negotiated positions are not

exhaustive, but seek to address the principal points which may arise with respect to these

areas. LMA members should note that the points raised here represent non-binding

suggestions as to the main areas of debate, the principal issues that may arise and, where

possible, a potential negotiated position that may be reached. LMA members and report

providers are free to depart from the guidance contained in this Guidance Note and should

satisfy themselves of, and establish their own views on, the suitability of the suggestions from

their perspective. In particular, the relative importance of the issues presented will need to be

considered by LMA members in the context of each transaction on a case-by-case basis.

It should be noted that the initiative has to date only focused on English law release and

reliance letters. However it is hoped that, in time, in the same way as the LMA

recommended form documents (or variations on them) have come to be used in many

jurisdictions, this Guidance Note will come to be of more general application, albeit with any

necessary modifications to reflect different requirements of the underlying governing law of

the release or reliance letter in question.


It should also be noted that the initiative has focused solely on release and reliance letters used

in the leveraged finance and acquisition finance market. Increasing degrees of modification

and complexity may be required for other markets, such as the securitisation, real estate

finance and capital markets where, for example, disclosure to rating agencies may be

required.

Finally it should be noted that the LMA has not engaged in debate on the terms of auditors'

release letters, the terms of which are often incorporated into prescribed form release and

reliance letters used by accountancy firms in connection with financial due diligence reports.

This will be relevant where, in order to prepare their report, the accountancy firm has used

information from an auditor's report on the Target. It is often the case that a potential

beneficiary of the accountancy firm's report will have to sign the form of auditor's release

letter appended to the accountancy firm's own release and reliance letters, thereby giving

access to the potential beneficiary in respect of the auditor's information. LMA members will

wish to exercise additional scrutiny in this case to ensure that the terms of the auditor's release

letter (if applicable) are acceptable to them.

Save where otherwise indicated, capitalised terms used in this Guidance Note have the same

meaning as given to them in the LMA Senior Multicurrency Term and Revolving Facilities

Agreement for Leveraged Acquisition Finance Transactions (Senior/Mezzanine).

Throughout this Guidance Note the terms "release letter" and "reliance letter" are used.

Certain report providers may use other terms. A release letter may be referred to as a "hold

harmless letter" or a "no duty access agreement". A reliance letter may be referred to as a

"duty of care letter", "assumption of duty letter" or "beneficiary access agreement".

References to a release letter are intended to refer to a letter which allows access to a due

diligence report on a non-reliance basis. References to a reliance letter are intended to refer

to a letter which allows reliance on a due diligence report.


1. Disclosure ........................................................................................... 1

2. Reliance .............................................................................................. 8

3. Liability Caps ...................................................................................... 12

4. Proportionality And Joinder Of Parties ........................................................ 13

5. Indemnities ......................................................................................... 15

6. Limitation Periods ................................................................................. 16

7. Limitations On Parties Which May Commence A Claim ................................... 17

8. Application Of Standard Form Terms And Conditions ...................................... 18

9. Carve Outs From Limitation Of Liability...................................................... 19

10. Marketing ........................................................................................... 20

SCHEDULE 1 LMA TEMPLATE RELEASE LETTER .................................................. 21

SCHEDULE 2 LMA TEMPLATE RELIANCE LETTER ................................................. 27

LMA.RRLUG.01 - 1 - 26 March 2015

1. DISCLOSURE

(i) Addressees

1.1 In the context of a syndicated loan facility, it is anticipated that release and reliance

letters will routinely be addressed to the Arranger and the Agent (for and on behalf of

Primary Syndicate Members (as defined in paragraph ‎2.3 below)) and potentially also

to the Security Agent (the "Addressees").

Paragraph 1.1 above is predicated on the basis that an entity has been appointed to the

role of Agent or Arranger, which is the preferable position at the time that release and

reliance letters are signed up. However, if this is not the case, then institutions should

be addressed by name. It should be noted that this reduces flexibility in the event that

the roles of arranger or agent are transferred. Therefore it may be desirable for a

further release or reliance letter to be signed up addressing these capacities as and

when they are appointed.

(ii) Disclosure by Addressees (other than to potential Primary Syndicate Members)

1.2 Disclosure should be permitted to Affiliates of the Addressees and to the Addressees'

and the Affiliates' respective officers, directors, employees and professional advisers

on a non-reliance basis.

1.3 Disclosure to Affiliates of the Addressees and to the Addressees' and the Affiliates'

respective officers, directors, employees and professional advisers should be permitted

on a non-reliance basis without any requirement for a separate written acknowledgment

or agreement from the recipient of the terms on which the report provider allows

disclosure to be made.

1.3.1 Report providers may express concern about disclosure to Affiliates and

professional advisers without the creation of any direct contractual relationship

between the report provider and such recipient.

(a) In relation to disclosure to Affiliates, it is likely to be unwieldy to

require a direct contractual relationship to be created with each Affiliate

of an Addressee. Depending on the bank group involved, due diligence

reports may pass freely from one Affiliate to another, for example where

the relationship, credit, arranging, underwriting, agency and/or security

trustee functions are performed by different legal entities. A potential

compromise (if acceptable to a particular LMA member) may be to

allow free disclosure to Affiliates, but on the basis that the disclosing

entity accepts responsibility for any breach by the Affiliate of the terms

on which disclosure is made.

(b) In relation to disclosure to professional advisers, it should not be

necessary to require direct contractual relationships between the report

provider and advisers who are bound by a professional duty of

confidentiality, for example legal advisers. However, in some


circumstances, for example where a due diligence report contains

sensitive information in relation to a potential restructuring, and the

provider of such report is an adviser who is not bound by a professional

duty of confidentiality, for example a restructuring advisory firm, a

direct contractual relationship with that report provider may be

appropriate. Alternatively, LMA members may prefer to replicate the

terms of the LMA standard form of Confidentiality and Front Running

Letter for Primary Syndication, which provides that where a professional

adviser is not subject to professional obligations to maintain the

confidentiality of the information or otherwise bound by requirements of

confidentiality in relation to the information, that professional adviser

should be informed in writing of the confidential nature of the

information and, if applicable, the price sensitive nature of some or all

of the information.

1.3.2 Report providers may express concern about disclosure to Affiliates where

those Affiliates represent investment banking or private equity divisions of the

Addressee.

(a) This will need to be considered by the Addressees on a case by case

basis, however in many cases it is likely to be unacceptable to prevent

disclosure to investment banking divisions as this is often the division in

which the individuals working on the relevant financing are employed,

or from which they are drawn. The same may not apply to private equity

divisions, but this should be considered against the individual structures

in place at each Addressees' institution. In addition, release and reliance

letters are generally predicated on the basis that the information

disclosed will only be used for a specific purpose and the main area for

concern from a report provider's perspective should be covered by the

existence of ethical barriers which will almost certainly be in place

between the individuals who justifiably require access and those of

concern to the relevant report provider who may seek to use the report

for other ends.

1.3.3 Report providers may seek to make the Addressees responsible (by way of

indemnity or otherwise) for the actions of third parties, such as professional

advisers, or require the Addressees to ensure that professional advisers

comply with the terms of the reliance letter.

(a) It would in all probability be unacceptable to Addressees to accept

responsibility for the actions of third parties in circumstances where they

cannot patrol and enforce the terms of the relevant release letter.

1.4 Whilst the report provider will require its report to be kept confidential, disclosure

should be permitted to the extent required by law or regulation, where required or

requested by judicial, governmental, supervisory or regulatory body or where required


by the rules of any stock exchange on which the shares or other securities of that

recipient (or its Affiliates) are listed.

1.4.1 Report providers may request prior notification of any such disclosure.

(a) Clearly this will be difficult in many situations, for example where

documents are disclosed pursuant to a subpoena, the terms of which

must be kept confidential, or where no prior notice is given of a

regulatory investigation. It may be appropriate to agree to notify the

report provider once disclosure has been made, unless disclosure is made

to the recipient during the ordinary course of the recipient's regulatory

or supervisory function. In any event, whether notification is to be

made prior to or following disclosure, Addressees should seek to qualify

the requirement to notify so that the obligation only arises to the extent

such notification is permitted by law and is reasonably practicable.

1.4.2 Report providers may also request that the Addressee consults or liaises with

the report provider prior to disclosure.

(a) Again, this may be difficult for Addressees to comply with and, given

the potential source of the requirement or request, Addressees may wish

to preserve the flexibility to comply as they see fit without being fettered

by the requirement to consult or liaise with the report provider.

(iii) Disclosure by Addressees to potential Primary Syndicate Members

1.5 Disclosure should be permitted without the need for potential Primary Syndicate

Members to sign separate documentation, such as individual release or hold harmless

letters. This is especially important for sizeable deals, where there may be a

significant number of potential Primary Syndicate Members and where it is easiest to

use an electronic data site to disclose the relevant due diligence reports.

1.6 Disclosure should be on the basis that potential Primary Syndicate Members cannot

rely on the material disclosed, and that the relevant report provider has no liability to

them, unless and until they become an actual Primary Syndicate Member.

1.6.1 The report provider may require the Addressee which is disclosing its due

diligence report to a potential Primary Syndicate Member to take reasonable

steps to notify the potential Primary Syndicate Members of the confidential

nature of the information contained in the due diligence report, the terms of

the relevant release or reliance letter and the fact that information is being

made available on a non-reliance basis.

(a) Where a due diligence report is being disclosed on an electronic data

site, this may be achieved by use of an access or "splash" page setting

out such notification, and requiring the recipient to use a click through

acceptance mechanism, indicating its acceptance of those terms before it

gains access to the due diligence report. The individual indicating


acceptance will often be required to confirm that he or she is authorised

on behalf of the legal entity he or she represents to accept such terms.

Alternatively a confidentiality agreement (or another agreement

replicating the terms of the release or reliance letter) may be used for

this purpose, although this is frequently regarded as being less

appropriate than an electronic data site as given the number of potential

due diligence reports (requiring different notifications) and the timing

differences that may arise it is, although technically possible, unlikely to

be practicable for the report provider to be a beneficiary of the

confidentiality agreement (or the relevant section thereof).

1.7 Disclosure should be permitted to potential Primary Syndicate Members without any

requirement for the report provider to give its prior consent, either generally or to the

identity of the recipient.

1.7.1 The report provider may in its terms of engagement with its principal (whether

the principal be a private equity sponsor in a leveraged finance transaction or a

corporate acquirer in a corporate acquisition financing) require the ability to

consent to the identity of the lead or arranging bank.

(a) The failure to grant such consent to the identity of the lead or arranging

bank would primarily be an issue for the principal, as it would

potentially frustrate the principal's debt financing plans (accepting that

the provision of due diligence reports and related reliance letters are

likely to be a condition precedent to the availability of such debt

financing).

Any requirement for consent to the identity of potential Primary

Syndicate Members would be a significant issue for the lead or arranging

bank, in particular where the debt is being underwritten. Whether

assignments and transfers of debt under the Facilities Agreement should

be permitted without any requirement for borrower consent is often a

key point in negotiation of the Facilities Agreement. To extend any such

right of veto to a report provider is unlikely to be acceptable to the lead

or arranging lender.

(iv) Disclosure of due diligence reports in the secondary debt trading market

1.8 Given that joint arrangers and underwriters may in some circumstances prefer to close

primary syndication early or forego primary syndication altogether, thus being able to

break free of front running provisions and manage their balance sheets independently,

the ability to disclose due diligence reports in the secondary debt trading market can be

useful. More generally, some secondary debt trading desks have expressed a desire to

disclose to prospective participants in the secondary debt trading market the same

information package as that given to prospective participants in primary syndication.


1.8.1 Report providers may then be concerned that they risk liability to a

significantly greater number of recipients (notwithstanding that their overall

cap on liability would continue to apply).

(a) Where the joint arrangers and underwriters close primary syndication

early or forego primary syndication altogether, the issue may simply be

a timing issue, in that the initial months of secondary syndication

effectively replace primary syndication. In these circumstances the

Addressees may be prepared to limit reliance to entities which become

lenders of record within a certain number of months of the deal going

free to trade.

(b) In some circumstances the Addressees may only require the ability to

disclose the due diligence reports to prospective purchasers in the

secondary debt trading market on a non-reliance basis.

1.8.2 Report providers may be concerned that they are obliged to update the

relevant due diligence report prior to any such distribution in the secondary

debt trading market, or that there is an implicit suggestion they have done so.

(a) Where the Addressees do not require an update, the report provider will

be able to take comfort from its terms of release and/or reliance, and

perhaps also from wording on the face of the due diligence report, which

makes it clear that the information in the due diligence report only

relates to the date on which the due diligence report is issued or to the

date on which the information is otherwise stated. The report provider

may wish to include explicit language to the effect that, for example, the

due diligence report was prepared for its principal, refers to facts which

existed at the date of issue of the due diligence report and has not been

updated by reference to audit papers, tax papers or any subsequent

work.

(v) Disclosure of due diligence reports to prospective sub-participants

1.9 In this case express provision for disclosure to prospective sub-participants would need

to be incorporated. The concerns raised on the part of report providers may be similar

to those referred to in paragraph ‎1.8 above.

(vi) Updated/supplemental due diligence reports

1.10 Addressees may be concerned that, if the report provider prepares and issues an

updated and/or supplemental due diligence report on the instructions of its principal,

such due diligence report is also disclosed to the Addressees and that no further release

and/or reliance letter is required in respect of the disclosure of such report.

1.10.1 Whilst it is anticipated that most report providers will wish to ensure that an

updated due diligence report can be disclosed to the Addressees (primarily to

ensure that there is no mismatch of information given to the private equity


sponsor / corporate acquirer on one hand and to the debt financing parties on

the other), report providers will want to ensure that they have appropriate

authority from their principal prior to any such disclosure and that they are not

under any obligation to the Addressees with which they cannot comply.

(a) From a timing perspective, the report provider and the Addressees may

be prepared to backstop the date by which the updated and/or

supplemental due diligence report to which they require access is

produced. It may be the case, for example, that the Addressees are less

concerned about provision of an updated and/or supplemental due

diligence report produced after first utilisation of the Facilities or after

close of primary syndication.

(vii) Disclosure pursuant to a release letter prior to agreement of a reliance letter

1.11 It should not be necessary when agreeing the terms of a release letter, pursuant to

which disclosure is made on a non-reliance basis, also to commit to the form of

reliance letter. This has the potential to delay access to the due diligence report at a

critical stage of a competitive bid process, and to require time and resource to be

invested in reviewing and negotiating a reliance letter (and related documents such as

terms of engagement) which may not be required if the bank or financial institution to

whom disclosure is made on a non-reliance basis is not selected as a debt financier for

the acquisition.

1.11.1 The report provider's prescribed form release letter may include an

undertaking to enter into a reliance letter in a prescribed form, which may or

may not be appended to the release letter.

(a) In such circumstances the most appropriate course of action may be to

remove the undertaking, or to amend the undertaking so that it only

requires negotiation of an appended form of reliance letter in good faith

if and when appropriate.

(viii) Return of due diligence reports to report providers where a transaction does not

proceed

1.12 Recipients of a due diligence report will want to consider carefully their obligations (if

any) in this respect.

1.12.1 The report provider may request that any copies of its report are returned to

the report provider or destroyed if the relevant recipient does not participate in

the financing or the acquisition does not proceed.

(a) The starting position is likely to be that such requests should be resisted

on the basis that they are adequately covered by obligations in related

confidentiality undertakings.


(b) If this is not the case, then the recipient may require a written request to

return the information at the relevant time.

(c) Recipients may want to consider including carve outs where recipients

are required to retain a copy of the report by any applicable law, rule or

regulation or by any competent judicial, governmental, supervisory or

regulatory body, by the rules of any stock exchange on which its shares

or other securities or those of its affiliates are listed or in accordance

with internal policy or audit requirements. Recipients should note that

any copies retained would still be subject to confidentiality restrictions.

(d) Recipients may prefer to agree to use reasonable endeavours to destroy,

rather than return, confidential information.

(e) In addition, in relation to any requirement to destroy electronic copies of

reports, recipients may wish to include a carve out so that the obligation

to destroy such copies only applies:

(i) to confidential information that can be immediately retrieved as

part of day to day business (i.e. without any requirement to access

any electronic back-up system); or

(ii) to the extent technically practicable.


2. RELIANCE

2.1 On the assumption that the Addressees sign a reliance letter, reliance by the other

Finance Parties to which the report provider accepts a duty of care should then be

permitted without the need for recipients to sign separate documentation such as

individual reliance letters. The LMA Senior Multicurrency Term and Revolving

Facilities Agreement for Leveraged Acquisition Finance Transactions

(Senior/Mezzanine) specifically provides that the Arranger and the Agent have

authority to accept the terms of reliance letters and engagement letters on behalf of the

other Finance Parties and to bind them accordingly. The relevant clause (Clause 32.19

(Reliance and engagement letters))1 is set out below:

"Reliance and engagement letters

Each Finance Party and Secured Party confirms that each of the Arranger and the

Agent has authority to accept on its behalf (and ratifies the acceptance on its behalf of

any letters or reports already accepted by the Arranger or Agent) the terms of any

reliance letter or engagement letters relating to the Reports or any reports or letters

provided by accountants in connection with the Finance Documents or the transactions

contemplated in the Finance Documents and to bind it in respect of those Reports,

reports or letters and to sign such letters on its behalf and further confirms that it

accepts the terms and qualifications set out in such letters."

Consequently reliance should be permitted without the need for the Finance Party to

sign separate documentation if the Finance Party has already authorised (or

subsequently ratifies) the acceptance of the reliance letter by the Arranger or the Agent

on its behalf when it becomes a party to the Facilities Agreement.

2.1.1 Report providers may seek a representation or warranty from the Addressees

in respect of the legally binding nature of the authorisation or ratification from

the Primary Syndicate Member.

(a) It is highly unlikely that the Addressees would agree to this, as they will

rarely have sufficient insight into the necessary corporate capacity and

authority of the relevant Finance Party, and as they will not be in a

position to confirm the legal, valid, binding and enforceable nature of

the Facilities Agreement.

2.2 It is recognised that report providers have a legitimate concern in seeking to restrict

those who can rely on their due diligence reports to a narrow, clearly defined group.

Accordingly, report providers will wish to restrict those who can rely on their due

diligence reports to the Finance Parties under the Facilities Agreement as at close of

primary syndication of the Facilities, and not (save as set out in paragraph ‎1.8 above)

subsequent assignees or transferees of lenders of record.

2.2.1 Report providers may seek to define the term "primary syndication".

1 Please note that this reference is applicable as of March 2015.


(a) It is unlikely that Addressees would agree to this, given the varying

nature of the syndication process from transaction to transaction and the

impact of market conditions on the timeframe for syndication.

2.3 A form of addressee wording that is consistent with the LMA Senior Multicurrency

Term and Revolving Facilities Agreement for Leveraged Acquisition Finance

Transactions (Senior/Mezzanine) would be as follows:

"The Arranger and the Agent for itself and as agent for the Primary Syndicate Members

and the Security Agent (where "Primary Syndicate Members" means the Original

Lenders and any lender who (a) participates in the primary syndication of the Facilities

and (b) has authorised (or before it participates in the Facilities ratifies) the acceptance

by the Arranger or the Agent of this reliance letter on its behalf as agent; where

"Facilities" means [describe the facilities and the purpose for which they have been

provided]; and where "Agent", "Arranger", Original Lenders" and "Security Agent"

have the meaning given to those terms in the facilities agreement under which the

Facilities are provided)".

2.3.1 Report providers may argue that it is inappropriate to address reliance letters

to the Arranger, the Security Agent and the Agent in such capacities rather

than by name of the relevant legal entity.

(a) This would be inconsistent with the authority given to the Arranger and

the Agent in the LMA Senior Multicurrency Term and Revolving

Facilities Agreement for Leveraged Acquisition Finance Transactions

(Senior/Mezzanine) (as described in paragraph ‎2.1) to accept the report

provider's terms of reliance on behalf of the other Finance Parties.

(b) This would not allow for a transfer of the relevant role (noting, for

example, that it is common to split the senior and mezzanine agency

roles post closing of an acquisition financing in case of a future conflict

of interest on a restructuring). The new Arranger or Agent, not

addressed by name, would not be entitled to accept the report provider's

terms of reliance on behalf of the other Finance Parties.

(c) An alternative compromise position may be to address the reliance letter

to a specific entity in a specific capacity but to then include wording in

the reliance letter to the effect that such entity may be succeeded by

another entity acting in that capacity and that the reliance letter will

benefit the successor entity in that capacity.

2.3.2 Report providers may seek to limit the entities that are entitled to rely on the

due diligence report to those that actually lend. In some cases report

providers may be prepared to extend the entities that are entitled to rely on the

due diligence report to the Arranger and the Agent to the extent that the

Arranger and the Agent have responsibility to entities that have actually lent.

LMA.RRLUG.01 - 10 - 26 March 2015

These restrictions may appear either in the addressee language itself or in the

terms of the reliance letter.

(a) This overlooks the fact that the Arranger, the Security Agent and/or the

Agent may themselves incur loss if a debt financing transaction does not

proceed as a result of a defect in the relevant due diligence report. It

may for example be the case that a debt financing transaction, or

acquisition, does not proceed because of a concern about the target

business discovered shortly prior to closing of the acquisition, which

might ordinarily be expected to have been highlighted in the due

diligence report but which was not highlighted in the due diligence

report due to the negligence, fraud, dishonesty, misrepresentation or

wilful default of the report provider. The losses incurred by the

Arranger, Security Agent or Agent in that case might be attributable to

costs and expenses incurred in, for example, instructing legal advisers to

prepare the Finance Documents, preparing, printing and distributing an

Information Memorandum or holding one or more meetings with

prospective Primary Syndicate Members.

(b) Addressees may be prepared to accept a lesser cap on liability in these

circumstances in respect of liability to the Arranger, Security Agent and

Agent only.

2.3.3 Report providers may argue that as a result of the abolition of the prohibition

on financial assistance for private limited companies (and the consequent

removal of the related "whitewash" procedure) in England and Wales, it is not

necessary to include the Security Agent as an addressee of the due diligence

report.

(a) Addressees may wish to reserve their position in this respect until

market practice evolves in relation to the provision of net assets letters in

connection with the grant of guarantees and security by target group

entities, irrespective of that abolition. Notwithstanding that abolition, the

Security Agent may still wish to consider legal threats to the validity of

the security (such as transactions at an undervalue, preferences and

compliance with directors' duties). Information contained in professional

reports such as those provided as part of the due diligence into the

financial standing of a borrower would be relevant to these

considerations and therefore the importance of the Security Agent as an

Addressee should be considered in the context of each transaction.

2.3.4 Report providers may seek to limit the scope of the Facilities referred to in the

addressee language, or in respect of which they will accept liability to lenders

of record. For example they may seek to exclude reference to a Capex

Facility or an Acquisition Facility for use post completion of the acquisition,

to a Revolving Credit Facility for use throughout the tenor of the Facilities, or

LMA.RRLUG.01 - 11 - 26 March 2015

to Facilities A, B and C to the extent they are not used to fund the acquisition

on the date of completion of the acquisition.

(a) This arguably adds an additional and unnecessary level of complexity,

which for many transactions will be negated by the size of the cap on

liability vis-à-vis the quantum of the Facilities. This approach fails to

take into account, for example, use of Facilities A, B and C to refinance

existing indebtedness of the target group or to pay acquisition costs, each

integral to completion of the acquisition, or to pay deferred

consideration after the date of completion of the acquisition.

2.3.5 Report providers may seek to make the Addressees responsible (by way of

indemnity or otherwise) for the actions of third parties, such as Primary

Syndicate Members or professional advisers, or require the Addressees to

ensure that Primary Syndicate Members comply with the terms of the reliance

letter.

(a) It is highly unlikely that an Addressee would accept responsibility for the

actions of third parties in circumstances where the Addressee cannot

patrol and enforce the terms of the relevant reliance letter.

LMA.RRLUG.01 - 12 - 26 March 2015

3. LIABILITY CAPS

3.1 The LMA does not seek to give any guidance on the quantum of appropriate liability

caps. The commercial parties to a transaction will negotiate appropriate caps on a deal

by deal basis.

3.2 The LMA understands that in the acquisition finance market, participants commonly

refer to the memorandum of understanding agreed between the BVCA and certain

accountancy firms in 1998. This states that liability caps should be set in accordance

with the overall size of the underlying transaction, and sets out certain parameters in

this respect.

3.3 Particular areas of focus for Addressees may be:

(i) whether a liability cap set by reference to a multiple of the fees charged by the

report provider is appropriate. In many circumstances this is unlikely to be

acceptable, in particular where the cap relates to a report which is central to

the due diligence package used by lenders in making a decision to lend, for

example, the financial due diligence report or where the transaction size and

potential loss is disproportionate to the cap on liability proposed;

(ii) where an accountancy firm is providing reliance in respect of a financial due

diligence report, whether a lesser cap for commercial due diligence,

operational services, tax structuring services or IT services is appropriate;

(iii) where an accountancy firm is engaged on several areas of work as part of the

same transaction, whether the cap should be extended to include these other

engagements; and

(iv) where an accountancy firm is providing a net assets letter, whether an

umbrella cap should apply to both liability in respect of the due diligence

report and liability in respect of the net assets letter. An umbrella cap may be

considered more appropriate on the basis that, whilst the due diligence report

may quickly become outdated, unenforceability of any guarantees and security

provided by the target group would have significant ramifications for the

Finance Parties on an ongoing basis in an enforcement scenario.

LMA.RRLUG.01 - 13 - 26 March 2015

4. PROPORTIONALITY AND JOINDER OF PARTIES

4.1 The LMA does not seek to give any guidance on the appropriateness or otherwise of

proportionality provisions. The commercial parties to a transaction will negotiate this

on a deal by deal basis.

4.2 Proportionality provisions are often resisted by Addressees on the basis that such

provisions cut across English law principles in respect of joint and several liability

between parties which have contributed to the same damage and the position set out in

the Civil Liability (Contribution) Act 1978, the latter of which may act to render such

proportionality provisions redundant (unless report providers are attempting to achieve

a contractually agreed position which puts an Addressee in a worse position than it

would be if the general principles of English law were permitted to apply).

4.3 If proportionality provisions are agreed in principle between a report provider and

Addressees, they will typically attempt to limit liability by reference to a proportion of

the total loss. This can be expressed as the proportion which it is just and equitable to

attribute to the report provider's fault, having regard to the contributory negligence (if

any) of the Addressees and the extent of the responsibility of any other party.

Alternatively this can be expressed as liability for the proportion of the loss ascribed to

the report provider by a court of competent jurisdiction allocating proportionate

responsibility. The proportionality provisions will typically also say that in assessing

the proportionate loss attributable to the report provider, no account will be taken of

any liability cap agreed or imposed on the liability of any other party who also bears

part of the responsibility. In 1998 the BVCA and certain accountancy firms agreed

that proportionality language would not be included where the transaction size was £55

million or less.

4.3.1 Where the report provider's terms state that the report provider is only liable

for the proportion of the loss ascribed to the report provider by a court of

competent jurisdiction, the report provider may seek to include reference to

final determination by a court of competent jurisdiction.

(a) This would require all avenues of appeal to be exhausted, and is

therefore unlikely to be acceptable to the Finance Parties.

4.3.2 The report provider may seek the ability to require a Finance Party to join

another potentially liable party to proceedings at the report provider's request.

(a) This could be highly detrimental to a Finance Party's commercial

relationships if, for example, a Finance Party was required to join one of

its clients to proceedings. The Finance Party will no doubt want the

option to elect not to join any potentially liable party to the proceedings,

whilst acknowledging that the liability of the report provider may be

reduced as if the potentially liable party had been joined as a party to the

proceedings.

LMA.RRLUG.01 - 14 - 26 March 2015

(b) Alternatively, joinder might be permitted in circumstances where, in the

reasonable opinion of the Finance Party, it is not detrimental to the

Finance Party's business or franchise.

(c) If a joinder of parties clause is acceptable, the cost of the exercise should

be for the account of the report provider requiring joinder to be made.

LMA.RRLUG.01 - 15 - 26 March 2015

5. INDEMNITIES

5.1 In most cases Finance Parties will simply be prevented from giving an indemnity as a

matter of policy or where subject to applicable regulation.

5.2 Indemnities will be inappropriate for a release letter, where there is no reliance by the

Addressees and where there is a comprehensive exclusion of liability by the report

provider.

5.3 Addressees are likely to be concerned about giving any indemnity to a report provider

for the failure of an electronic data site used to disclose a due diligence report to

prospective Primary Syndicate Members. If the electronic data site provider provides a

high level of security for its site, in respect of which the electronic data site provider

can give separate assurances, the report provider may be able to get comfortable that

use of an electronic data site does not entail undue risk from a confidentiality

perspective and that therefore no indemnity is required. If not, an indemnity from the

principal on whose behalf the financing is being arranged and with whom the report

provider has a direct contractual relationship may be an alternative where such

principal gives an indemnity directly to the relevant report provider.

LMA.RRLUG.01 - 16 - 26 March 2015

6. LIMITATION PERIODS

6.1 Statutory limitation periods under the laws of the relevant jurisdiction should apply.

For example a limitation period of two, three or four years is not acceptable where a

statutory limitation period of six years would apply under English law.

LMA.RRLUG.01 - 17 - 26 March 2015

7. LIMITATIONS ON PARTIES WHICH MAY COMMENCE A CLAIM

7.1 It is anticipated that each Finance Party with reliance on a due diligence report will

wish to preserve flexibility to bring its own individual claim against the report provider

for any loss suffered by that Finance Party as a result of the negligence, fraud,

dishonesty, misrepresentation or wilful default of the report provider.

7.1.1 Report providers may seek to restrict the parties that can commence a claim,

for example by providing that only the Arranger or the Agent may bring a

claim.

7.1.2 Report providers may require an instructing group or majority lender vote

prior to commencement of a claim. In this case it is often unclear whether the

required vote is a vote of the Majority Lenders (as defined in the Facilities

Agreement) or of a majority of the Lenders by number.

(a) In either case it is preferable that the majority concept refers to the

majority Primary Syndicate Members at the relevant time.

On the assumption that the Finance Parties who have been given reliance

are limited to the Arranger, the Security Agent, the Agent and the

Primary Syndicate Members, Lenders who become party to the Facilities

Agreement after close of primary syndication (who will be unable to rely

on the due diligence report and who may therefore have little incentive

to support a claim) will be excluded from the vote.

This interpretation also ensures that if several of the Primary Syndicate

Members transfer their commitment and participation to New Lenders,

the majority will be calculated by reference to the Primary Syndicate

Members who remain lenders of record (rather than the original Primary

Syndicate Members, some of whom have then traded out of the deal and

will consequently have little incentive to support a claim).

7.1.3 The report provider's underlying concern may be to prevent a party with

reliance whom they consider to be particularly litigious or aggressive from

pursuing them (notwithstanding the contractual relationship which has been

established extending a duty of care to such party).

(a) Finance Parties may consider the merits of the claim, and the report

provider's ability to seek summary dismissal of a frivolous or vexatious

claim, to be sufficient protection for the report provider in this instance.

LMA.RRLUG.01 - 18 - 26 March 2015

8. APPLICATION OF STANDARD FORM TERMS AND CONDITIONS

8.1 In many cases it will not be appropriate to extend the application of specific terms of

engagement between the report provider and its principal to the Finance Parties. These

would include:

(i) payment of fees, costs and expenses;

(ii) provision of information, access, assistance and fulfilment of obligations;

(iii) non-solicitation of employees;

(iv) specific warranties about the principal's business or tax position;

(v) announcements or the names of addressees to be used for marketing purposes;

(vi) retaining responsibility for the management, conduct and operation of the

business; and

(vii) any indemnities provided by the principal, for example in respect of any

breach of its obligations under the engagement letter with the report provider

or a breach by a lender of its obligations under any release and/or reliance

letter.

8.2 Application of such terms often occurs through use of the term "you" in the report

provider's terms of engagement to cover all addressees (including Finance Parties who

become addressees by means of a separate reliance letter). To the extent that such

terms are inappropriate they should be specifically disapplied vis-à-vis the Finance

Parties, either in the terms of engagement or in the reliance letter.

8.3 Other provisions which Lenders may seek to address in the terms of business could

include:

(i) in any statement by the report provider that their services are not designed to

detect fraud or misrepresentation, or that they are not liable for loss suffered

as a result of the fraud or misrepresentation by the management of the client, a

statement could be added that this only applies unless the fraud should have

been apparent to the report provider in acting as professional accountants in

preparing the report; and

(ii) in relation to the internal disclosure of information by the report provider to

other members of its organisation, a requirement could be included that this is

permitted subject to adequate information barriers being in place and that

reasonable endeavours are used to ensure information is not passed to a team

within the report provider which is acting for competitors of the Addressees;

LMA.RRLUG.01 - 19 - 26 March 2015

9. CARVE OUTS FROM LIMITATION OF LIABILITY

9.1 Addressees will wish to ensure that where report providers seek to limit their liability

certain areas of liability are expressly excluded from such limitation. The areas of

liability that are typically of concern (and therefore should be carved out from any such

provision) are wilful default, fraud, dishonesty and any other liability that cannot be

limited or excluded as a matter of law.

LMA.RRLUG.01 - 20 - 26 March 2015

10. MARKETING

10.1 The report provider should not be allowed to use a Finance Party's name, logo or the

fact that the report provider is providing services to the Finance Party, for marketing

purposes, unless the report provider has obtained the prior written consent of the

Finance Party.

LMA.RRLUG.01 - 21 - 26 March 2015

SCHEDULE 1

LMA TEMPLATE RELEASE LETTER

PRIVATE AND CONFIDENTIAL - RELEASE LETTER TO PROSPECTIVE LEAD

BANK(S)

[Name and Address of prospective Lead Bank(s)]

[Date]

Dear Sirs

[Insert description of deal (the "Proposed Transaction")]

In this letter:

"Affiliate" means in relation to any person, a Subsidiary of that person or a Holding

Company of that person or any other Subsidiary of that Holding Company.

"Holding Company" means, in relation to a person, any other person in respect of which it is

a Subsidiary.

"Subsidiary" means a subsidiary undertaking within the meaning of section 1162 of the

Companies Act 2006.

1. Introduction

1.1 We refer to our [draft] report dated [date of Report] on [insert name of

company/group] (the "[Company"/"Group]") in connection with the Proposed

Transaction (the "Report"), and prepared on the basis of the instructions set out in the

engagement letter dated [•] between us and [client name] (the "Instructing Client") (the

"Engagement Letter") and any further information or explanations we may provide to

you or your professional advisers in relation to the contents of the Report or the

matters dealt with in it (the "Information").

1.2 We understand that you are considering whether to provide, and/or arrange, and/or act

as agent, security trustee and/or security agent for a syndicate of banks and financial

institutions providing, debt finance for and in connection with the Proposed

Transaction (where, in each such capacity, you will be acting as a "Lead Bank").

1.3 We understand that you wish to be provided with a copy of the Report. The Instructing

Client has authorised us to provide a copy of the Report and the Information to you.

1.4 This letter sets out the terms upon which we will agree to release the Report and the

Information to you and explains certain matters in relation to the Report and the

Information.

LMA.RRLUG.01 - 22 - 26 March 2015

2. Terms

2.1 The Report and the Information are provided to you to assist you in assessing whether

or not you wish to act as a Lead Bank in relation to and participate in the Proposed

Transaction. You agree not to use the Report or the Information for any other

purpose.

2.2 You accept that our providing you with a copy of the Report and our providing you

with the Information is on the understanding that, to the fullest extent permitted by

law1, we neither owe nor accept any duty or responsibility or liability to you or any

other party, whether in contract, tort (including negligence) or otherwise and shall not

be liable in respect of any loss, damage or expense which is caused by your or any

other party's reliance upon the Report or the Information except, in each case, as we

agree otherwise in writing.2

2.3 Subject to paragraph 2.4 below, you agree not to disclose all or any part of the Report

or the Information to any other person, by any means, without our prior written

consent except to the extent that disclosure is required by law or regulation, required or

requested by any competent judicial, governmental, supervisory or regulatory body or

required by the rules of any stock exchange on which your or your Affiliates' shares or

other securities are listed. Whether or not we have given our consent, we will not

accept any liability or responsibility to any third party who may gain access to the

Report or the Information.

2.4 You may make copies of the Report available to and share the Information with (i)

your Affiliates3 and your and your Affiliates' directors, officers and employees

involved in considering the Proposed Transaction, (ii) your and your Affiliates'

financial and professional advisers4 and (iii) any potential lender who is considering

1 Included in place of a lengthier carve out from the exclusion of liability for e.g. loss or damage in relation to

death or personal injury caused by negligence within the meaning of the Unfair Contract Terms Act 1977, or for

fraud.

2 To streamline the documentation process (and to avoid the requirement to append a form of reliance letter to the

release letter), no reference is made in this letter to the reliance letter which will need to be entered into for the

report provider to assume a duty of care to the Lead Bank/recipient.

3 Disclosure to "Related Funds" has not been included in the release letter as our view is that it is unlikely that

funds/Related Funds would be involved in the transaction at this stage. Reference to Related Funds is, however,

included in the Template Reliance Letter. The definition of "Related Funds" is as follows:

"Related Fund" in relation to a fund (the "first fund"), means a fund which is managed or advised by the

same investment manager or adviser as the first fund or, if it is managed by a different investment

manager or adviser, a fund whose investment manager or adviser is an Affiliate of the investment

manager or adviser of the first fund.

4 Disclosure is permitted to a recipient's "financial and professional" advisers to allow disclosure to financial

advisory firms (which are not members of professional bodies) who may require access to the report. Disclosure

does not, however, extend to professional advisors of directors, officers and employees. Whilst this omission

may not be relevant to an acquisition finance transaction, where such packages are an issue for the borrower and

the target group rather than the Finance Parties, Addressees may wish to consider whether an express authority

for disclosure to such persons would be useful in order to enable an informed negotiation of management

incentives in the context of a restructuring transaction.

LMA.RRLUG.01 - 23 - 26 March 2015

providing finance for or otherwise participating in the Proposed Transaction (who can

in turn disclose the Report and share the Information in the manner described in

paragraph 2.3 and points (i) and (ii) of this paragraph 2.4)5 provided that in each case

the person making the Report available or sharing the Information takes reasonable

steps to ensure that the recipient understands that:

2.4.1 the Report and the Information are confidential and may not be disclosed to

any other parties without our prior written consent except to the extent that

disclosure is required by law or regulation, or required or requested by any

competent judicial, governmental, supervisory or regulatory body or required

by the rules of any stock exchange on which the shares or other securities of

the recipient or any of its Affiliates are listed;

2.4.2 they may use the Report and the Information only for the purposes of assisting

you in your consideration as to whether to act as a Lead Bank in relation to

the Proposed Transaction or, in the case of potential lenders, for the purpose

of assisting them in their consideration as to whether or not to participate in

the Proposed Transaction; and

2.4.3 to the fullest extent permitted by law, we accept no responsibility or liability

to them, whether in contract, tort (including negligence) or otherwise in

respect of any use they may make of the Report or the Information and shall

not be liable to them in respect of any loss, damage or expense which is

caused by their reliance upon the Report or the Information until such time as,

in the case of potential lenders, they participate in the primary syndication of

the debt facilities provided in connection with the Proposed Transaction and

have agreed to be bound by the terms of a reliance letter.

2.5 You understand that the Report was prepared solely on the instructions of the

Instructing Client.

2.6 We have not undertaken any work or made any enquiries of the [Company's/Group's]

management in relation to the matters dealt with in the Report and the Report has not

been updated in each case since its date.

3. General

3.1 If any term or provision of this letter is or becomes invalid, illegal or unenforceable,

the remainder shall survive unaffected.

5 The additional wording at sub-paragraph (iii) expands this paragraph to cover the situation where several banks

are considering acting as Lead Bank and forming a syndicate in respect of the Proposed Transaction and allows

them to disclose the Report and the Information to their potential syndicate members, prior to reliance being

obtained. Query whether the concept of Information is likely to be acceptable in this context.

LMA.RRLUG.01 - 24 - 26 March 2015

3.2 [The obligations under this letter of each person to whom this letter is addressed are

several. No person to whom this letter is addressed is responsible for the obligations

under this letter of any other person to whom this letter is addressed.]6

4. Third party rights

4.1 A person who is not a party to this letter has no right under the Contracts (Rights of

Third Parties) Act 1999 to enforce or to enjoy the benefit of any of its terms.

4.2 The consent of any person who is not a party to this letter is not required to rescind or

vary this letter at any time.

5. Counterparts

This letter may be executed in any number of counterparts and this has the same effect

as if the signatures on the counterparts were on a single copy of this letter.

6. Entire agreement

This letter sets out the entire understanding between us in relation to the conditions

upon which the Report and the Information are provided to you.

7. Governing law and jurisdiction

7.1 This letter (including the agreement constituted by your acknowledgement of its terms)

and any non-contractual claims arising from it are governed by English law.

7.2 The parties submit to the [exclusive]/[non-exclusive]7 jurisdiction of the English courts.

7.3 [Without prejudice to any other mode of service allowed under any relevant law you:

(a) irrevocably appoint [] as your agent for service of process in relation to any

proceedings before the English courts in connection with this letter and will

promptly deliver a copy of a letter from the agent accepting its appointment as

agent for service of process; and

(b) agree that failure by a process agent to notify you of the process will not

invalidate the proceedings concerned.]8

8. Acknowledgement and acceptance

If you wish to receive a copy of the Report and the Information on the terms set out in

this letter, please record your agreement to the terms of this letter by signing the

enclosed copy of this letter and returning it to us, marked for the attention of [•].

6 Insert if letter is addressed to more than one prospective Lead Bank.

7 To be determined in accordance with the relevant circumstances e.g. where the jurisdiction of incorporation of

the report provider is outside England and Wales then a non-exclusive jurisdiction clause may be appropriate.

8 Delete if the addressee is incorporated in England and Wales

LMA.RRLUG.01 - 25 - 26 March 2015

Yours faithfully

[Report Provider]

LMA.RRLUG.01 - 26 - 26 March 2015

We confirm that we wish to receive a copy of the Report and the Information referred to in

the letter dated [insert date] from [Report Provider] on the basis of the terms set out in that

letter.

Signed: ……………………………………………..

Name and position: ……………………………………………..

On behalf of [insert name of relevant bank or financial institution]

Date: ………………………………………………

LMA.RRLUG.01 - 27 - 26 March 2015

SCHEDULE 2

LMA TEMPLATE RELIANCE LETTER

PRIVATE AND CONFIDENTIAL - RELIANCE LETTER

The Arranger, the Agent and [the Security Trustee][the Security Agent] (as such terms are

defined in the Facilities Agreement (as defined below)) and the Primary Syndicate Members

(as defined below).1

[Date]

Dear Sirs

[Insert description of deal (the "Proposed Transaction")]

In this letter:

"Addressee" means the Instructing Client and each person to whom this letter is addressed.

"Affiliate" means in relation to any person, a Subsidiary of that person or a Holding

Company of that person or any other Subsidiary of that Holding Company.

"Facilities" means [describe facilities and the purpose for which they have been provided].

"Facilities Agreement" means the facilities agreement dated [•] between, amongst others, []

(as the parent), [•] (as original borrowers), [•] (as original guarantors), [•] (as arranger,

agent, [security trustee] [security agent] and issuing bank) and certain lenders (as original

lenders).

"Holding Company" means, in relation to a person, any other person in respect of which it is

a Subsidiary.

"Primary Syndicate Members" means [] and any lender under the Facilities Agreement

who (a) participates in the primary syndication of the Facilities and (b) has authorised (or

before it participates in the Facilities ratifies) the acceptance by the Arranger and/or the Agent

of this letter on its behalf2.

1 If an Agent or Security Agent/Security Trustee has not been appointed at the date of the reliance letter,

appropriate consequential amendments to this letter will be required.

2 Note: The Facilities Agreement should be checked to ensure that it contains a provision reflecting the terms of

Clause 32.19 (Reliance and engagement letters) of the LMA Senior Multicurrency Term and Revolving Facilities

Agreement for Leveraged Acquisition Finance Transactions (Senior/Mezzanine) which provides a confirmation

from each Finance Party and each Secured Party (as defined therein) that the Arranger and Agent have the

authority to accept on its behalf (and that such entity will ratify the Agent or Arranger's acceptance on its behalf)

the terms of a reliance letter or engagement letter relating to any reports.

LMA.RRLUG.01 - 28 - 26 March 2015

"Recipient Parties" means any entity to whom a duty of care is owed by [the Report

Provider] in connection with the Report.

"Related Fund" in relation to a fund (the "first fund"), means a fund which is managed or

advised by the same investment manager or adviser as the first fund or, if it is managed by a

different investment manager or adviser, a fund whose investment manager or adviser is an

Affiliate of the investment manager or adviser of the first fund.

"Subsidiary" means a subsidiary undertaking within the meaning of section 1162 of the

Companies Act 2006.

1. Introduction

1.1 We refer to our report(s)3 dated [date of Report] on [insert name of company/group]

(the "[Company"/"Group"]) in connection with the Proposed Transaction (the

"Report") and prepared on the basis of the instructions set out in the engagement letter

dated [] between us and [client name] (the "Instructing Client") (the "Engagement

Letter").4

1.2 We understand that you have been provided with a copy of the Report and that you

wish to make copies of the Report available to prospective Primary Syndicate

Members.

1.3 In consideration of us agreeing to assume a duty of care to you in relation to the

Report, you agree to the terms set out in this letter upon which we agree to assume a

duty of care to you and explain certain matters in respect of the Report.

2. Scope of work

2.1 You understand that the Report was prepared solely on the instructions of the

Instructing Client. We have not verified the completeness and/or accuracy of the

information provided to or obtained by us.

2.2 [We have not undertaken any work or made any enquiries of the [Company's/Group's]

management in relation to the matters dealt with in the Report and no updates have

been made to the Report in each case since its date.]

2.3 If, prior to completion of the Proposed Transaction, we produce updated,

supplemented or amended versions of the Report on the instructions of the Instructing

Client, we shall promptly provide you with a copy of such Report. The terms of this

letter shall apply to all versions of the Report including any annexes or supplements

3 Consider including reference to multiple reports (for example in the case of a financial due diligence report and a

tax structure report prepared by the same report provider).

4 We have omitted the concept of Information from the Reliance Letter, in contrast to the Release Letter, on the

basis that it is unusual for reliance to be given in respect of ad hoc supplementary information and explanations,

many of which may be verbal, and on the basis that significant additional information is usually required to be

documented in amendments or updates to the written Report.

LMA.RRLUG.01 - 29 - 26 March 2015

thereto and if applicable, the terms of this letter shall be regarded as having been

amended to be applicable to each version of the Report.

3. Limitation on liability

3.1 The aggregate liability of [Report Provider] for all losses or damages (including

interest thereon, if any) and costs suffered or incurred, directly or indirectly, by the

Recipient Parties under or in connection with the Report (as the same may be amended

or varied), including as a result of breach of contract, breach of statutory duty, tort

(including negligence), fault or other act or omission by [Report Provider] shall be

limited to the maximum amount of [•]5.

3.2 Nothing in this letter shall exclude or reduce our liability in respect of our fraud,

dishonesty or wilful default or for any other liability that cannot be excluded as a

matter of law.

3.3 We accept no duty of care to anyone other than the Addressees.

4. Proportionality

[Our liability shall be limited to that proportion (the "Proportion") of the total loss or

damage, after taking into account your contributory negligence (if any) or the

contributory negligence (if any) of any other Addressees, which is just and equitable

having regard to the extent of our responsibility for the loss or damage concerned and

the extent of responsibility of any other party also responsible for such loss and

damage. For the purposes of determining the Proportion, no account shall be taken of

any liability cap agreed or imposed on the liability of any other party also responsible

for such loss and damage.]6

5. Confidentiality and disclosure

5.1 Subject to paragraphs 5.2, 5.3 and 5.4 below, you agree not to disclose all or any part

of the Report to any other person by any means without our prior written consent,

except to the extent that disclosure is required by law or regulation, or required or

requested by any competent judicial, governmental, supervisory or regulatory body or

required by the rules of any stock exchange on which your or your Affiliates' shares or

other securities are listed. Whether or not we have given our consent, we will not

accept any liability or responsibility to any third party who may gain access to the

Report.

5.2 You may make copies of the Report available to (i) your Affiliates and Related Funds

and your and their directors, officers and employees involved in considering the

5 This language should be included where the concept of a liability cap has been commercially agreed between the

parties.

6 The guidelines agreed between the BVCA and certain accountancy firms in 1998 suggest that proportionality

language would be appropriate where the transaction size is greater than £55 million. The inclusion of this

language is, however, subject to commercial negotiation between the parties.

LMA.RRLUG.01 - 30 - 26 March 2015

Proposed Transaction and your and their financial and professional advisers;7 and (ii)

any potential lender who is considering providing finance for or otherwise participating

in the Proposed Transaction (who can in turn disclose the Report in the manner

described in point (i) of this paragraph 5.2), provided that in each case the person

making the Report available takes reasonable steps to ensure that the recipient

understands that:

5.2.1 the Report is confidential and may not be disclosed to any other parties

without our prior written consent except to the extent that disclosure is

required by law or regulation, or required or requested by any competent

judicial, governmental, supervisory or regulatory body or required by the

rules of any stock exchange on which the shares or other securities of the

recipient or any of its Affiliates are listed;

5.2.2 they may use the Report only for the purposes of their consideration of matters

related to the Proposed Transaction and in the case of their financial and

professional advisers only for the purpose of advising on the Proposed

Transaction;



respect of any use they may make of the Report and shall not be liable to them

in respect of any loss, damage or expense which is caused by their reliance

upon the Report.

5.3 The Agent and the Arranger may make copies of the Report available to prospective

Primary Syndicate Members and each prospective Primary Syndicate Member may

make copies of the Reports available to their Affiliates and their Related Funds, and

their and their Affiliates' and their Related Funds' directors, officers and employees

involved in considering the Proposed Transaction and their and their Affiliates' and

their Related Funds' financial and professional advisers8, provided that in each case the

person making the Report available takes reasonable steps to ensure that the recipient

understands that:

5.3.1 the Report is confidential and may not be disclosed to any other parties

without our prior written consent except to the extent that disclosure is

required by law or regulation, or required or requested by any competent

judicial, governmental, supervisory or regulatory body or required by the

7 Disclosure is permitted to a recipient's "financial and professional" advisers to allow disclosure to financial

advisory firms (which are not members of professional bodies) who may require access to the report. Disclosure

does not, however, extend to professional advisors of directors, officers and employees. Whilst this omission

may not be relevant to an acquisition finance transaction, where such packages are an issue for the borrower and

the target group rather than the Finance Parties, Addressees may wish to consider whether an express authority

for disclosure to such persons would be useful in order to enable an informed negotiation of management

incentives in the context of a restructuring transaction.

8 See footnote 8 above.

LMA.RRLUG.01 - 31 - 26 March 2015

rules of any stock exchange on which the shares or other securities of the

recipient or any of its Affiliates are listed;

5.3.2 they may use the Report only for the purposes of their consideration of matters

related to the Proposed Transaction and in the case of their financial and

professional advisers only for the purpose of advising them in relation to their

consideration as to whether to become a Primary Syndicate Member; and



respect of any use they may make of the Report and shall not be liable to them

in respect of any loss, damage or expense which is caused by their reliance

upon the Report until such time as, in the case of prospective Primary

Syndicate Members, they become a Primary Syndicate Member and the Agent

and/or the Arranger have signed this letter on their behalf.

5.4 Nothing in this letter shall prevent you from disclosing all or any part of the Report (i)

to advance any defence that you or your Affiliates or your Related Funds may wish to

advance in any claim or proceeding in connection with the Proposed Transaction or (ii)

where it is reasonable to do so for the purpose of resolving any actual or potential

dispute to which you are a party in connection with the Proposed Transaction.

6. General

6.1 If any term or provision of this letter is or becomes invalid, illegal or unenforceable,

the remainder shall survive unaffected.

6.2 We agree that we shall not use your name, or the fact that we are providing services to

you under the terms of this letter, for any marketing purposes without your prior

consent.

6.3 Each Addressee's obligations under this letter are several and no Addressee is

responsible for any other Addressee's obligations under this letter.

7. Third party rights

7.1 Unless expressly provided to the contrary in this letter, a person who is not a party to

this letter has no right under the Contracts (Rights of Third Parties) Act 1999 to

enforce or to enjoy the benefit of any of its terms.

7.2 Notwithstanding any term of this letter, the consent of any person who is not a party to

this letter is not required to rescind or vary this letter at any time.

8. Counterparts

This letter may be executed in any number of counterparts and this has the same effect

as if the signatures on the counterparts were on a single copy of this letter.

LMA.RRLUG.01 - 32 - 26 March 2015

9. Entire agreement

This letter sets out the entire understanding between us in relation to the conditions

upon which the Report is provided to you.

10. Governing Law and jurisdiction

10.1 This letter (including the agreement constituted by your acknowledgement of its terms)

and any non-contractual claims arising from it are governed by English law.

10.2 The parties submit to the [exclusive]/[non-exclusive]9 jurisdiction of the English courts.

10.3 [Without prejudice to any other mode of service allowed under any relevant law you:

(a) irrevocably appoint [] as your agent for service of process in relation to any

proceedings before the English courts in connection with this letter and will

promptly deliver a copy of a letter from the agent accepting its appointment as

agent for service of process; and

(b) agree that failure by a process agent to notify you of the process will not

invalidate the proceedings concerned.]10

11. Acknowledgement and acceptance

If you wish us to assume a duty of care to you on the terms set out above, please

record your agreement to the terms of this letter by signing the enclosed copy of this

letter and returning it to us, marked for the attention of [].

Yours faithfully

[Report Provider]

9 To be determined in accordance with the relevant circumstances e.g. where the jurisdiction of incorporation of

the report provider is outside England and Wales then a non-exclusive jurisdiction clause may be appropriate.

10 Delete if the addressee is incorporated in England and Wales

LMA.RRLUG.01 - 33 - 26 March 2015

We confirm our acceptance of the terms set out in the letter dated [insert date] from [Report

Provider].

The Arranger (for itself and for and on behalf of the Primary Syndicate Members)

Signed: ……………………………………………..


On behalf of [insert name of bank or financial institution]

Date: ………………………………………………

The Agent (for itself and for and on behalf of the Primary Syndicate Members)

Signed: ……………………………………………..



Date: ………………………………………………

The [Security Trustee]/[Security Agent]

Signed: ……………………………………………..



Date: ………………………………………………