USERS GUIDE FORM OF FACILITY AGREEMENT FOR LEVERAGED ACQUISITION FINANCE TRANSACTIONS (SENIOR / MEZZANINE) NOVEMBER 2014

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1 For the avoidance of doubt, this Users Guide, the Leveraged Document and the LMA Intercreditor Agreement are in a nonbinding, 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 November 2014

2 CONTENTS 1. Important Notice Introduction The Transaction Anatomy Of The Leveraged Document Section By Section Guide To The Leveraged Document LMA.UserGuide.LeveragedFinanceFacilityAgmt November 2014

3 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. LMA.UserGuide.LeveragedFinanceFacilityAgmt November 2014

4 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 Comments were also taken from the LMA's Institutional Investors Committee. The Leveraged Document was then revised in 2005 and again in 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 & LMA.UserGuide.LeveragedFinanceFacilityAgmt November 2014

5 Customs. The Leveraged Document and the LMA Intercreditor Agreement were both subject to a major update in September 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 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 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. LMA.UserGuide.LeveragedFinanceFacilityAgmt November 2014

6 (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 LMA.UserGuide.LeveragedFinanceFacilityAgmt November 2014

7 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. LMA.UserGuide.LeveragedFinanceFacilityAgmt November 2014

8 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. LMA.UserGuide.LeveragedFinanceFacilityAgmt November 2014

9 Debt Structure Chart Investors Equity Investment by way of Loan Notes Equity Investment by way of subscription for Shares of Parent (including Preference Shares) Vendor Vendor Note (deferred Purchase Price) Parent Warrants Subscription for shares of Company (downstreaming equity investment) and Structural Intra Group Loan (downstreaming equity investment) Mezzanine Lenders Mezzanine Loan Company (Purchaser) Senior Loan (Term Facilities A, B and C plus Revolver) Senior Lenders Acquisition Target Company Subsidiary 1 of Target Subsidiary 2 of Target Subsidiary 3 of Target LMA.UserGuide.LeveragedFinanceFacilityAgmt November 2014

10 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 above, it is important to note that LMA.UserGuide.LeveragedFinanceFacilityAgmt November 2014

11 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. LMA.UserGuide.LeveragedFinanceFacilityAgmt November 2014

12 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. LMA.UserGuide.LeveragedFinanceFacilityAgmt November 2014

13 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. LMA.UserGuide.LeveragedFinanceFacilityAgmt November 2014

14 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. LMA.UserGuide.LeveragedFinanceFacilityAgmt November 2014

15 "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) (b) (c) (d) 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; which otherwise rescinds or repudiates a Finance Document; 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 (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"); LMA.UserGuide.LeveragedFinanceFacilityAgmt November 2014

16 (b) (c) (d) (e) (f) (g) (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)); 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)); (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)); its identity may be disclosed to the other Finance Parties and the Parent (see Clause 32.7 (Rights and discretions)); it shall cease to have a vote to the extent of its undrawn Commitments (see Clause 41.9 (Disenfranchisement of Defaulting Lenders)); 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 (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) (b) (c) for the purposes of the Guarantee; where necessary in the context of the transaction (for example to include the arrangements documented by each Hedging Agreement as a "Permitted Transaction"); and 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. LMA.UserGuide.LeveragedFinanceFacilityAgmt November 2014

17 "Finance Party": in a similar way to the definition of "Finance Document", this definition includes each Hedge Counterparty as a Finance Party only: (a) (b) (c) for the purposes of the Guarantee; where necessary in the context of the transaction (for example to include each Hedge Counterparty as a "Secured Party"); and 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 Intercreditor Agreement. "Impaired Agent": an Agent: (a) (b) 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); which otherwise rescinds or repudiates a Finance Document; LMA.UserGuide.LeveragedFinanceFacilityAgmt November 2014

18 (c) (d) which is a Defaulting Lender; or 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) (b) (c) the Majority Lenders can remove the Agent by appointing a replacement Agent (see Clause (Replacement of the Agent)); 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 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 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. LMA.UserGuide.LeveragedFinanceFacilityAgmt November 2014

19 "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) (b) (c) 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); is a Defaulting Lender; or 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) (b) 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)); in respect of an existing letter of credit that has already been issued: (i) (ii) 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 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 LMA.UserGuide.LeveragedFinanceFacilityAgmt November 2014

20 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) (ii) (iii) 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); 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 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. LMA.UserGuide.LeveragedFinanceFacilityAgmt November 2014

21 "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). LMA.UserGuide.LeveragedFinanceFacilityAgmt November 2014

22 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). LMA.UserGuide.LeveragedFinanceFacilityAgmt November 2014

23 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. LMA.UserGuide.LeveragedFinanceFacilityAgmt November 2014

24 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 LMA.UserGuide.LeveragedFinanceFacilityAgmt November 2014

25 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". LMA.UserGuide.LeveragedFinanceFacilityAgmt November 2014

26 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. LMA.UserGuide.LeveragedFinanceFacilityAgmt November 2014

27 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. LMA.UserGuide.LeveragedFinanceFacilityAgmt November 2014