A Loan Market Association GuideA Loan Market Association Guide

Guide to Agency ProtectionsApril 2015

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ALOANMARKETASSOCIATIONGUIDE

AGUIDETOAGENCYPROTECTIONS

Loan Market Association

10 Upper Bank Street, London E14 5JJ

© Loan Market Association 2015

Published by the Loan Market Association in April 2015

10 Upper Bank Street, London E14 5JJ

Telephone: +44 (0)20 7006 6007 Fax: +44 (0)20 7006 3423

Email: lma@lma.eu.com Website: www.lma.eu.com

All rights reserved. No part of this publication may be reproduced, stored in any retrieval system or transmitted in any form or by any means, electronic,

mechanical, photocopying, recording or otherwise, without prior written permission of the copyright holder, for which application should be addressed in the first instance to the publishers. No liability shall attach to the authors,

the copyright holder or the publishers for loss or damage of any nature suffered as a result of the reproduction of any of the contents of this

publication.

The views and opinions expressed in this publication are the views of the authors. The Loan Market Association and the authors have made every effort to ensure the complete accuracy of the text but none of the Loan Market Association, the authors or the publishers can accept any legal

responsibility or liability for any error or omission in its contents.

This "Guide to Agency Protections" is not intended to be completely comprehensive. Rather, it seeks to provide an overview of the protections afforded to an agent under LMA facility documentation. Most importantly,

this publication is not designed to provide legal or other advice on any matter whatsoever.

TheLoanMarketAssociation

The Loan Market Association (LMA) is the trade body for the Europe, Middle East and Africa (EMEA) syndicated loan market and was founded in December 1996 by banks operating in that market. Its aim is to encourage liquidity in both the primary and secondary loan markets by promoting efficiency and transparency, as well as by developing standards of documentation and codes of market practice, which are widely used and adopted. Membership of the LMA currently stands at over 550, covering 50+ nationalities, and consists of

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banks, non-bank lenders, law firms, rating agencies and service providers. The LMA has gained substantial recognition in the market and has expanded its activities to include all aspects of the primary and secondary syndicated loan markets. It sees its overall mission as acting as the authoritative voice of the EMEA loan market vis à vis lenders, borrowers, regulators and other interested parties.

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CONTENTS

Page Number

INTRODUCTION 3

PROTECTIONS GIVEN TO AN AGENT IN LMA FACILITY DOCUMENTATION

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INTRODUCTION

In syndicated loan agreements the role of an agent is intended to be solely mechanical and administrative in nature1. The LMA Guide to Syndicated Loans and Leveraged Finance Transactions identifies the agent's functions as acting as a point of contact with all parties to the agreement, monitoring compliance of obligors with certain requirements in the agreement, acting as a post box, postman and record keeper and finally acting as a paying agent for all payments made under the loan agreement. The agent is appointed by the arranger and the lenders, and acts on their behalf and not on behalf of the obligors.

Whilst the agent under a syndicated loan agreement has various duties, tasks and authorities, it is generally accepted in the syndicated loan market that so long as the agent carries out those functions with reasonable skill and care, the agent should be protected from any loss or liability in carrying out those functions. An LMA facility agreement therefore contains a number of protective provisions which seek to exclude the Agent from any such loss and liability.

The purpose of this guide is not to provide a general overview of the workings of an agent bank acting within syndicated facilities. Instead the guide seeks to provide an overview of the principal protections provided in an LMA facility agreement, and assist agents, arrangers, lenders and those agreeing loan documentation to identify the standard protections that an agent under a loan agreement would expect to benefit from. Any amendments to a loan agreement, which either have the effect of extending the duties of the agent or limiting the protections of the agent, should be considered carefully. Agent approval should also be sought before any such changes are made or agreed.

This guide uses, where appropriate, relevant extracts from the recommended form of Senior Multicurrency Term and Revolving Facilities Agreement for Leveraged Acquisition Finance Transactions produced by the LMA (FacilityAgreement). Clause references refer to the Facility Agreement and terms defined in the Facility Agreement have the same meaning when used in this guide.

1 Clause 32.3(a) (DutiesoftheAgent)

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PROTECTIONSGIVENTOTHEAGENTINLMAFACILITYDOCUMENTATION

The following protections are included in LMA recommended form facility agreements:-

A. LIMITATIONOFDUTIES

The arranger, lenders and issuing bank (if any) expressly authorise the agent to perform the duties, obligations and responsibilities specifically given to it in the Finance Documents together with any other incidental rights, powers authorities and discretions2.

The agent only has the duties, obligations and responsibilities that are specified in the loan agreement, and no others shall be implied3. Any fiduciary or trustee duties that may otherwise arise from acting as the agent are expressly excluded.

The role of the agent in a syndicated loan is expressed to be solely mechanical and administrative in nature4.

Unless otherwise specified, the agent is not obliged to review or check the adequacy, accuracy or completeness of any document it forwards to any party5. The agent is not responsible or liable for:

(i) any information supplied by it in connection with the Finance Documents6;

(ii) any Finance Document, Transaction Security or other document connected to the Finance Documents or Transaction Security7;

(iii) any determination as to whether any information is non-public information8.

The agent benefits from a confirmation from each Lender that it is solely responsible for making its own assessment of all risks in relation to the Finance Documents including, for example, the creditworthiness of the obligors, all aspects of the transaction documentation, its own legal position vis-à-vis the other parties and all information provided to it from whatever source9.

2 Clause 32.1(b) (AppointmentoftheAgent) 3 Clause 32.3(g) (DutiesoftheAgent) 4 Clause 32.3(a) (DutiesoftheAgent) 5 Clause 32.3(d) (DutiesoftheAgent) 6 Clause 32.8(a) (DutiesoftheAgent) 7 Clause 32.8(b) (DutiesoftheAgent) 8 Clause 32.8(c) (DutiesoftheAgent) 9 Clause 32.16 (CreditappraisalbytheLender)

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The agent is not required to carry out "know your customer" (KYC) checks on behalf of a lender or other checks as to whether the transaction contemplated may be unlawful for a lender. The agent benefits from a confirmation that each lender is solely responsible for any such checks and may not rely on any statement relating to such checks made by the agent10. An agent is not obliged to sign an otherwise duly completed Assignment Agreement or Transfer Certificate until it is satisfied that is has complied with all necessary KYC or similar checks in relation to a New Lender11. Similarly, an assignment of rights will only be effective once the agent has performed all necessary KYC or similar checks in relation to such assignment to a New Lender12.

B. RIGHTSANDDISCRETIONS

The agent is not obliged to do, or omit to do, anything which would or might (in its reasonable opinion) constitute a breach of any law or regulation, or a breach of a fiduciary duty or duty of confidentiality13.

The agent may rely on any representation, communication, notice or document believed by it to be genuine, correct and appropriately authorised14. Absent actual knowledge, the agent may assume that no default has occurred under the finance documents15.

In the case of certificates, the agent may rely on the truth and accuracy of a certificate as to any matter of fact or circumstance which might reasonably be expected to be within the knowledge of the person providing the certificate. In the case of a certificate approving a particular dealing, transaction, step or action, the agent may rely on that certificate16.

Unless a Finance Document states otherwise, the agent may act or refrain from acting in relation to any right, power, authority or discretion in accordance with the instructions of the Majority Lenders17, with any such instruction being binding on all Finance Parties save for the Security Agent18. The agent may assume that any instructions it receives from any lender or group of lenders are given in accordance with the Finance Documents and absent notice to the contrary, that such instructions have not been

10 Clause 32.10(d) (Exclusionofliability) 11 Clause 29.5(b) (Procedurefortransfer)/Clause 29.6(b) (Procedureforassignment)12 Clause 29.2(d)(iii) (Conditionsofassignmentortransfer)13 Clause 32.7(i) (Rightsanddiscretions) 14 Clause 32.7(a)(i) (Rightsanddiscretions) 15 Clause 32.7(b) (Rightsanddiscretions) 16 Clause 32.7(a)(iii) (Rightsanddiscretions) 17 Clause 32.2 (Instructions) 18 Clause 32.2(c) (Instructions)

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revoked19. The agent is entitled to refrain from acting in accordance with any instructions of any lender or group of lenders until it has received any indemnification and/or security that it may in its discretion require20. In the absence of instructions, the agent may act (or refrain from acting) as it considers to be in the best interest of the lenders21.

The agent may engage22 and rely on23 the advice or services of professional advisers, including accountants and lawyers, and is not liable for any damages, costs, losses, diminution in value or any liability whatsoever arising as a result of the agent relying on such advice. If the agent in its reasonable opinion deems it desirable, it may also engage and pay for the services of any lawyers to act as independent counsel to the agent24.

The agent may disclose to any other party any information it reasonably believes it has received as agent unless a Finance Document provides otherwise25. In addition and without prejudice to the generality of this permission, the agent is expressly permitted to disclose the identity of a Defaulting Lender to the Parent and other Finance Parties26.

The agent may act through its officers, employees and agents and is not responsible for any errors of judgments they may make or be bound to supervise them. Equally, the agent is not responsible for any loss incurred by reason of their misconduct, omission or default unless directly caused by the agent's gross negligence or wilful misconduct27.

The agent is not obliged to incur cost, risk its own funds or incur financial liability in acting as agent if it has grounds for believing the repayment of such funds or adequate indemnity or security is not reasonably assured to it28.

The agent is not obliged to enquire whether there has been a default by an obligor, whether any party is in breach of any of its obligations or whether any other event specified in a Finance Document has occurred29.

An agent may, in its sole discretion, terminate its role or resign and appoint

19 Clause 32.7(a)(ii) (Rightsanddiscretions) 20 Clause 32.3(d) (DutiesoftheAgent) 21 Clause 32.2(e) (Instructions) 22 Clause 32.7(c) (Rightsanddiscretion) 23 Clause 32.7(e) (Rightsanddiscretion) 24 Clause 32.7(d) (Rightsanddiscretion) 25 Clause 32.7(g) (Rightsanddiscretions) 26 Clause 32.7(h) (Rightsanddiscretion) 27 Clause 32.7(f) (Rightsanddiscretion)28 Clause 32.7(j) (Rightsanddiscretion) 29 Clause 32.9 (Nodutytomonitor)

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one of its Affiliates in its place30.

C. EXCLUSIONSOFLIABILITY

The agent is protected from any liability whatsoever (including for negligence) unless the damages, costs, losses, diminution in value or liability arises as a result of taking or not taking any action under or in connection with any Finance Document or the Transaction Security and it is directly caused by the agent's gross negligence or wilful misconduct31.

Officers, employees and agents of the agent are protected from any proceedings being taken against them by any Party (other than the agent) in respect of any potential claim or act or omission by them and each officer, employee and agent is entitled to rely on this exclusion32.

The agent is not liable for the consequences of any delay in crediting an account with a required amount if it has taken all necessary steps as soon as reasonably practicable to comply with the rules of any recognised clearing or settlement system33.

The agent is not liable for any damages, costs or losses whatsoever as a result of giving notice to the Parent and the Lenders that it has received all condition precedent documentation in relation to an Additional Borrower or Additional Guarantor34.

To the extent the agent is liable for any losses, they are limited to the amount of actual loss which has been finally judicially determined but without reference to any special conditions or circumstances known to the agent. In no event is the agent liable for loss of profits, goodwill, reputation, business opportunity or anticipated saving or for special, punitive, indirect or consequential damages whether or not advised to the agent as a possibility35.

D. INDEMNITIES

I. PARENT'SINDEMNITYTOTHEAGENT

In addition to the indemnities given in favour of all of the Finance Parties, the agent benefits from an indemnity given to it by the Parent for any cost, loss or liability incurred by the agent (acting reasonably), (i) in investigating any event which the agent reasonably believes is a Default, (ii) for acting or

30 Clause 32.12 (ResignationoftheAgent)31 Clause 32.10(Exclusionofliability)32 Clause 32.10(b) (Exclusionofliability) 33 Clause 32.10(c) (Exclusionofliability) 34 Clause 31.2(c) (AdditionalBorrowers)and Clause 31.4(f) (AdditionalGuarantors)35 Clause 32.10(e) (Exclusionofliability)

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relying on an instruction which it reasonably believes to be genuine, correct and appropriately authorised, (iii) in instructing professional advisers or experts as permitted, and (iv) for any other cost, loss or liability incurred by the agent in acting as agent under the Finance Documents36. This indemnity does not apply where any loss arises by virtue of the agent's gross negligence or wilful misconduct except where the liability arises as a result of the agent taking or failing to take any steps under Clause 35.11 (DisruptiontoPayment Systems etc), in which case the indemnity covers all categories of liability except any claim based on the fraud of the agent37.

II. LENDERS'INDEMNITYTOTHEAGENT38

Each lender must indemnify the agent within 3 Business Days of demand, prorata to its share of the Total Commitments, for any cost, loss or liability incurred by the agent. This indemnity does not apply where the loss, cost or liability arises as a result of the agent's gross negligence or wilful misconduct except where the cost, loss or liability arises as a result of the agent taking or failing to take any steps under Clause 35.11 (Disruptiontopaymentsystemsetc), in which case the indemnity covers all categories of liability except any claim based on the fraud of the agent. This indemnity applies to the extent that the agent has not been reimbursed by the borrower in accordance with the Finance Documents.

E. PAYMENTPROTECTION

I. FEES,COSTSANDEXPENSES

The agent is paid an agency fee by the Parent in an amount and at the times agreed in a Fee Letter39.

The Parent must pay the agent promptly on demand the amount of all reasonably incurred costs and expenses (including legal fees) in connection with the negotiation, preparation, printing, execution, syndication and perfection of (i) the transaction documentation and (ii) any Finance Documents entered into after completion40.

If an Obligor requests an amendment, waiver or consent or an amendment is required as a result of a change in the lawful currency of a country pursuant to Clause 35.10 (Changeofcurrency), the Parent must pay the agent within 3

36 Clause 20.3 (IndemnitytotheAgent) 37 Clause 20.3 (IndemnitytotheAgent) 38 Clause 32.11 (Lender'sindemnitytotheAgent) 39 Clause 17.3 (Agency Fee) 40 Clause 22.1 (Transactionexpenses)

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Business Days of demand the amount of all reasonably incurred costs and expenses (including legal fees) in responding to, evaluating, negotiating or complying with that request or requirement41.

Any amount payable to the agent under the indemnities and fees and expenses provisions referred to above must also include the cost of the agent's management time or other resources and will be calculated on a reasonable daily or hourly rate as notified to the Parent and the Lenders, and is in addition to any agency fee payable under any Fee Letter42.

II. CLAWBACKANDPRE-FUNDING

The agent is not obliged to make any required payments to another party until it has established to its satisfaction that it has already received the relevant funds from the payer. However, if the agent pays an amount to another party and it proves to be the case that the agent has not actually received that amount from the payer, the party to whom the amount was paid, is required, on demand, to refund that amount to the agent, together with interest on that amount from the date of payment to the date of receipt by the agent, calculated by the agent to reflect its cost of funds. If the agent agrees with a lender to make payments to the borrower before receiving funds from that lender and the agent does not receive funds from that lender in respect of such a payment, the borrower must refund the amount to the agent and such lender (or the borrower if the lender fails to do so) must indemnify the agent on demand against any funding costs incurred by the agent43.

III. SETOFF

In addition to rights of set-off given to all Finance Parties44, the agent may, after giving notice to any Party owing an amount to the agent under the Finance Documents, deduct an amount not exceeding such amount from any payment to that party which the agent would otherwise be obliged to make under the Finance Documents and apply such amount towards satisfaction of the amount owed45.

41 Clause 22.2 (Amendmentcosts) 42 Clause 32.17 (Agent'smanagementtime) 43 Clause 35.4 (Clawbackandpre-funding) 44 Clause 36 (Set-off)45 Clause 32.18 (DeductionfromamountspayablebytheAgent)

LMA contact

T: +44 (0)20 7006 6007 F: +44 (0)20 7006 3423 lma@lma.eu.com www.lma.eu.com

© 2015 Loan Market Association. All rights reserved. Printed in the United Kingdom.

In syndicated loan agreements the role of an agent is intended to be solely mechanical and administrative in nature. Whilst the agent under a syndicated loan agreement has various duties, tasks and authorities, it is generally accepted in the syndicated loan market that so long as the agent carries out those functions with reasonable skill and care, the agent should be protected from any loss or liability in carrying out those functions. An LMA facility agreement therefore contains a number of protective provisions which seek to exclude the agent from any such loss and liability.

The purpose of this guide is to provide an overview of the principal protections provided in an LMA facility agreement, and assist agents, arrangers, lenders and those agreeing loan documentation to identify the standard protections that an agent under a loan agreement would expect to benefit from.

Guide to Agency ProtectionsA Loan Market Association Guide