users guide to form of facility agreement...

LMA.UserGuide.LeveragedFinanceFacilityAgmt.09 12 November 2014

For the avoidance of doubt, this Users Guide, the Leveraged Document and the LMA Intercreditor Agreement are in a non-

binding, recommended form. Their intention is to be used as a starting point for negotiation only. Individual parties are free

to depart from their terms and should always satisfy themselves of the regulatory implications of their use.

USERS GUIDE

TO

FORM OF FACILITY AGREEMENT

FOR LEVERAGED ACQUISITION FINANCE TRANSACTIONS

(SENIOR / MEZZANINE)

NOVEMBER 2014

The Loan Market Association ("LMA") consents to the use and reproduction 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. The LMA does not consent to the use, reproduction, distribution or communication to the public 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.

LMA.UserGuide.LeveragedFinanceFacilityAgmt.09 12 November 2014

CONTENTS

1. Important Notice ............................................................................................ 1

2. Introduction .................................................................................................. 2

3. The Transaction ............................................................................................. 6

4. Anatomy Of The Leveraged Document ............................................................... 10

5. Section By Section Guide To The Leveraged Document ........................................... 12

LMA.UserGuide.LeveragedFinanceFacilityAgmt.09 - 1 - 12 November 2014

1. IMPORTANT NOTICE

This Users Guide has been prepared for the Loan Market Association ("LMA") in connection with

the form of facility agreement for leveraged acquisition finance transactions (senior / mezzanine)

(the "Leveraged Document") published by the LMA. Whilst every care has been taken in the

preparation of this Users Guide and the Leveraged Document, no representation or warranty is

given by the LMA or Clifford Chance LLP:

as to the suitability of the Leveraged Document for any particular transaction

that the Leveraged Document will cover any particular eventuality

as to the accuracy or completeness of the contents of this Users Guide.

This Users Guide provides limited guidance only on the terms of the Leveraged Document. It is not

intended to be a comprehensive analysis of the Leveraged Document nor to explain exactly how

each provision operates. In particular, users of the Leveraged Document should satisfy themselves

as to the taxation, regulatory and accounting implications of its use and that the Leveraged

Document is appropriate to the terms of the commercial transaction.

Neither the LMA nor Clifford Chance LLP is liable for any losses suffered by any person as a

result of any contract made on the terms of the Leveraged Document or which may arise from the

presence of any errors or omissions in this Users Guide or the Leveraged Document and no

proceedings shall be taken by any person in relation to such losses.

For the avoidance of doubt, this Users Guide and the Leveraged Document are in a non-binding,

recommended form. Their intention is to be used as a starting point for negotiation only.

Individual parties are free to depart from their terms and should always satisfy themselves of the

regulatory implications of their use.


2. INTRODUCTION

The purpose of this Users Guide is to assist users of the Leveraged Document. The Leveraged

Document is a Senior Multicurrency Term and Revolving Facilities Agreement intended for use in

leveraged acquisition finance transactions.

2.1 Evolution and Scope of the Leveraged Document

The Leveraged Document project was begun in response to demand from the leveraged

finance market to provide a form of leveraged finance facility agreement in much the same

way as the LMA provided the Recommended Forms of Primary Document for the

investment grade market.

From an early stage it was recognised that the nature of leveraged finance transactions was

such that it would be very difficult to produce a document which was in any way "standard".

In particular, it was accepted that any document which was produced would need to be

adapted so as to be tailored to the particular transaction structure and the business to be

acquired. However, it was still felt that it would be a step forward in promoting the

efficiency of the market if a document was produced which was a good starting point for the

draftsman; which provided a common framework and language for those involved in these

transactions; and which used the same basic structure and "boilerplate" as the LMA

Recommended Forms of Primary Documents.

It is important, therefore, to recognise that the Leveraged Document is not a standard form

to be followed slavishly for each deal but a document which will be used as a starting point

by law firms drafting facility agreements for leveraged finance transactions.

In order to be helpful, various provisions which may or may not be included in any

particular transaction have been included in square brackets in order that a menu of clauses is

available to the draftsman should those clauses be required. These include some provisions

(for example, wording permitting the making of acquisitions and joint venture investments)

which in certain parts of the market are rarely accepted (although they may be normal in

others). Where this is the case such provisions can be deleted in the draft prepared using the

Leveraged Document as a starting point. The non-inclusion of such square bracketed

provisions should not be considered as a departure from the LMA form.

A Working Party consisting of representatives from banks (including in-house lawyers) and

major City law firms was established to consider the drafting of the Leveraged Document

when first issued in 2004. Comments were also taken from the LMA's Institutional

Investors Committee. The Leveraged Document was then revised in 2005 and again in

2008. In February 2009 the LMA launched a recommended form of Intercreditor

Agreement for leveraged acquisition finance transactions (senior / mezzanine) (the "LMA

Intercreditor Agreement") and consequential changes were made to the Leveraged

Document at that time. The Leveraged Document was further revised in June 2009 and in

July 2010, September 2010 and October 2010 was amended to take account of the

introduction of the Double Taxation Treaty Passport scheme by the UK's HM Revenue &


Customs. The Leveraged Document and the LMA Intercreditor Agreement were both

subject to a major update in September 2012. The Leveraged Document was further updated

in November 2014 to conform to changes made to the Recommended Forms of Primary

Document. The Primary Document process included a negotiation with representatives of

the borrower community (in the guise of the ACT), but this was not the case for the

Leveraged Document when first issued, although comments from the British Venture Capital

Association were considered when the Leveraged Document was revised in 2005.

Nevertheless, the document produced does contain a number of borrower-friendly provisions

which are not always included in a first draft, but which are sometimes conceded by lenders

in negotiation.

A large number of provisions will need to be tailored to a transaction on a case-by-case

basis. In those cases, the Leveraged Document provides a sensible starting point only and

does not attempt to deal with the complexities of each transaction. In particular, the

provisions setting out the representations, undertakings and events of default are not intended

to be exhaustive or absolute. It is expected that further representations, undertakings or

events of default may need to be added and that the Clauses that are included may need to be

amended.

2.2 Format and Use of the Leveraged Document

(a) Assumptions

The agreement has been produced on the basis of various assumptions set out below, made in

order to avoid overcomplicating the document. However, if any assumption is not correct in

the context of a particular transaction, the Leveraged Document may still represent a useful

starting point. The assumptions are explained in more detail in the section-by-section guide

in Section 5 of this Users Guide, but in summary the Leveraged Document assumes:

the Leveraged Document is to be governed by English law and the transaction is as

described in Sections 3.1-3.5 of this Users Guide;

the Agent is based in London and syndication takes place primarily in the London market

and the euromarkets;

the Obligors are companies. The Leveraged Document is unlikely to be suitable for any

other type of entity, partnership, association or individual;

the Obligors are incorporated in England and Wales. While some provisions applicable

to overseas companies are included, it is not possible to contemplate all amendments

required for every jurisdiction and so some further changes may need to be made if the

Obligors are not incorporated in England and Wales; and

the intercreditor agreement used in conjunction with the transaction is based on the LMA

Intercreditor Agreement.


(b) Format

All the standard sections of a syndicated leveraged facility agreement are included.

Where provisions are likely to be deal specific so that no common starting point can easily be

identified, spaces have been left or options provided.

(c) Style

As far as possible the Leveraged Document adopts a "plain English" approach, with clauses

broken down into shorter sub-paragraphs and exceptions listed in sub-paragraphs rather than

as provisos.

The Leveraged Document is divided into Sections and Clauses. Each Clause is divided into

sub-clauses, and sub-clauses may be further divided into separate paragraphs. The sequence

of numbering is as follows:

SECTION 1 HEADING,

Clause 1 HEADING,

Clause 1.1 Heading,

paragraphs (a), (b), (c),

paragraphs (i), (ii), (iii),

paragraphs (A), (B), (C),

paragraphs (1), (2), (3).

Headings are given to each Section and Clause only. Cross references should refer to the

Clause number and the heading of the Clause.

Where additional information is required a gap [ ] is left. Where optional

language or more than one option have been included it is identified as [option] or

[option 1]/[option 2].

(d) How to use the Leveraged Document

It is impossible to use the Leveraged Document without amendment or additions (because of

the inclusion of different options and the provisions that have been left blank). It will

therefore be necessary to show clearly what amendments have been made, both during the

course of negotiation and at the end of the transaction. The following approach is

recommended:

when distributing the first draft to the syndicate of banks and the borrowers, the drafting

law firm should provide copies of the draft marked to show changes from the Leveraged

Document including the deletion of the LMA logo and the copyright notice. Further

comparisons should be provided as required by the Parties


at the end of the transaction, the law firm responsible for the draft should provide the

Parties with a conformed copy of the final document marked to show changes from the

Leveraged Document. This will help with administration of the facility and any

secondary trading that may take place.

There is no recommendation for how this comparison will be produced or how additions or

deletions should be indicated.

2.3 Relationship with LMA Recommended Forms of Primary Documents

To the greatest extent possible the Leveraged Document has been based upon the LMA

Recommended Forms of Primary Documents (and in particular LMA.MTR.LC.02, the

Multicurrency Term and Revolving Facilities Agreement incorporating a Letter of Credit

Facility). For that reason, where the Users Guide to the Recommended Forms already

covers a particular provision which is replicated in the Leveraged Document, this Users

Guide does not repeat what is said in the Recommended Forms Users Guide. Also the

Leveraged Document does not replicate any of the footnotes already included within the

Recommended Forms.


3. THE TRANSACTION

Set out below is a brief description of the transaction documented by the Leveraged Document.

3.1 Structure

The Leveraged Document relates to a typical senior loan and mezzanine loan structure.

Below is a diagram of the assumed structure. The assumption is that Parent establishes

Company to which senior and mezzanine finance is made available for the acquisition of

Target. The assumption is also made that equity investment is by way of (a) ordinary shares

and (b) institutional loan notes or preference shares into Parent. Security is to be granted in

favour of a trustee for both senior lenders and mezzanine lenders with the order of priority

and other trustee provisions set out in a separate intercreditor agreement. (The LMA

Intercreditor Agreement contains such provisions). The document provides for both a share

and business acquisition. All other forms of finance contemplated by the structure would be

subordinated to the finance provided under the senior and mezzanine facilities agreements.


Debt Structure Chart

Warrants

Subscription for shares of

Company (downstreaming

equity investment) and

Structural Intra Group Loan

(downstreaming equity

investment)

Investors

Equity Investment by way of

subscription for Shares of Parent

(including Preference Shares)

Equity Investment by

way of Loan Notes

Parent

Vendor

Company

(Purchaser)

Target

Company

Subsidiary 3

of Target

Subsidiary 2

of Target

Senior

Lenders

Acquisition

Vendor Note

(deferred

Purchase Price)

Mezzanine Loan

(Term Facilities A, B

and C plus Revolver)

Senior Loan Mezzanine

Lenders

Subsidiary 1

of Target


3.2 Facilities

The Leveraged Document provides for three senior term facilities and a senior revolving

facility.

The revolving credit facility includes a letter of credit facility and provides for other ancillary

facilities (such as overdraft, foreign exchange and guarantee facilities) to be included (albeit

that the detail of these facilities would be documented separately).

In addition to the facilities under the Leveraged Document it is assumed that certain financial

institutions (which need not also be senior lenders) would provide hedging facilities. It is

assumed however that there would be no other layers of debt except for the mezzanine

facility (and institutional loan notes/vendor loan notes).

3.3 Mezzanine Finance

This is to be a single layer and borrowed at the Company level; warrants are issued by

Parent to the mezzanine lenders.

3.4 Vendor Notes

It is assumed that notes are to be issued by Parent to the Vendor as part of the consideration

for the acquisition.

3.5 Security Structure

The security is to be held by a security trustee (defined as the "Security Agent") on behalf

of the senior lenders, the mezzanine lenders and the hedge counterparties and is to be

documented in the form of a debenture.

The documentation has not been drafted in order to provide a structure which will benefit

from an exemption from the insolvency provisions of the UK Enterprise Act (and so it is

likely that the Lenders will not be able to block the appointment of an administrator). It is

also assumed that security trustee provisions are to be contained in an intercreditor

agreement between (amongst others) the senior lenders, the mezzanine lenders and the hedge

counterparties. (The LMA Intercreditor Agreement contains such provisions.)

3.6 Alternative Structures

The structure assumed above is a traditional European Leveraged buy-out structure and is

considered to be one which is commonly encountered across all levels of the acquisition

finance market. There are, of course, a number of other structures that could be used for

leveraged acquisition finance transactions with a senior/mezzanine debt structure. For

example, the structure could envisage the granting of security (for the benefit of the

Mezzanine Lenders only) over shares in a company positioned above the Parent in the Group

structure. It is likely that the choice of structure will be driven by the specific requirements

of the transaction in question. To the extent that the structure of the transaction in question

is different from that described in sections 3.1 – 3.5 above, it is important to note that


changes will be required to the Leveraged Document (and to the LMA Intercreditor

Agreement) to take account of that structure's particular characteristics and complexities.


4. ANATOMY OF THE LEVERAGED DOCUMENT

The provisions of the Leveraged Document may be broken down into the following broad

categories:

4.1 Section 1

Definitions and interpretation of terms used in the Leveraged Document. In particular there

are a number of "Permitted …" definitions which specify exceptions to the negative

undertakings and which are likely to be heavily negotiated.

4.2 Section 2 to Section 6

The clauses in these Sections set out the operational mechanics of the agreement and include:

the conditions on which the Facilities are made available (including the drawdown

mechanisms)

the Finance Parties' rights and obligations in relation to the Facilities

the clean-down mechanism

the letter of credit provisions

provisions dealing with the provision of Ancillary Facilities

the determination of interest and Interest Periods

taxes and increased cost provisions

the terms on which the Facilities are to be repaid and prepaid (including mandatory

prepayment)

the provisions in relation to the fees, costs and expenses.

4.3 Section 7

This Section sets out the guarantee and indemnity.

4.4 Section 8

This Section sets out the most commonly negotiated terms:

the representations

the undertakings

the events of default

It is these clauses that particularly need to be tailored to the terms of the transaction and

parties involved.


4.5 Section 9

This Section deals with assignments and transfers by the Lenders and changes to the

Obligors.

4.6 Section 10 to Section 12

These provisions are what are commonly referred to as the "boilerplate". They set out:

the relationship between the Agent, the Arranger and the Lenders

sharing among the Lenders

administration of the facilities

the mechanics for amendments and waivers (including the so-called "yank the bank"

provisions)

confidentiality obligations of the Finance Parties

the provisions relating to the governing law and enforcement of the agreement.

4.7 The Schedules

The Schedules contain transaction specific information (such as details of the Lenders and

their Commitments) and forms of ancillary documentation which may be required throughout

the life of the transaction (such as the Utilisation Request and Transfer Certificate) as well as

the list of conditions precedent documentation.


5. SECTION BY SECTION GUIDE TO THE LEVERAGED DOCUMENT

Please note that this Users Guide does not comment on all definitions and Clauses within the

Leveraged Document and (as indicated above) does not repeat guidance already included within the

Users Guide to the Recommended Forms of Primary Documents.

THE PARTIES

The Leveraged Document assumes that the Security Agent will be appointed to hold the Security on

behalf of the Secured Parties. It is assumed that the provisions relating to the appointment of the

Security Agent will be included in a separate Intercreditor Agreement. (The LMA Intercreditor

Agreement contains such provisions.) It is also assumed that one or more Issuing Banks will be

parties to the Leveraged Document for the purpose of issuing Letters of Credit. The Leveraged

Document allows for any Hedge Counterparty to be an original party in that capacity, although it is

more usual for the Hedge Counterparties to accede to the Leveraged Document after signing.

SECTION 1 - INTERPRETATION

Clause 1.1: Definitions

"Acceptable Bank": in order for deposits or various other investments to count as "Cash

Equivalent Investments" they must be made with or issued by an Acceptable Bank.

"Accounting Reference Date": this is the financial year end for the Group.

"Acquisition", "Acquisition Agreement", "Acquisition Costs" and "Acquisition Document": all

these definitions may need to be tailored to fit the Acquisition in question. In particular, it will be

necessary to determine whether assets and/or shares in Target are being acquired.

"Agreed Security Principles": these will be particularly relevant when assets located outside the

UK are likely to be the subject of Security. They set out the basis on which Security will be taken.

"Ancillary Commitment": the Ancillary Commitment of a Lender (or its Affiliates) is a sub-limit

of its Revolving Facility Commitment made available on a bilateral basis to a member of the Group

in accordance with Clause 9 (Ancillary Facilities).

"Ancillary Lender": there is an option for Affiliates of Lenders to make Ancillary Facilities

available.

"Availability Period": in relation to the Term Facilities this will have to be linked in to the

expected Closing Date.

"Available Commitment": a Lender's Commitment under the Revolving Credit Facility will be

reduced to the extent of a Lender's (or its Affiliate's) Ancillary Commitments.

"Base Case Model": this definition needs to be adjusted to take account of the actual details of any

financial model produced in relation to the transaction.


"Borrower": this provides as an option the ability to include Affiliates of Borrowers as Borrowers

of Ancillary Facilities.

"Cash Equivalent Investments": this definition is clearly one which can be subject to change

depending on the commercial requirements.

"Certain Funds Periods" and "Certain Funds Utilisation": these are to be included when the

Borrower requires that the funding be provided on a "certain funds" basis so that there are only

very limited circumstances in which the Lenders can refuse to lend for an Acquisition Purpose.

"Certificate of Title": this is a Certificate of Title relating to English real estate and may not be

appropriate in all cases.

"Change of Control": the method of defining a Change of Control will, of course, differ widely

depending upon the transaction structure and upon the structure of the Group of initial investors.

"Clean-Up Date", "Clean-Up Default", "Clean-Up Representation" and "Clean-Up

Undertaking": are included for circumstances where it is agreed that certain of the Events of

Default, representations and undertakings will be disapplied for a period following Completion.

"Completion": this will need to be adjusted to take account of the particular details of the

Acquisition.

"Constitutional Documents": these will usually be the Articles of Association of the Parent and

may include detailed agreements between shareholders as to pre-emption rights etc.

"Defaulting Lender": a Lender:

(a) which fails to make its participation in a Loan available or fails to provide cash

collateral to an Issuing Bank when required to do so;

(b) which otherwise rescinds or repudiates a Finance Document;

(c) which is also an Issuing Bank and which fails to issue a Letter of Credit or fails to

pay a claim under a Letter of Credit; or

(d) (optionally) with respect to which an Insolvency Event has occurred and is

continuing

will be a "Defaulting Lender". There are grace periods for payment failures and failures to issue a

Letter of Credit caused by administrative/technical errors and an exception for a good faith dispute

of the obligation to make the relevant payment. Users should note that Sponsor Affiliates are

excluded from the definition.

The consequences of a Lender being a Defaulting Lender are that:

(a) to the extent that that it participates in the Revolving Facility, it will be a Non-

Acceptable L/C Lender (see definition of "Non-Acceptable L/C Lender");


(b) (if the appropriate optional language is included) its participations in existing

Revolving Facility Loans will be automatically termed out (see Clause 10.2

(Repayment of Revolving Facility Loans));

(c) the Parent can cancel its undrawn Commitments (see Clause 11.7 (Right of

cancellation in relation to a Defaulting Lender)) and those Commitments can

subsequently be reinstated and assumed by another willing Lender (or other entity)

selected by the Parent (see Clause 2.2 (Increase));

(d) (if the appropriate optional language is included) no Commitment Fee will be

payable in respect of its Available Commitments (see Clause 17.1 (Commitment

fee));

(e) its identity may be disclosed to the other Finance Parties and the Parent (see Clause

32.7 (Rights and discretions));

(f) it shall cease to have a vote to the extent of its undrawn Commitments (see Clause

41.9 (Disenfranchisement of Defaulting Lenders));

(g) its drawn commitments will be disregarded on a vote if it fails to respond to that

vote within a specified time frame (see Clause 41.7 (Excluded Commitments)); and

(h) it can be forced to transfer its participation in the Facilities (see Clause 41.10

(Replacement of a Defaulting Lender)).

"Designated Gross Amount" and "Designated Net Amount": these relate to gross and net limits

under multiple account overdraft arrangements.

"Facility [A/B/C] Repayment Date": institutional investors prefer these to be easily identifiable

dates (not, for example, fixed by reference to the first Utilisation).

"Finance Document": this definition includes, as an option, the Mandate Letter as this may include

important provisions (eg market flex etc) breach of which may need to be an Event of Default. The

definition includes each Hedging Agreement as a Finance Document only:

(a) for the purposes of the Guarantee;

(b) where necessary in the context of the transaction (for example to include the

arrangements documented by each Hedging Agreement as a "Permitted

Transaction"); and

(c) to the extent beneficial to the other Finance Parties (for example in the Events of

Default).

It is assumed that, other than in respect of the Guarantee, the Hedging Agreements themselves will

(to the extent appropriate) address the position between the relevant Obligor and a Hedge

Counterparty and that it would not necessarily be appropriate for the other provisions of the

Leveraged Document to apply to the Hedging Agreements.


"Finance Party": in a similar way to the definition of "Finance Document", this definition

includes each Hedge Counterparty as a Finance Party only:

(a) for the purposes of the Guarantee;

(b) where necessary in the context of the transaction (for example to include each

Hedge Counterparty as a "Secured Party"); and

(c) to the extent beneficial to the other Finance Parties (for example to include an

impact on a Hedge Counterparty's rights in the definition of "Material Adverse

Effect".

It is assumed that, other than in respect of the Guarantee, the Hedging Agreements themselves will

(to the extent appropriate) address the position between the relevant Obligor and a Hedge

Counterparty and that it would not necessarily be appropriate for the other provisions of the

Leveraged Document to apply to the Hedge Counterparties.

"Funds Flow Statement": this is an important document which sets out the payments to be made at

Completion.

"Group": this includes the Target and its subsidiaries and, therefore, these companies will be

subject to the Representations, Undertakings and Events of Default for the period between signing

of the Facility Agreement and Completion.

"Group Structure Chart": this is intended to show the Group as it will be at Completion.

"Hedge Counterparties": the Hedge Counterparties' rights under the Hedging Agreements will be

secured and, therefore, the Hedge Counterparties will need to accede as parties to the Intercreditor

Agreement. The Hedge Counterparties are also required to accede to the Leveraged Document,

principally to ensure that they obtain the benefit of the Guarantee.

"Hedging Agreement": this definition is intended to allow the Hedging Agreements to hedge, in

aggregate, notional amounts in excess of those required by the Hedging Letter. It is assumed that

controls on the total notional amounts hedged are contained in the Intercreditor Agreement. (The

LMA Intercreditor Agreement contains such controls.)

"Hedging Letter": the LMA publishes a recommended form of Hedging Letter for Leveraged

Acquisition Finance Transactions (Senior / Mezzanine) which is designed for use with, and

contemplates the hedging structure envisaged by, the Leveraged Document and the LMA


"Impaired Agent": an Agent:

(a) which fails to make a payment required to be made by it under the Finance

Documents (subject to a grace period for payment failures caused by

administrative/technical errors and to an exception for a good faith dispute of the

obligation to make that payment);

(b) which otherwise rescinds or repudiates a Finance Document;


(c) which is a Defaulting Lender; or

(d) with respect to which an Insolvency Event has occurred and is continuing

will be an "Impaired Agent".

The key consequences of the Agent being an Impaired Agent are that:

(a) the Majority Lenders can remove the Agent by appointing a replacement Agent (see

Clause 32.13 (Replacement of the Agent));

(b) Lenders and Obligors may use alternative means of making payments under the

Finance Documents in place of making payments through the Agent (see Clause

35.5 (Impaired Agent)); and

(c) notices and communications may be made directly between the Parties instead of

through the Agent (see Clause 37.5 (Communication when Agent is Impaired

Agent)).

"Information Package": this will need to be tailored to the particular transaction, but it is intended

to include all of the information based upon which the Original Lenders have made their decision to

lend.

"Insolvency Event": this definition is used in the definition of "Defaulting Lender" and "Impaired

Agent". As is footnoted in the Leveraged Document, other than the optional paragraph (f) and the

carve-out to paragraph (h), it is based on the Bankruptcy event of default definition in ISDA Master

Agreement documentation. Paragraph (f) allows the user to include an express reference to the

procedures that may be exercised in respect of banks under the Banking Act 2009 - as is footnoted

in the Leveraged Document users should note that the Banking Act 2009 would allow for the

effectiveness of this limb to be disapplied in certain circumstances and that it is possible that, in

some contexts, regulators may constrain borrowers from agreeing to its inclusion. The carve-out to

paragraph (h) is intended to exclude from the scope of that paragraph specialist rescue procedures of

regulated entities (such as the Dutch "stille curatele") which are required to be kept confidential.

"Intercreditor Agreement": this agreement is intended to cover the relationship between the

Lenders and the Mezzanine Lenders together with the Ancillary Lenders and the Hedge

Counterparties. It will also deal with the subordination of any Loan Notes, the Vendor Notes and

any intra-group loans (including Structural Intra-Group Loans). For guidance on the LMA

Intercreditor Agreement (which covers all these areas and is designed for use in conjunction with

the Leveraged Document), users should refer to the separate Users Guide to the LMA Intercreditor

Agreement.

"Key-man Policy": to be included if required.

"Major Event of Default" and "Major Representation": these are to be used in conjunction with

the provisions relating to "certain funds" and are the Events of Default and representations which

are not effectively disapplied for the purposes of those provisions.


"Mandatory Prepayment Account": this is an account into which the proceeds of various

transactions are to be paid pending their utilisation for mandatory prepayment of the Facilities.

"Margin": this includes a so-called "ratcheting" margin. Parties should take advice in relation to

the taxation implications of such a margin.

"Material Adverse Effect": this is a very important term in relation to the Leveraged Document.

It is used as a qualifier to many of the representations and undertakings. Its exact wording is

expected to be the subject of negotiation.

"Material Company": this is another key definition. Certain of the provisions for the document

only apply to Material Companies and, therefore, it is important to make sure that it encompasses

all members of the Group which are likely to be important in the context of the Facilities.

"Mezzanine Facility": it is assumed that there will be a separate mezzanine facility agreement on

similar terms to the Leveraged Document, but with customary amendments. The Mezzanine

Facility is secured but subordinated to the Senior Facilities under the Intercreditor Agreement.

"Non-Acceptable L/C Lender": a Lender under the Revolving Facility which either:

(a) does not meet the ratings criteria prescribed in the definition of "Acceptable Bank"

(other than to the extent each Issuing Bank indicates that that Lender is nonetheless

acceptable);

(b) is a Defaulting Lender; or

(c) has failed to make a payment due from it under a Finance Document to another

Finance Party. (There is an option to allow a grace period for payment failures

caused by administrative/technical errors and an option to provide an exception for

good faith disputes of the obligation to make that payment),

will be a "Non-Acceptable L/C Lender".

The key consequences of a Lender being a Non-Acceptable L/C Lender are that:

(a) it must notify the Agent and the Parent that it is a Non-Acceptable L/C Lender (see

Clause 7.4 (Cash collateral by Non-Acceptable L/C Lender and Borrower's option

to provide cash cover));

(b) in respect of an existing letter of credit that has already been issued:

(i) the Issuing Bank may require that Lender to provide it with cash

collateral in respect of that Lender's participation in the relevant Letter

of Credit (see Clause 7.4 (Cash Collateral by Non-Acceptable L/C

Lender and Borrower's option to provide cash cover)); and

(ii) if that Lender fails to provide such cash collateral, the Issuing Bank may

require the relevant Borrower to provide cash cover in respect of that


participation (see Clause 7.5 (Requirement for cash cover from

Borrower)); and

(c) in respect of a proposed Letter of Credit that has been requested but not issued:

(i) the Issuing Bank may require that Lender to provide it with cash

collateral in respect of that Lender's participation in the relevant Letter

of Credit see Clause 7.4 (Cash Collateral by Non-Acceptable L/C Lender

and Borrower's option to provide cash cover);

(ii) if that Lender fails to provide such cash collateral the relevant Borrower

has the option to provide cash cover in respect of that participation see

Clause 7.4 (Cash Collateral by Non-Acceptable L/C Lender and

Borrower's option to provide cash cover); and

(iii) if the Borrower does not provide such cash cover, the Issuing Bank may

reduce the amount of the proposed Letter of Credit by an amount equal

to that Lender's participation in that Letter of Credit (see Clause 6.7

(Reduction of a Letter of Credit) .

The Letter of Credit fee payable for the account of a Non-Acceptable L/C Lender is

reduced proportionately to the extent that a Borrower so provides cash cover in

respect of that Lender's participation in a Letter of Credit (see Clause 7.6

(Regulation and consequences of cash cover provided by Borrower)).

"Original Financial Statements": this will need to be adjusted to take account of the most

appropriate available up to date statements.

"Permitted Acquisition", "Permitted Disposal", "Permitted Distribution", "Permitted Financial

Indebtedness", "Permitted Guarantee", "Permitted Joint Venture", "Permitted Loan",

"Permitted Payment", "Permitted Security" and "Permitted Share Issue": these terms are

exceptions to the relevant negative undertakings contained within Clause 27 (General Undertakings)

of the Leveraged Document. They are intended to be starting points for the draftsman but are

neither exhaustive nor absolute. They will need to be considered for each transaction separately.

They permit transactions which are not expected to be controversial (eg transactions required in

order to complete the Acquisition, transactions entered into in the ordinary course of trading etc);

intra-group transactions which will need to be considered carefully in the light of the security

structure and the need to retain as much value as possible within those members of the Group which

are giving security; and certain transactions which give the Company operational or strategic

flexibility and which are usually associated with a "basket" (which is generally a maximum amount

on an individual transaction, annual or aggregate basis).

"Permitted Transaction": this is a general exception to most of the negative undertakings which is

intended to permit transactions required for the ongoing business of the Group (such as any

transactions (except for the granting of Security or the incurring of Financial Indebtedness) in the

ordinary course of trading on arms length terms.


"Relevant Jurisdiction": this is most likely to be relevant where some members of the Group are

incorporated outside England and Wales; it is also relevant to situations where assets of English

incorporated companies are located outside England and Wales.

"Report on Title": see "Certificate of Title" above.

"Reports": the exact nature of these reports will, of course, differ from transaction to transaction.

"Structural Intra-Group Loans": these are the loans made by the Parent to the Company and any

other loans made by members of the Group as part of the distribution of the sums to be used at

Completion to pay the purchase price for the Acquisition and for the refinancing of any debt to be

made at that time and other permanent intra-group funding arrangements. It may be that Structural

Intra-Group Loans will be subjected to a more restrictive regime than intra-group loans generally

under the Intercreditor Agreement. (Such an approach is accommodated by the LMA Intercreditor

Agreement.)

"Structure Memorandum": this will normally be a paper produced by the relevant reporting

accountants detailing the structure of the financing (debt and equity).


SECTION 2 - THE FACILITIES

Clause 2.2: Increase

If a Lender's Available Commitments are cancelled under Clause 11.7 (Right of cancellation in

relation to a Defaulting Lender) or a Lender's Commitments are cancelled under Clause 11.1

(Illegality) or Clause 11.6 (Right of cancellation and repayment in relation to a single Lender or

Issuing Bank), this Clause allows those cancelled Commitments to be reinstated and assumed by

another Lender or other bank, financial institution, trust, fund or other entity which is selected by

the Parent and which is willing to assume those Commitments.

Clause 2.4: Obligors' Agent

This Clause allows each Obligor to authorise the Parent to act on its behalf as its Agent in relation

to the Finance Documents (including by giving and receiving notices etc and by making

amendments and variations to those documents).

Clause 3.1: Purpose

Clearly this will need to be amended to take account of the particular circumstances of the

Acquisition.

Clause 4.5: Utilisations during the Certain Funds Period

This Clause deals with the disapplication of certain Events of Default and breaches of representation

as "drawstops" in respect of loans made for an Acquisition Purpose (in circumstances where it has

been agreed that the Facilities will be made available on a "certain funds" basis).


SECTION 3 - UTILISATION

Clause 5.3: Currency and Amount

It is assumed that the Term Facilities will only be made available in the Base Currency. It is also

assumed that the Term Facilities will remain outstanding in the Base Currency for the life of the

transaction.

Clause 5.7: Clean down

This provides for the amounts outstanding under the Revolving Facility and under the cash loan

element of the Ancillary Facilities to be reduced (when netted with any cash etc) to zero for a

consecutive period of days during each Financial Year/Half Year. This is intended to ensure that

the Revolving Facility is used only for working capital purposes and not permanent financing.

Clause 6.7: Reduction of a Letter of Credit

This Clause allows an Issuing Bank to reduce the amount of a Letter of Credit requested to be

issued or renewed by an amount equal to the amount of a Non-Acceptable L/C Lender's

participation in that Letter of Credit if:

(a) that Non-Acceptable L/C Lender has failed to provide cash collateral under Clause 7.4 (Cash

Collateral by Non-Acceptable L/C Lender and Borrower's option to provide cash cover); and

(b) the Borrower has not exercised its option to provide cash cover under that Clause.

Clause 7.4: Cash collateral by Non-Acceptable L/C Lender and Borrower's option to provide

cash cover

This Clause enables the Issuing Bank to require a Non-Acceptable L/C Lender to provide it with

cash collateral (in respect of that Lender's obligations to the Issuing Bank under a Letter of Credit)

in an amount equal to that Lender's L/C Proportion of the outstanding amount of that Letter of

Credit or, in the case of a proposed Letter of Credit the amount of that Letter of Credit. The

Clause provides for the return of such cash collateral if that Lender ceases to be a Non-Acceptable

Lender and no amounts are then due and payable from it in respect of that Letter of Credit. If the

Non-Acceptable L/C Lender fails to provide cash collateral in respect of a proposed Letter of

Credit, the Borrower has the option to provide cash cover.

The Clause also requires each Lender under the Revolving Facility to inform the Agent and the

Parent of whether it is a Non-Acceptable L/C Lender when it first becomes a Lender and to inform

the Agent and the Parent if it subsequently becomes a Non-Acceptable L/C Lender.

Clause 7.5: Requirement for cash cover by Borrower

If a Non-Acceptable L/C Lender fails to provide cash collateral pursuant to Clause 7.4 (Cash

collateral by Non-Acceptable L/C Lender and Borrower's option to provide cash cover) in respect of

a Letter of Credit that has been issued, the Issuing Bank can require the relevant Borrower to

provide cash cover in an amount equal to the relevant Lender's L/C Proportion of the outstanding

amount of the relevant Letter of Credit.


Clause 7.6: Regulation and consequences of cash cover provided by Borrower

To the extent a Borrower provides such cash cover under Clauses 7.4 (Cash Collateral by Non-

Acceptable L/C Lender and Borrower's option to provide cash cover) and 7.5 (Requirement for cash

cover by Borrower), it is no longer obliged to pay the Letter of Credit fee for the account of that

Lender.

Clause 9.1: Type of Facility

This is clearly not an exhaustive list.

Clause 9.2: Availability

Ancillary Facilities can only be provided if the Parent and the relevant Lender agree. In these

circumstances that Lender's Commitment under the Ancillary Facility in question is deducted from

that Lender's Revolving Facility Commitment when determining that Lender's Available

Commitment in respect of the Revolving Facility.

Clause 9.4: Repayment of Ancillary Facility

Note that under paragraph (c) Ancillary Lenders may only demand repayment in respect of an

Ancillary Facility if the Revolving Facility has become repayable, if providing an Ancillary Facility

becomes unlawful or if the outstandings under the relevant Ancillary Facility can be refinanced by a

Utilisation of the Revolving Facility.

Clause 9.6: Adjustment for Ancillary Facilities upon acceleration

This provides for a loss sharing mechanism between the Ancillary Facilities and the Revolving

Facility.

Clause 9.8: Affiliates of Lenders as Ancillary Lenders

There is an option for Ancillary Facilities to be provided by an Affiliate of a Lender. In these

circumstances the Affiliate must accede to the Leveraged Document and the Intercreditor

Agreement. The LMA Intercreditor Agreement contains a mechanism under which such an

Affiliate of a Lender will automatically accede to the Leveraged Document upon acceding to the

LMA Intercreditor Agreement in that capacity and that mechanism is cross-referred to, and

provided for, in this Clause.

Clause 9.9: Affiliates of Borrowers

Again this is an optional clause permitting Affiliates of Borrowers to borrow under Ancillary

Facilities. The relevant Affiliate does not have to become a party to the Leveraged Document.

Multi-account Overdrafts

Ancillary Lenders may wish to report Ancillary Facilities provided by way of overdraft facility

comprising more than one account to the UK regulator on a "net" basis (i.e. taking account of cash

balances). The Leveraged Document (and the LMA Intercreditor) contain optional wording


intended to facilitate this. This wording contains two options. The first allows such facilitation

only from a gross limit down to a net limit (each of which are agreed between the Parent and the

Ancillary Lender and notified to the Agent when the facility is established). The second allows

such facilitation without limits. The choice of option is likely to affect the extent to which an

Ancillary Lender is able to report such an overdraft on a net basis. The inclusion of the language

and the choice of option is clearly a matter for commercial agreement. It is assumed that the

relevant Ancillary Lenders will obtain regulatory advice in relation to the ability to report such

facilities "net".


SECTION 4 - REPAYMENT, PREPAYMENT AND CANCELLATION

Clause 10.2: Repayment of Revolving Facility Loans

This Clause contains an optional provision providing for a Defaulting Lender's participation in

Revolving Facility Loans to be automatically termed out and treated as separate term loans existing

under the Revolving Facility. As is footnoted in the Leveraged Document, users should note that

the inclusion of this mechanic may result in the Revolving Facility not always being drawn on a pro

rata basis and that, accordingly, a Defaulting Lender whose participation in Revolving Facility

Loans is termed out in this way may suffer a disproportionate loss if the Borrower defaults when the

only Loans outstanding under the Revolving Facility are those separate terms loans.

Clause 10.4: Effect of cancellation and prepayment on scheduled repayments and reductions

This provides a multiplicity of options for the manner in which prepayments etc are to be applied

(and other alternatives are, of course, possible). These will be expected to be the subject of

negotiation and may differ depending on whether a prepayment is voluntary or mandatory.

Clause 11.7: Right of cancellation in relation to a Defaulting Lender

This Clause allows the Parent to cancel the Available Commitment of any Defaulting Lender.

Clause 12.1: Exit

This provides for the mandatory prepayment of the entirety of the Facilities upon a Flotation,

Change of Control or sale of all or substantially all of the assets of the Group. Unlike in the

Recommended Forms of Primary Documents this prepayment is an automatic requirement upon a

Change of Control, reflecting practice in the leveraged market. If it is intended that the Facilities

will survive a Flotation then amendments will be required.

Clause 12.2: Disposal, Insurance and Acquisition Proceeds and Excess Cashflow

This provision provides for certain proceeds of disposals, insurance claims and claims in respect of

warranties made in connection with the Acquisition together with a specified percentage of Excess

Cashflow in any Financial Year (the "Relevant Proceeds") to be applied by way of mandatory

prepayment of the Facilities. It is expected that these provisions will be substantially negotiated.

Certain proceeds of disposals and claims are expressed to be "excluded". These would have to be

tailored to the particular transaction. Users should note that the LMA Intercreditor Agreement

provides that if such a mandatory prepayment would result in the LMA Intercreditor Agreement

requiring the close-out of a hedging transaction under a Hedging Agreement, the amount to be

prepaid under this provision will be adjusted to provide sufficient funds for the relevant member of

the Group to make any resulting close-out payment under that hedging transaction out of the

Relevant Proceeds. This provision makes a specific cross reference to the relevant clause in the

LMA Intercreditor Agreement.


Clause 12.4: Mandatory Prepayment Accounts and Holding Accounts

Disposal Proceeds, Insurance Proceeds and Acquisition Proceeds are to be paid into a Mandatory

Prepayment Account pending application in prepayment at the end of an Interest Period (if the

Parent has elected to do so). If any amounts of Disposal Proceeds, Insurance Proceeds or

Acquisition Proceeds are to be applied in replacement, reinstatement or repair of assets then they

are paid into a Holding Account pending application in this manner.

Clause 13.8: Prepayment elections

Under this provision a Lender under Facility B or Facility C can elect not to receive part of its

share of any prepayment with the resulting extra amount being applied in prepayment of Facility A.


SECTION 5 - COSTS OF UTILISATION

Clause 16: Changes to the calculation of interest

This clause incorporates optional wording intended to restrict the likelihood of the rate of interest

being determined on a cost of funds basis by reason either of insufficient Base Reference Banks

providing quotations or lenders' funding costs exceeding the specified interest rate benchmark. It

does this by:

(a) determining the interest rate benchmark by reference to quotations provided by a wider

group of reference banks (referred to as the "Alternative Reference Bank Rate") than the

standard reference banks taken from the syndicate as an intermediate step before use of the

cost of funds provisions; and

(b) then requiring a larger percentage of lenders to report funding costs in excess of the

specified interest rate benchmark.

Clause 16.1: Unavailability of Screen Rate

The above optional wording means that the two forms of this clause are different to those contained

in the Recommended Forms of Primary Document: if a Base Reference Bank Rate is unavailable,

each form of this Clause determines the relevant interest rate benchmark on the basis of the

Alternative Reference Bank Rate. Only if an Alternative Reference Bank Rate is also unavailable is

the benchmark determined on a cost of funds basis.

They are each shown diagrammatically below.

First form of Clause 16.1 (Unavailability of Screen Rate).


Screen Rate unavailable

Interpolated Screen Rate

Shorten Interest Period to

Fallback Interest Period and

use Screen Rate for that

Fallback Interest Period

Interest Period remains


use Interpolated Screen Rate

for that Fallback Interest

Period



use Historic Screen Rate for

that Fallback Interest Period



use Interpolated Historic

Screen Rate for that Fallback

Interest Period

If relevant option is included,

Interest Period returns to

original length and use

Reference Bank Rate for

original Interest Period

If relevant option is included,

Interest Period remains at

original length and use

Alternative Reference Bank

Rate for original Interest

Period

failing which......

failing which......

failing which......

failing which......

failing which......

failing which......

Interest Period returns to/

remains at original length. No

benchmark and use of cost of

funds

failing which......


Second Form of Clause 16.1 (Unavailability of Screen Rate)

failing which.....

failing which.....

Screen Rate

unavailable

Interpolated Screen

Rate

If relevant option is

included, use

Reference Bank Rate

If relevant option is

included, use

Alternative Reference

Bank Rate

failing which.....

No benchmark and use

of cost of funds

Clause 17.1: Commitment Fee

This clause contains an optional paragraph which provides that no commitment fee is payable to a

Lender for any day on which that Lender is a Defaulting Lender.

Clause 17.4: Security Agent fee

Sometimes this fee will be encompassed within the agency fee.

Clause 17.6: Interest, commission and fees on Ancillary Facilities

These are to be dealt with bilaterally between the relevant Ancillary Lender and Borrower.


SECTION 6 - ADDITIONAL PAYMENT OBLIGATIONS

Clause 20.2: Other indemnities

Paragraph (b) contains a general indemnity relating to the Acquisition.

Clause 20.4: Indemnity to the Security Agent

This indemnity could equally be contained within the Intercreditor Agreement and, to the extent that

this is the case, this indemnity can be removed from the Leveraged Document to avoid unnecessary

overlap. (The LMA Intercreditor Agreement contains such an indemnity.)

Clause 22.3: Security Agent's management time and additional remuneration

This provision could equally be contained within the Intercreditor Agreement and, to the extent that

this is the case, this provision can be removed from the Leveraged Document to avoid unnecessary

overlap. (The LMA Intercreditor Agreement contains such a provision.)


SECTION 7 - GUARANTEE

Clause 23.5: Guarantor Intent

This provision is intended to make clear that the guarantee is expected to cover all amounts

outstanding under the Finance Documents notwithstanding any variations etc which may occur in

the future. Its effect needs to be considered each time any such variations etc are contemplated.

Clause 23.11: Guarantee Limitations

This provision should be carefully considered in the context of the facts of the relevant transaction.

It is intended to limit liabilities of the Guarantors so that they are not in breach of any applicable

law relating to unlawful financial assistance etc.


SECTION 8 - REPRESENTATIONS, UNDERTAKINGS AND EVENTS OF DEFAULT

Generally speaking these are fuller than those contained within the Recommended Forms of Primary

Documents. They are designed to be a starting point for negotiation and should not be considered

as the only representations, undertakings and events of default that are to be included in any

particular Facility. Each transaction will have its own requirements. It may also be necessary to

obtain advice in the jurisdiction of incorporation of the Obligors to determine if there are specific

provisions, including legal representations, that should be included in respect of the relevant

Obligors.

Clause 24.12: No misleading information

The information warranties are particularly important in relation to a leveraged finance transaction

and it is expected that this provision will be one which is the subject of particular negotiation. Note

that there is an option to provide that the representations and warranties made in respect of the

Reports are made only so far as the relevant Obligor is aware after making due and careful

enquiries.

Clause 24.13: Original Financial Statements

In a leveraged finance transaction the question of which statements to use as the Original Financial

Statements is not as straightforward as in an investment grade transaction and, therefore, this

provision may well need amendment to cope with the particular circumstances of the transaction.

Clause 24.18: Anti-corruption law

Provisions specifically addressing anti-corruption legislation may be required by some Lenders.

Clause 24.26: Obligors

Note that there is an option either to provide that all non-dormant Subsidiaries will be Obligors or to

provide that Material Companies need to be Obligors. There is also an option to require that the

facilities must be guaranteed by guarantors representing a fixed percentage of EBITDA, gross

assets, net assets and turnover (or any combination of these).

Clause 24.32: Holding and Dormant Companies

It is assumed that the Parent and Company will be pure holding companies which do not trade or

have any other liabilities.

Clause 24.33: Times when representations made

It will be necessary to consider carefully when the various representations are repeated. Practice in

the leveraged market is for more representations to be repeated than would be normal in the

investment grade market and it is important to understand when the transaction will be syndicated

and what representations will be needed at the time of syndication.


Clause 25: Information Undertakings

The assumption is that monthly financial statements as well as quarterly and annual statements will

be delivered. The Clause provides suggestions as to what will be contained within these statements,

although this will be a matter for negotiation in each case. Generally speaking the information

required under the Leveraged Document is much fuller than that required under the Recommended

Forms of Primary Documents.

Users should refer to the LMA memorandum entitled "Auditor choice provisions in LMA facility

documentation" (available through the LMA website) for commentary on the approach taken in the

Leveraged Document in relation to upcoming EU legislation which will impact the legality of

contractual restrictions on a company's choice of auditor.

Clause 26: Financial Covenants

Guidance is contained in the separate Financial Covenants Provisions User's Guide.

Clause 27: General Undertakings

Generally speaking these are fuller than those contained within the Recommended Forms of Primary

Documents. In particular, the negative undertakings are much more wide ranging.

Clause 27.5: Anti-corruption law

Provisions specifically addressing anti-corruption legislation may be required by some Lenders.

Clause 27.21: Dividends and share redemption

It is assumed that if further restrictions are to be applied to the payment of dividends and the

redemption of shares by the Parent and the Company, that these will be provided for in the


Clause 27.22: Loan Notes and Vendor Loan Notes

This Clause envisages that certain payments under the Loan Notes and/or the Vendor Loan Notes

may be permitted. It does not attempt to specify these on the basis that they are likely to vary

widely on a case-by-case basis.

Clause 27.23: Mezzanine Facility and Structural Intra-Group Loans

It is assumed that payment of amounts under the Mezzanine Facility and Structural Intra-Group

Loans will only be permitted if allowed under the Intercreditor Agreement. (The LMA Intercreditor

Agreement contains further restrictions on the payment of such amounts.)

Clause 27.27: Pensions

The wording included is a suggestion only and the detail of this provision will need to be considered

on a case by case basis.


Clause 27.36: Cash management

This requires members of the Group to hold only enough cash etc that may be required for their

cashflow requirements over a certain period of time. Any excess is to be lent up to the Company.

Whether or not this is feasible will have to be investigated in each case.

Clause 27.39: Syndication

To be included if, as is usual in leveraged finance transactions, the transaction is to be syndicated

after signing of the agreement.

Clause 28: Events of Default

In line with practice in the leveraged finance market these are somewhat fuller than those which

would normally be found in an investment grade transaction.

Clause 28.13: Change of management

This deals with the termination of employment of key management personnel.

Clause 28.19: Material adverse change

A suggestion has been made here. The exact form is likely to differ from transaction to transaction.

Clause 28.21: Clean-Up Period

If it is agreed that certain representations, undertakings and Events of Default are to be disapplied

for a period following Completion this optional provision will need to be included.


SECTION 9 - CHANGES TO PARTIES

Clause 29.2: Conditions of assignment or transfer

Consent of the Company/Parent is not required under this provision for assignment or transfer.

Instead there is a consultation requirement. Of course, Borrowers may wish to negotiate with

regards to consent provisions. Note that New Lenders will be required to enter into accession

documentation in relation to the Intercreditor Agreement before a transfer or assignment will be

effective. The forms of Transfer Certificate and Assignment Agreement scheduled to the

Agreement incorporate an accession mechanic to the LMA Intercreditor Agreement which accords

with the relevant accession provisions of the LMA Intercreditor Agreement.

An option is contained at paragraph (c) pursuant to which a Lender is restricted from making partial

transfers or assignments to the extent that this would result in the Lender's participation falling

below a (specified) minimum level.

Clause 29.8: Accession of Hedge Counterparties

The LMA Intercreditor Agreement contains a mechanism under which a person which accedes to

the LMA Intercreditor Agreement as a Hedge Counterparty will automatically accede to the

Leveraged Document as a Hedge Counterparty and that mechanism is cross-referred to, and

provided for, here.

Clause 31.3: Resignation of a Borrower

This provides detailed rules as to when Borrowers can resign upon the relevant Borrowers being

disposed of outside the Group. Similar provisions are contained within Clause 31.5 (Resignation of

a Guarantor). Note that the LMA Intercreditor Agreement provides that no Guarantor may resign

without the consent of the Hedge Counterparties and that, for ease of use, those restrictions are

expressly cross-referred to here.


SECTION 10 - THE FINANCE PARTIES

Clause 32.7: Rights and discretions

Paragraph (h) of this Clause allows the Agent to disclose a Defaulting Lender's identity to the

Finance Parties and the Parent and obliges the Agent to do so following a request by either the

Parent or the Majority Lenders.

Clause 32.13: Replacement of the Agent

This Clause allows the Majority Lenders to replace the Agent by giving the Agent 30 days' notice.

If the Agent is an Impaired Agent the notice period can be any shorter period as determined by the

Majority Lenders.

Clause 32.19: Reliance and engagement letters

This authorises the Arranger and Agent to accept the terms of any reliance letters or engagement

letters relating to the Report or any other accountants' engagement letters.


SECTION 11 - ADMINISTRATION

Clause 35.5: Impaired Agent

This Clause provides an alternative to making payments through the Agent at a time when the Agent

is an Impaired Agent and before the appointment of a replacement Agent. In those circumstances

the Clause allows the Obligors and the Lenders to make any payment due under the Finance

Documents direct to the required recipient, or if such a direct payment is not practicable, into a

designated trust account held with a bank (which meets the ratings criteria prescribed in the

definition of "Acceptable Bank" and which has not suffered an Insolvency Event) instead of to the

Impaired Agent.

Clause 37.5: Communication when Agent is Impaired Agent

This Clause provides an alternative to communicating through the Agent at a time when the Agent

is an Impaired Agent and before the appointment of a replacement Agent. In those circumstances

the Clause allows the Parties to communicate directly with each other notwithstanding any provision

in any Finance Document requiring such communications to be made through the Agent.

Clause 41.3: All Lender matters

Exceptions to the rule that all amendments and waivers can be made with Majority Lender consent

are slightly longer to deal with the secured nature of the facilities.

Clause 41.6: Structural Adjustment

This optional Clause allows changes to the structure and size of the Facilities which would

otherwise require all Lender consent to be made instead with the consent of (i) the affected Lenders

and (ii) a specified majority of the Lenders. The Clause contains three types of structural

adjustment which are treated separately to allow users to specify different consent groups for each

type of structural adjustment (if this reflects the commercial agreement):

(a) Major Structural Adjustment: this is an alteration to the Facilities, or the insertion of a new

Facility, where the size of the Facilities is increased (subject to an optional cap) or where

the currency of a Facility or of an amount payable is changed;

(b) Minor Structural Adjustment: this is an alteration to the Facilities, or insertion of a new

Facility, which does not result in an increase in the size of the Facilities or a change in

currency of a Facility or of an amount payable; and

(c) Payables Reduction: this is an amendment which results in the extension of a payment date

or a reduction in any amount payable.

Users should note that the extent to which the Clause should permit a release and retaking of the

Transaction Security, or of the guarantee, to facilitate a structural adjustment without all Lender

consent, and the extent of any qualification to that permission, should be considered in the context

of the facts of the relevant transaction.


Clause 41.7: Excluded Commitments

This Clause (often referred to as "Snooze and lose") provides that if a Lender fails to respond to a

request for a consent, waiver or amendment within a specified time-frame it will not be taken into

account in calculating whether the requisite consent level has been reached. It is suggested as an

optional Clause for Lenders generally but as a standard Clause for Defaulting Lenders.

Clause 41.8: Replacement of Lender

This provision permits the Parent to replace a Lender which does not (in certain circumstances)

agree to a waiver or amendment requested by the Parent or which has a problem relating to

illegality, increased costs or taxes. It may not be appropriate for all transactions.

Clause 41.9: Disenfranchisement of Defaulting Lenders

This Clause is intended to remove a Defaulting Lender's voting rights attributable to that Defaulting

Lender's Available Commitment and sets out the circumstances in which, for those purposes, the

Agent is entitled to assume that a Lender is a Defaulting Lender.

Clause 41.10: Replacement of a Defaulting Lender

This provision allows the Parent to replace a Defaulting Lender.

Clause 44: Disclosure of Lender details by Agent

This Clause sets out the circumstances in which the Agent is required to provide a list of the

Lenders' ‎details.‎

The Agent is required to:‎

‎(a) provide to the Parent a list identifying the Lenders, their Commitments, notice details and

account ‎details. It is optional as to whether this is required to be provided on a routine

monthly basis or at the ‎request of the Parent only;‎

‎(b) additionally provide details of the Lenders and their Commitments to any member of the

Group, ‎upon request by the Parent;‎

‎(c) provide details of the Lenders and their Commitments to any other party to the Agreement

upon ‎request of the Parent to facilitate a refinancing or material amendment or waiver;‎

‎(d) provide details of Lenders and their Commitments among Lenders who have agreed to share

their ‎Commitment levels with each other. The Agent is required to ask the Lenders

whether they so agree if ‎requested to do so by Lenders holding 15% of the Facilities; and‎

‎(e) confirm, if requested by a Lender, the extent to which any institution which becomes

insolvent or is ‎downgraded below investment grade has a participation in the Facilities.‎


THE SCHEDULES

Schedule 2 : Conditions Precedent

Given the secured nature of the transaction these are fuller than those contained within the

Recommended Forms of Primary Documents. They will differ significantly from transaction to

transaction.