Document:

Exhibit 4.2

 

SALLY HOLDINGS LLC

and

SALLY CAPITAL INC.

as Issuers

 

and

 

the Guarantors from time to time parties hereto

 

and

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,
 as Trustee

 

 

SUPPLEMENTAL INDENTURE

 

Dated as of May 18, 2012

 

to the Indenture dated as of May 18, 2012

 

 

Establishing a series of Securities designated

 

5.75% Senior Notes due 2022

 

 

TABLE OF CONTENTS

 

	
ARTICLE I
    	
APPLICATION OF SUPPLEMENTAL INDENTURE AND CREATION OF THE   NOTES
    	
2
    
	
 
    	
 
    	
 
    
	
ARTICLE II
    	
DEFINITIONS AND INCORPORATION BY REFERENCE
    	
2
    
	
 
    	
 
    	
 
    
	
ARTICLE III
    	
SECURITY FORMS
    	
35
    
	
 
    	
 
    	
 
    
	
ARTICLE IV
    	
THE NOTES
    	
35
    
	
 
    	
 
    	
 
    
	
ARTICLE V
    	
REDEMPTION
    	
37
    
	
 
    	
 
    	
 
    
	
ARTICLE VI
    	
SINKING FUNDS
    	
41
    
	
 
    	
 
    	
 
    
	
ARTICLE VII
    	
COVENANTS
    	
41
    
	
 
    	
 
    	
 
    
	
ARTICLE VIII
    	
SUCCESSOR CORPORATION
    	
60
    
	
 
    	
 
    	
 
    
	
ARTICLE IX
    	
EVENTS OF DEFAULT AND REMEDIES
    	
61
    
	
 
    	
 
    	
 
    
	
ARTICLE X
    	
TRUSTEE
    	
68
    
	
 
    	
 
    	
 
    
	
ARTICLE XI
    	
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
    	
72
    
	
 
    	
 
    	
 
    
	
ARTICLE XII
    	
AMENDMENT, SUPPLEMENT OR WAIVER
    	
76
    
	
 
    	
 
    	
 
    
	
ARTICLE XIII
    	
GUARANTEES
    	
79
    
	
 
    	
 
    	
 
    
	
ARTICLE XIV
    	
MISCELLANEOUS
    	
84
    
	
 
    	
 
    	
 
    
	
ARTICLE XV
    	
SATISFACTION AND DISCHARGE
    	
92
    
	
 
    	
 
    	
 
    
	
ARTICLE XVI
    	
HOLDERS’ LISTS AND REPORTS BY TRUSTEE AND THE COMPANY
    	
93
    
	
 
    	
 
    	
 
    
	
ARTICLE XVII
    	
ADDITIONAL TERMS OF THE SUPPLEMENTAL INDENTURE
    	
94
    

 

ii

 

CROSS-REFERENCE TABLE

 

	
TIA
   Section
    	
 
    	
Indenture
   Section
    
	
310(a)(1)
    	
 
    	
9.10
    
	
(a)(2)
    	
 
    	
9.10
    
	
(a)(3)
    	
 
    	
N.A.
    
	
(a)(4)
    	
 
    	
N.A.
    
	
(a)(5)
    	
 
    	
9.10
    
	
(b)
    	
 
    	
9.10
    
	
(c)
    	
 
    	
N.A.
    
	
 
    	
 
    	
 
    
	
311(a)
    	
 
    	
9.11
    
	
(b)
    	
 
    	
9.11
    
	
(c)
    	
 
    	
N.A.
    
	
 
    	
 
    	
 
    
	
312(a)
    	
 
    	
3.5
    
	
(b)
    	
 
    	
15.2
    
	
(c)
    	
 
    	
15.2
    
	
 
    	
 
    	
 
    
	
313(a)
    	
 
    	
9.6
    
	
(b)
    	
 
    	
9.6
    
	
(c)
    	
 
    	
9.6
    
	
(d)
    	
 
    	
9.6
    
	
 
    	
 
    	
 
    
	
314(a)
    	
 
    	
6.4, 6.5(a)
    
	
(b)(1)
    	
 
    	
N.A.
    
	
(b)(2)
    	
 
    	
N.A.
    
	
(c)(1)
    	
 
    	
13.2
    
	
(c)(2)
    	
 
    	
13.2
    
	
(c)(3)
    	
 
    	
N.A.
    
	
(d)
    	
 
    	
N.A.
    
	
(e)
    	
 
    	
13.2
    
	
(f)
    	
 
    	
N.A.
    
	
 
    	
 
    	
 
    
	
315(a)
    	
 
    	
9.1
    
	
(b)
    	
 
    	
9.5
    
	
(c)
    	
 
    	
9.1
    
	
(d)
    	
 
    	
9.1
    
	
(e)
    	
 
    	
8.13
    
	
 
    	
 
    	
 
    
	
316(a)(last   sentence)
    	
 
    	
1.1
    
	
(a)(1)(A)
    	
 
    	
8.11
    
	
(a)(1)(B)
    	
 
    	
N.A.
    
	
(a)(2)
    	
 
    	
8.12
    
	
(b)
    	
 
    	
8.8
    

 

iii

 

	
TIA
   Section
    	
 
    	
Indenture
   Section
    
	
(c)
    	
 
    	
13.4
    
	
 
    	
 
    	
 
    
	
317(a)(1)
    	
 
    	
8.3
    
	
(a)(2)
    	
 
    	
8.4
    
	
(b)
    	
 
    	
3.10
    
	
 
    	
 
    	
 
    
	
318(a)
    	
 
    	
13.1
    
	
(b)
    	
 
    	
N.A.
    
	
(c)
    	
 
    	
13.1
    

 

N.A. means Not Applicable

 

Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture.

 

iv

 

SUPPLEMENTAL INDENTURE, dated as of May 18, 2012, by and between Sally Holdings LLC, a Delaware limited liability company (the “Company”), and Sally Capital Inc., a Delaware corporation (the “Co-Issuer” and, together with the Company, the “Issuers”), the Guarantors from time to time party hereto and Wells Fargo Bank, National Association, a national banking association, as trustee (the “Trustee”) to the Indenture, dated as of May 18, 2012, between the Issuers, the Guarantors from time to time party thereto and the Trustee (the “Base Indenture” and, as supplemented by this Supplemental Indenture, the “Indenture”).

 

RECITALS OF THE COMPANY

 

WHEREAS, the Issuers and the Trustee have heretofore executed and delivered the Base Indenture, providing for the issuance from time to time of the Issuers’ unsecured debentures, notes or other evidences of indebtedness (herein and therein called the “Securities”), to be issued in one or more series as provided in the Base Indenture;

 

WHEREAS, Section 11.1(9) of the Base Indenture permits the Issuers and the Trustee to enter into a supplemental indenture to the Base Indenture to establish the form and terms of any series of Securities;

 

WHEREAS, Section 2.2 of the Base Indenture permits the form of Securities of any series to be established in a supplemental indenture to the Base Indenture;

 

WHEREAS, Section 3.1 of the Base Indenture permits certain terms of any series of Securities to be established pursuant to a supplemental indenture to the Base Indenture;

 

WHEREAS, pursuant to Sections 2.2 and 3.1 of the Base Indenture, the Issuers desire to provide for the establishment of a new series of Securities in an initial aggregate principal amount of $700,000,000 to be designated the “5.75% Senior Notes due 2022” (hereinafter called the “Notes”) under the Base Indenture, the form and substance of such Notes and the terms, provisions and conditions thereof to be set forth as provided in the Base Indenture and this Supplemental Indenture; and

 

WHEREAS, all things necessary to make this Supplemental Indenture a valid agreement of the Issuers and the Guarantors, in accordance with its terms, have been done;

 

NOW, THEREFORE, for and in consideration of the foregoing and the purchase of the Notes established by this Supplemental Indenture by the Holders (as defined below) thereof, it is mutually agreed, for the equal and proportionate benefit of all such Holders, as follows:

 

 

ARTICLE I

APPLICATION OF SUPPLEMENTAL INDENTURE AND CREATION OF THE NOTES

 

SECTION 101                                                                 Application of this Supplemental Indenture

 

This Supplemental Indenture constitutes a part of the Base Indenture (the provisions of which, as modified by this Supplemental Indenture, shall apply to the Notes) in respect of the Notes.  Notwithstanding any other provision of this Supplemental Indenture, all provisions of this Supplemental Indenture are expressly and solely for the benefit of the Holders of the Notes and any such provisions shall not be deemed to apply to any other series of Securities issued under the Indenture and shall not be deemed to amend, modify or supplement the Base Indenture for any purpose other than with respect to the Notes.  All Initial Notes and Additional Notes, if any, will be treated as a single class for all purposes of this Indenture, including waivers, amendments, redemptions and offers to purchase.

 

SECTION 102                                                                 Effect of Supplemental Indenture

 

(a)  With respect to the Notes only, the Base Indenture shall be supplemented pursuant to Section 11.1 thereof to establish the terms of the Notes as set forth in this Supplemental Indenture.

 

(b)  To the extent that the provisions of this Supplemental Indenture conflict with any provision of the Base Indenture, the provisions of this Supplemental Indenture shall govern and be controlling.

 

SECTION 103                                                                 The Trustee

 

The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Issuers and the Guarantors.

 

ARTICLE II

DEFINITIONS AND INCORPORATION BY REFERENCE

 

SECTION 201                      Certain Terms Defined in the Indenture

 

For all purposes of this Supplemental Indenture, the capitalized terms used herein (i) which are defined or amended in this Article II have the respective meanings assigned hereto in this Article II and (ii) which are defined in the Base Indenture (and which are not defined or amended in this Article II) have the respective meanings assigned thereto in the Base Indenture.

 

SECTION 202                      Definitions

 

(a)  Section 1.1 of the Base Indenture shall be amended to add new definitions thereto in appropriate alphabetical sequence, as follows:

 

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“2019 Notes” means the Issuers’ 6.875% Senior Notes due 2019 issued on November 8, 2011.

 

“Acquired Indebtedness” means Indebtedness of a Person (i) existing at the time such Person becomes a Subsidiary or (ii) assumed in connection with the acquisition of assets from such Person, in each case other than Indebtedness Incurred in connection with, or in contemplation of, such Person becoming a Subsidiary or such acquisition.  Acquired Indebtedness shall be deemed to be Incurred on the date of the related acquisition of assets from any Person or the date the acquired Person becomes a Subsidiary.

 

“Additional Assets” means (i) any property or assets that replace the property or assets that are the subject of an Asset Disposition; (ii) any property or assets (other than Indebtedness and Capital Stock) used or to be used by the Company or a Restricted Subsidiary or otherwise useful in a Related Business (including any capital expenditures on any property or assets already so used); (iii) the Capital Stock of a Person that is engaged in a Related Business and becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary; or (iv) Capital Stock of any Person that at such time is a Restricted Subsidiary acquired from a third party.

 

“Additional Notes” means any notes issued under this Indenture in addition to the Initial Notes (other than any Notes issued pursuant to Section 3.4, 3.7, 3.8, 3.15(c) or 4.8).

 

“Asset Disposition” means any sale, lease, transfer or other disposition of shares of Capital Stock of a Restricted Subsidiary (other than directors’ qualifying shares, or (in the case of a Foreign Subsidiary) to the extent required by applicable law), property or other assets (each referred to for the purposes of this definition as a “disposition”) by the Company or any of its Restricted Subsidiaries (including any disposition by means of a merger, consolidation or similar transaction), other than (i) a disposition to the Company or a Restricted Subsidiary, (ii) a disposition in the ordinary course of business, (iii) the sale or discount (with or without recourse, and on customary or commercially reasonable terms) of accounts receivable or notes receivable arising in the ordinary course of business, or the conversion or exchange of accounts receivable for notes receivable, (iv) any Restricted Payment Transaction, (v) a disposition that is governed by Article VII, (vi) any Financing Disposition, (vii) any “fee in lieu” or other disposition of assets to any governmental authority or agency that continue in use by the Company or any Restricted Subsidiary, so long as the Company or any Restricted Subsidiary may obtain title to such assets upon reasonable notice by paying a nominal fee, (viii) any exchange of property pursuant to or intended to qualify under Section 1031 (or any successor section) of the Code, or any exchange of equipment to be leased, rented or otherwise used in a Related Business, (ix) any financing transaction with respect to property built or acquired by the Company or any Restricted Subsidiary after the Issue Date, including without limitation any sale/leaseback transaction or asset securitization, (x) any disposition arising from foreclosure, condemnation or similar action with respect to any property or other assets, or exercise of termination rights under any lease, license, concession or other agreement, (xi) any disposition of Capital Stock, Indebtedness or other securities of an Unrestricted Subsidiary, (xii) a disposition of Capital Stock of a Restricted Subsidiary pursuant to an agreement or other obligation with or to a Person (other than the Company or a Restricted Subsidiary) from whom such Restricted Subsidiary was acquired, or from whom such Restricted Subsidiary acquired its business and assets (having been newly

 

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formed in connection with such acquisition), entered into in connection with such acquisition, (xiii) a disposition of not more than 5% of the outstanding Capital Stock of a Foreign Subsidiary that has been approved by the Board of Directors, or (xiv) any disposition or series of related dispositions for aggregate consideration not to exceed $10.0 million.

 

“Authenticating Agent” means any Person authorized by the Trustee pursuant to Section 9.14 to act on behalf of the Trustee to authenticate Notes of one or more series.

 

“Bank Indebtedness” means any and all amounts, whether outstanding on the Issue Date or thereafter incurred, payable under or in respect of any Credit Facility, including without limitation principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company or any Restricted Subsidiary whether or not a claim for post-filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations, guarantees, other monetary obligations of any nature and all other amounts payable thereunder or in respect thereof.

 

“Borrowing Base” means the sum of (1) 80% of the book value of Inventory of the Company and its Domestic Subsidiaries, (2) 85% of the book value of Receivables of the Company and its Domestic Subsidiaries and (3) cash, Cash Equivalents and Temporary Cash Investments of the Company and its Domestic Subsidiaries (in each case, determined as of the end of the most recently ended fiscal month of the Company for which internal consolidated financial statements of the Company are available, and, in the case of any determination relating to any Incurrence of Indebtedness, on a pro forma basis including (x) any property or assets of a type described above acquired since the end of such fiscal month and (y) any property or assets of a type described above being acquired in connection therewith).

 

“Capital Stock” of any Person means any and all shares of, rights to purchase, warrants or options for, or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity.

 

“Capitalized Lease Obligation” means an obligation that is required to be classified and accounted for as a capitalized lease for financial reporting purposes in accordance with GAAP.  The Stated Maturity of any Capitalized Lease Obligation shall be the date of the last payment of rent or any other amount due under the related lease.

 

“Cash Equivalents” means any of the following: (a) securities issued or fully guaranteed or insured by the United States of America or a member state of the European Union or any agency or instrumentality of any thereof, (b) time deposits, certificates of deposit or bankers’ acceptances of (i) any lender under the Senior ABL Agreement or any affiliate thereof or (ii) any commercial bank having capital and surplus in excess of $500,000,000 and the commercial paper of the holding company of which is rated at least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody’s (or if at such time neither is issuing ratings, then a comparable rating of another nationally recognized rating agency), (c) money market instruments, commercial paper or other short-term obligations rated at least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody’s (or if at such time neither is issuing ratings, then a comparable rating of another nationally recognized rating agency), (d) investments in money market funds subject to the risk limiting conditions of Rule 2a-7 or any

 

4

 

successor rule of the SEC under the Investment Company Act of 1940, as amended and (e) investments similar to any of the foregoing denominated in foreign currencies approved by the Board of Directors.

 

“CDR” means Clayton, Dubilier & Rice, Inc.

 

“CDR Investors” means, collectively, (i) CDRS Acquisition LLC, a Delaware limited liability company, and any successor thereto, (ii) Clayton, Dubilier & Rice Fund VII, L.P., a Cayman Islands exempted limited partnership, or any successor thereto, (iii) CD&R Parallel Fund VII, L.P., a Cayman Islands exempted limited partnership, or any successor thereto, and (iv) any Affiliate of any CDR Investor.

 

“Change of Control” means:

 

(i)            any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders or a Parent, becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of the total voting power of the Voting Stock of the Company, provided that (x) so long as the Company is a Subsidiary of any Parent, no “person” shall be deemed to be or become a “beneficial owner” of more than 50% of the total voting power of the Voting Stock of the Company unless such “person” shall be or become a “beneficial owner” of more than 50% of the total voting power of the Voting Stock of such Parent and (y) any Voting Stock of which any Permitted Holder is the “beneficial owner” shall not in any case be included in any Voting Stock of which any such “person” is the “beneficial owner”;

 

(ii)           the Company merges or consolidates with or into, or sells or transfers (in one or a series of related transactions) all or substantially all of the assets of the Company and its Restricted Subsidiaries to, another Person (other than one or more Permitted Holders) and any “person” (as defined in clause (i) above), other than one or more Permitted Holders or any Parent, is or becomes the “beneficial owner” (as so defined), directly or indirectly, of more than 50% of the total voting power of the Voting Stock of the surviving Person in such merger or consolidation, or the transferee Person in such sale or transfer of assets, as the case may be, provided that (x) so long as such surviving or transferee Person is a Subsidiary of a parent Person, no “person” shall be deemed to be or become a “beneficial owner” of more than 50% of the total voting power of the Voting Stock of such surviving or transferee Person unless such “person” shall be or become a “beneficial owner” of more than 50% of the total voting power of the Voting Stock of such parent Person and (y) any Voting Stock of which any Permitted Holder is the “beneficial owner” shall not in any case be included in any Voting Stock of which any such “person” is the beneficial owner; or

 

(iii)          during any period of two consecutive years (during which period the Company has been a party to this Indenture), individuals who at the beginning of such period were members of the Board of Directors of the Company (together with any new members thereof whose election by such Board of Directors or whose nomination for election by holders of Capital Stock of the Company was approved by one or more Permitted Holders or by a vote of a majority of the members of such Board of Directors then still in office who were either members thereof at the beginning of such period or whose election or nomination for election was

 

5

 

previously so approved) cease for any reason to constitute a majority of such Board of Directors then in office.

 

“Co-Issuer” means Sally Capital Inc., a Delaware corporation, and any successor in interest thereto.

 

“Co-Issuer Subordinated Obligation” means any Indebtedness of the Co-Issuer (whether outstanding on the date of this Indenture or thereafter Incurred) that is expressly subordinated in right of payment to the Notes pursuant to a written agreement.

 

“Commodities Agreement” means, in respect of a Person, any commodity futures contract, forward contract, option or similar agreement or arrangement (including derivative agreements or arrangements), as to which such Person is a party or beneficiary.

 

“Consolidated Coverage Ratio” as of any date of determination means the ratio of (i) the aggregate amount of Consolidated EBITDA for the period of the most recent four consecutive fiscal quarters ending prior to the date of such determination for which consolidated financial statements of the Company are available to (ii) Consolidated Interest Expense for such four fiscal quarters; provided, that

 

(1)           if since the beginning of such period the Company or any Restricted Subsidiary has Incurred any Indebtedness that remains outstanding on such date of determination or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, Consolidated EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such period (except that in making such computation, the amount of Indebtedness under any revolving credit facility outstanding on the date of such calculation shall be computed based on (A) the average daily balance of such Indebtedness during such four fiscal quarters or such shorter period for which such facility was outstanding or (B) if such facility was created after the end of such four fiscal quarters, the average daily balance of such Indebtedness during the period from the date of creation of such facility to the date of such calculation),

 

(2)           if since the beginning of such period the Company or any Restricted Subsidiary has repaid, repurchased, redeemed, defeased or otherwise acquired, retired or discharged any Indebtedness that is no longer outstanding on such date of determination (each, a “Discharge”) or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio involves a Discharge of Indebtedness (in each case other than Indebtedness Incurred under any revolving credit facility unless such Indebtedness has been permanently repaid), Consolidated EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Discharge of such Indebtedness, including with the proceeds of such new Indebtedness, as if such Discharge had occurred on the first day of such period,

 

(3)           if since the beginning of such period the Company or any Restricted Subsidiary shall have disposed of any company, any business or any group of assets constituting an operating unit of a business (any such disposition, a “Sale”), the Consolidated EBITDA for such period shall be reduced by an amount equal to the Consolidated EBITDA (if positive)

 

6

 

attributable to the assets that are the subject of such Sale for such period or increased by an amount equal to the Consolidated EBITDA (if negative) attributable thereto for such period and Consolidated Interest Expense for such period shall be reduced by an amount equal to (A) the Consolidated Interest Expense attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, redeemed, defeased or otherwise acquired, retired or discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Sale for such period (including but not limited to through the assumption of such Indebtedness by another Person) plus (B) if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for such period attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such Sale,

 

(4)           if since the beginning of such period the Company or any Restricted Subsidiary (by merger, consolidation or otherwise) shall have made an Investment in any Person that thereby becomes a Restricted Subsidiary, or otherwise acquired any company, any business or any group of assets constituting an operating unit of a business, including any such Investment or acquisition occurring in connection with a transaction causing a calculation to be made hereunder (any such Investment or acquisition, a “Purchase”), Consolidated EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the Incurrence of any related Indebtedness) as if such Purchase occurred on the first day of such period, and

 

(5)           if since the beginning of such period any Person became a Restricted Subsidiary or was merged or consolidated with or into the Company or any Restricted Subsidiary, and since the beginning of such period such Person shall have Discharged any Indebtedness or made any Sale or Purchase that would have required an adjustment pursuant to clause (2), (3) or (4) above if made by the Company or a Restricted Subsidiary since the beginning of such period, Consolidated EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Discharge, Sale or Purchase occurred on the first day of such period.

 

For purposes of this definition, whenever pro forma effect is to be given to any Sale, Purchase or other transaction, or the amount of income or earnings relating thereto and the amount of Consolidated Interest Expense associated with any Indebtedness Incurred or repaid, repurchased, redeemed, defeased or otherwise acquired, retired or discharged in connection therewith, the pro forma calculations in respect thereof (including without limitation in respect of anticipated cost savings or synergies relating to any such Sale, Purchase or other transaction which cost savings or synergies shall consist solely of operating expense reductions and other operating improvements or synergies reasonably expected to result from such Sale, Purchase or other transaction to the extent reasonably anticipated to be realized and supportable in the good faith judgment of the Company and actions necessary for realization thereof have been taken or are to be taken within 12 months of the applicable Sale, Purchase or other transaction and to the extent such actions shall not have been taken within such period, such cost savings and synergies shall not be given further effect) shall be as determined in good faith by the Chief Financial Officer or an authorized Officer of the Company.  If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest expense on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the

 

7

 

entire period (taking into account any Interest Rate Agreement applicable to such Indebtedness).  If any Indebtedness bears, at the option of the Company or a Restricted Subsidiary, a rate of interest based on a prime or similar rate, a eurocurrency interbank offered rate or other fixed or floating rate, and such Indebtedness is being given pro forma effect, the interest expense on such Indebtedness shall be calculated by applying such optional rate as the Company or such Restricted Subsidiary may designate.  If any Indebtedness that is being given pro forma effect was Incurred under a revolving credit facility, the interest expense on such Indebtedness shall be computed based upon the average daily balance of such Indebtedness during the applicable period.  Interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate determined in good faith by a responsible financial or accounting officer of the Company to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP.

 

“Consolidated EBITDA” means, for any period, the Consolidated Net Income for such period, plus the following to the extent deducted in calculating such Consolidated Net Income, without duplication: (i) provision for all taxes (whether or not paid, estimated or accrued) based on income, profits or capital, (ii) Consolidated Interest Expense and any Special Purpose Financing Fees, (iii) depreciation, amortization (including but not limited to amortization of goodwill and intangibles and amortization and write-off of financing costs) and all other non-cash charges or non-cash losses, (iv) any expenses or charges related to any Equity Offering, Investment or Indebtedness permitted by this Indenture (whether or not consummated or incurred), (v) the amount of any minority interest expense and (vi) any management, monitoring, consulting and advisory fees and related expenses paid to any of CDR and its Affiliates.

 

“Consolidated Interest Expense” means, for any period, (i) the total interest expense of the Company and its Restricted Subsidiaries to the extent deducted in calculating Consolidated Net Income, net of any interest income of the Company and its Restricted Subsidiaries, including without limitation any such interest expense consisting of (a) interest expense attributable to Capitalized Lease Obligations, (b) amortization of debt discount, (c) interest in respect of Indebtedness of any other Person that has been Guaranteed by the Company or any Restricted Subsidiary, but only to the extent that such interest is actually paid by the Company or any Restricted Subsidiary, (d) non-cash interest expense, (e) the interest portion of any deferred payment obligation and (f) commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing, plus (ii) Preferred Stock dividends paid in cash in respect of Disqualified Stock of the Company held by Persons other than the Company or a Restricted Subsidiary and minus (iii) to the extent otherwise included in such interest expense referred to in clause (i) above, amortization or write-off of financing costs, in each case under clauses (i) through (iii) as determined on a Consolidated basis in accordance with GAAP; provided, that gross interest expense shall be determined after giving effect to any net payments made or received by the Company and its Restricted Subsidiaries with respect to Interest Rate Agreements.

 

“Consolidated Net Income” means, for any period, the net income (loss) of the Company and its Restricted Subsidiaries, determined on a Consolidated basis in accordance with GAAP and before any reduction in respect of Preferred Stock dividends; provided, that there shall not be included in such Consolidated Net Income:

 

8

 

(i)            any net income (loss) of any Person if such Person is not a Restricted Subsidiary, except that (A) subject to the limitations contained in clause (iii) below, the Company’s equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution to a Restricted Subsidiary, to the limitations contained in clause (ii) below) and (B) the Company’s equity in the net loss of such Person shall be included to the extent of the aggregate Investment of the Company or any of its Restricted Subsidiaries in such Person,

 

(ii)           solely for purposes of determining the amount available for Restricted Payments under Section 6.7(a)(3)(A), any net income (loss) of any Restricted Subsidiary that is not the Co-Issuer or a Subsidiary Guarantor if such Restricted Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of similar distributions by such Restricted Subsidiary, directly or indirectly, to the Company by operation of the terms of such Restricted Subsidiary’s charter or any agreement, instrument, judgment, decree, order, statute or governmental rule or regulation applicable to such Restricted Subsidiary or its stockholders (other than (x) restrictions that have been waived or otherwise released, (y) restrictions pursuant to the Notes or this Indenture and (z) restrictions in effect on the Issue Date with respect to a Restricted Subsidiary and other restrictions with respect to such Restricted Subsidiary that taken as a whole are not materially less favorable to the Noteholders than such restrictions in effect on the Issue Date), except that (A) subject to the limitations contained in clause (iii) below, the Company’s equity in the net income of any such Restricted Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of any dividend or distribution that was or that could have been made by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary (subject, in the case of a dividend that could have been made to another Restricted Subsidiary, to the limitation contained in this clause) and (B) the net loss of such Restricted Subsidiary shall be included to the extent of the aggregate Investment of the Company or any of its other Restricted Subsidiaries in such Restricted Subsidiary,

 

(iii)          any gain or loss realized upon the sale or other disposition of any asset of the Company or any Restricted Subsidiary (including pursuant to any sale/leaseback transaction) that is not sold or otherwise disposed of in the ordinary course of business (as determined in good faith by the Board of Directors),

 

(iv)          any item classified as an extraordinary, unusual or nonrecurring gain, loss or charge (including fees, expenses and charges associated with any acquisition, merger or consolidation after the Issue Date),

 

(v)           the cumulative effect of a change in accounting principles,

 

(vi)          all deferred financing costs written off and premiums paid in connection with any early extinguishment of Indebtedness,

 

(vii)         any unrealized gains or losses in respect of Currency Agreements,

 

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(viii)        any unrealized foreign currency transaction gains or losses in respect of Indebtedness of any Person denominated in a currency other than the functional currency of such Person,

 

(ix)           any non-cash compensation charge arising from any grant of stock, stock options or other equity based awards,

 

(x)            to the extent otherwise included in Consolidated Net Income, any unrealized foreign currency translation or transaction gains or losses in respect of Indebtedness or other obligations of the Company or any Restricted Subsidiary owing to the Company or any Restricted Subsidiary, and

 

(xi)           any non-cash charge, expense or other impact attributable to application of the purchase method of accounting (including the total amount of depreciation and amortization, cost of sales or other non-cash expense resulting from the write-up of assets to the extent resulting from such purchase accounting adjustments).

 

In the case of any unusual or nonrecurring gain, loss or charge not included in Consolidated Net Income pursuant to clause (iv) above in any determination thereof, the Company will deliver an Officer’s Certificate to the Trustee promptly after the date on which Consolidated Net Income is so determined, setting forth the nature and amount of such unusual or nonrecurring gain, loss or charge.  Notwithstanding the foregoing, for the purpose of Section 6.7(a)(3)(A) only, there shall be excluded from Consolidated Net Income, without duplication, any income consisting of dividends, repayments of loans or advances or other transfers of assets from Unrestricted Subsidiaries to the Company or a Restricted Subsidiary, and any income consisting of return of capital, repayment or other proceeds from dispositions or repayments of Investments consisting of Restricted Payments, in each case to the extent such income would be included in Consolidated Net Income and such related dividends, repayments, transfers, return of capital or other proceeds are applied by the Company to increase the amount of Restricted Payments permitted under Section 6.7(a)(3)(C) or (D).

 

“Consolidated Tangible Assets” means, as of any date of determination, the total assets less the sum of the goodwill, net, and other intangible assets, net, in each case reflected on the consolidated balance sheet of the Company and its Restricted Subsidiaries as at the end of the most recently ended fiscal quarter of the Company for which such a balance sheet is available, determined on a Consolidated basis in accordance with GAAP (and, in the case of any determination relating to any Incurrence of Indebtedness or any Investment, on a pro forma basis including any property or assets being acquired in connection therewith).

 

“Consolidated Total Indebtedness” means, as of any date of determination, an amount equal to the aggregate amount of all outstanding Indebtedness of the Company and its Restricted Subsidiaries on a consolidated basis consisting of Indebtedness for borrowed money, Capitalized Lease Obligations and debt obligations evidenced by bonds, notes, debentures or similar instruments, as determined and calculated in accordance with GAAP.

 

“Consolidated Total Leverage Ratio” means, as of any date of determination, the ratio of (a)(i) Consolidated Total Indebtedness, minus (ii) cash and Cash Equivalents of the Company

 

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and its Restricted Subsidiaries on a consolidated basis in an aggregate amount not to exceed $100.0 million, in each case as of the end of the most recent fiscal quarter ending prior to the date of such determination for which consolidated financial statements of the Company are available to (b) the aggregate amount of Consolidated EBITDA for the period of the most recent four consecutive fiscal quarters ending prior to the date of such determination for which consolidated financial statements of the Company are available, in each case with such pro forma adjustments to Consolidated Total Indebtedness and Consolidated EBITDA as are appropriate and consistent with the pro forma adjustment provisions set forth in the definition of “Consolidated Coverage Ratio.”

 

“Consolidation” means the consolidation of the accounts of each of the Restricted Subsidiaries with those of the Company in accordance with GAAP; provided that “Consolidation” will not include consolidation of the accounts of any Unrestricted Subsidiary, but the interest of the Company or any Restricted Subsidiary in any Unrestricted Subsidiary will be accounted for as an investment.  The term “Consolidated” has a correlative meaning.

 

“Contribution Amounts” means the aggregate amount of capital contributions applied by the Company to permit the Incurrence of Contribution Indebtedness pursuant to Section 6.6(b)(xii).

 

“Contribution Indebtedness” means Indebtedness of the Company or any Restricted Subsidiary in an aggregate principal amount not greater than the aggregate amount of cash contributions (other than Excluded Contributions) made to the capital of the Company or such Restricted Subsidiary after the Issue Date (whether through the issuance or sale of Capital Stock or otherwise); provided that such Contribution Indebtedness (a) is incurred within 180 days after the making of the related cash contribution and (b) is so designated as Contribution Indebtedness pursuant to an Officer’s Certificate on the date of Incurrence thereof.

 

“Credit Facilities” means one or more of (i) the Senior ABL Facility and (ii) any other facilities or arrangements designated by the Company, in each case with one or more banks or other lenders or institutions providing for revolving credit loans, term loans, receivables financings (including without limitation through the sale of receivables to such institutions or to special purpose entities formed to borrow from such institutions against such receivables or the creation of any Liens in respect of such receivables in favor of such institutions), letters of credit or other Indebtedness, in each case, including all agreements, instruments and documents executed and delivered pursuant to or in connection with any of the foregoing, including but not limited to any notes and letters of credit issued pursuant thereto and any guarantee and collateral agreement, patent and trademark security agreement, mortgages or letter of credit applications and other guarantees, pledge agreements, security agreements and collateral documents, in each case as the same may be amended, supplemented, waived or otherwise modified from time to time, or refunded, refinanced, restructured, replaced, renewed, repaid, increased or extended from time to time (whether in whole or in part, whether with the original banks, lenders or institutions or other banks, lenders or institutions or otherwise, and whether provided under any original Credit Facility or one or more other credit agreements, indentures, financing agreements or other Credit Facilities or otherwise).  Without limiting the generality of the foregoing, the term “Credit Facility” shall include any agreement (i) changing the maturity of any Indebtedness Incurred thereunder or contemplated thereby, (ii) adding Subsidiaries as additional borrowers or

 

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guarantors thereunder, (iii) increasing the amount of Indebtedness Incurred thereunder or available to be borrowed thereunder or (iv) otherwise altering the terms and conditions thereof.

 

“Currency Agreement” means, in respect of a Person, any foreign exchange contract, currency swap agreement or other similar agreement or arrangements (including derivative agreements or arrangements), as to which such Person is a party or a beneficiary.

 

“Designated Noncash Consideration” means the Fair Market Value of noncash consideration received by the Company or one of its Restricted Subsidiaries in connection with an Asset Disposition that is so designated as Designated Noncash Consideration pursuant to an Officer’s Certificate, setting forth the basis of such valuation.

 

“Designated Senior Indebtedness” means with respect to a Person (i) the Bank Indebtedness under or in respect of the Senior ABL Facility and (ii) any other Senior Indebtedness of such Person that, at the date of determination, has an aggregate principal amount equal to or under which, at the date of determination, the holders thereof are committed to lend up to, at least $25.0 million and is specifically designated by such Person in an agreement or instrument evidencing or governing such Senior Indebtedness as “Designated Senior Indebtedness” for purposes of this Indenture.

 

“Disinterested Directors” means, with respect to any Affiliate Transaction, one or more members of the Board of Directors of the Company, or one or more members of the Board of Directors of a Parent, having no material direct or indirect financial interest in or with respect to such Affiliate Transaction.  A member of any such Board of Directors shall not be deemed to have such a financial interest by reason of such member’s holding Capital Stock of the Company or any Parent or any options, warrants or other rights in respect of such Capital Stock.

 

“Disqualified Stock” means, with respect to any Person, any Capital Stock (other than Management Stock) that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable or exercisable) or upon the happening of any event (other than following the occurrence of a Change of Control or other similar event described under such terms as a “change of control,” or an Asset Disposition) (i) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness or Disqualified Stock or (iii) is redeemable at the option of the holder thereof (other than following the occurrence of a Change of Control or other similar event described under such terms as a “change of control,” or an Asset Disposition), in whole or in part, in each case on or prior to the final Stated Maturity of the Notes.

 

“Domestic Subsidiary” means any Restricted Subsidiary of the Company other than a Foreign Subsidiary.

 

“Equity Offering” means a sale of Capital Stock (x) that is a sale of Capital Stock of the Company (other than Disqualified Stock), or (y) proceeds of which in an amount equal to or exceeding the Redemption Amount are contributed to the equity capital of the Company or any of its Restricted Subsidiaries.

 

“Excluded Contribution” means Net Cash Proceeds, or the Fair Market Value of property or assets, received by the Company as capital contributions to the Company after the Issue Date

 

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or from the issuance or sale (other than to a Restricted Subsidiary) of Capital Stock (other than Disqualified Stock) of the Company, in each case to the extent designated as an Excluded Contribution pursuant to an Officer’s Certificate of the Company and not previously included in the calculation set forth in Section 6.7(a)(3)(B)(x) for purposes of determining whether a Restricted Payment may be made.

 

“Fair Market Value” means, with respect to any asset or property, the fair market value of such asset or property as determined in good faith by the Board of Directors, whose determination will be conclusive.

 

“Financing Disposition” means any sale, transfer, conveyance or other disposition of, or creation or incurrence of any Lien on, property or assets by the Company or any Subsidiary thereof to or in favor of any Special Purpose Entity, or by any Special Purpose Subsidiary, in each case in connection with the Incurrence by a Special Purpose Entity of Indebtedness, or obligations to make payments to the obligor on Indebtedness, which may be secured by a Lien in respect of such property or assets.

 

“Foreign Borrowing Base” means the sum of (1) 80% of the book value of Inventory of Foreign Subsidiaries, (2) 85% of the book value of Receivables of Foreign Subsidiaries, and (3) cash, Cash Equivalents and Temporary Cash Investments of Foreign Subsidiaries (in each case, determined as of the end of the most recently ended fiscal month of the Company for which internal consolidated financial statements of the Company are available, and, in the case of any determination relating to any Incurrence of Indebtedness, on a pro forma basis including (x) any property or assets of a type described above acquired since the end of such fiscal month and (y) any property or assets of a type described above being acquired in connection therewith); provided that the Foreign Borrowing Base shall in no event be less than the amount thereof determined as of June 30, 2006.

 

“Foreign Subsidiary” means (a) any Restricted Subsidiary of the Company that is not organized under the laws of the United States of America or any state thereof or the District of Columbia and (b) any Restricted Subsidiary of the Company that has no material assets other than securities or Indebtedness of one or more Foreign Subsidiaries (or Subsidiaries thereof), and other assets relating to an ownership interest in any such securities, Indebtedness or Subsidiaries.

 

“Guarantors” means the Parent Guarantors and the Subsidiary Guarantors.

 

“Guarantor Subordinated Obligations” means, with respect to a Guarantor, any Indebtedness of such Guarantor (whether outstanding on the Issue Date or thereafter Incurred) that is expressly subordinated in right of payment to the obligations of such Guarantor under its Guarantee pursuant to a written agreement.

 

“Hedging Obligations” of any Person means the obligations of such Person pursuant to any Interest Rate Agreement, Currency Agreement or Commodities Agreement.

 

“Holding” means Sally Beauty Holdings, Inc., a Delaware corporation, and any successor in interest thereto.

 

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“Incur” means issue, assume, enter into any Guarantee of, incur or otherwise become liable for; and the terms “Incurs,” “Incurred” and “Incurrence” shall have a correlative meaning; provided, that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Subsidiary at the time it becomes a Subsidiary.  Accrual of interest, the accretion of accreted value and the payment of interest in the form of additional Indebtedness will not be deemed to be an Incurrence of Indebtedness.  Any Indebtedness issued at a discount (including Indebtedness on which interest is payable through the issuance of additional Indebtedness) shall be deemed Incurred at the time of original issuance of the Indebtedness at the initial accreted amount thereof.

 

“Indebtedness” means, with respect to any Person on any date of determination (without duplication):

 

(i) the principal of indebtedness of such Person for borrowed money,

 

(ii) the principal of obligations of such Person evidenced by bonds, debentures, notes or other similar instruments,

 

(iii) all reimbursement obligations of such Person in respect of letters of credit, bankers’ acceptances or other similar instruments (the amount of such obligations being equal at any time to the aggregate then undrawn and unexpired amount of such letters of credit, bankers’ acceptances or other instruments plus the aggregate amount of drawings thereunder that have not then been reimbursed),

 

(iv) all obligations of such Person to pay the deferred and unpaid purchase price of property (except Trade Payables), which purchase price is due more than one year after the date of placing such property in final service or taking final delivery and title thereto,

 

(v) all Capitalized Lease Obligations of such Person,

 

(vi) the redemption, repayment or other repurchase amount of such Person with respect to any Disqualified Stock of such Person or (if such Person is a Subsidiary of the Company other than the Co-Issuer or a Subsidiary Guarantor) any Preferred Stock of such Subsidiary, but excluding, in each case, any accrued dividends (the amount of such obligation to be equal at any time to the maximum fixed involuntary redemption, repayment or repurchase price for such Capital Stock, or if less (or if such Capital Stock has no such fixed price), to the involuntary redemption, repayment or repurchase price therefor calculated in accordance with the terms thereof as if then redeemed, repaid or repurchased, and if such price is based upon or measured by the fair market value of such Capital Stock, such fair market value shall be as determined in good faith by the Board of Directors or the board of directors or other governing body of the issuer of such Capital Stock),

 

(vii) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided that the amount of Indebtedness of such Person shall be the lesser of (A) the fair market value of such asset at such date of determination (as determined in good faith by the Company) and (B) the amount of such Indebtedness of such other Persons,

 

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(viii) all Guarantees by such Person of Indebtedness of other Persons, to the extent so Guaranteed by such Person, and

 

(ix) to the extent not otherwise included in this definition, net Hedging Obligations of such Person (the amount of any such obligation to be equal at any time to the termination value of such agreement or arrangement giving rise to such Hedging Obligation that would be payable by such Person at such time).

 

For the avoidance of doubt, any operating leases, as such instruments would be determined in accordance with GAAP on the Issue Date, shall be deemed not to constitute Indebtedness.

 

The amount of Indebtedness of any Person at any date shall be determined as set forth above or otherwise provided in this Indenture, or otherwise shall equal the amount thereof that would appear as a liability on a balance sheet of such Person (excluding any notes thereto) prepared in accordance with GAAP.

 

“Initial Notes” means the 5.75% Senior Notes due 2022 of the Issuers issued on the Issue Date (and any Notes issued in respect thereof pursuant to Section 3.4, 3.7, 3.8, 3.15(c) or 4.8).

 

“Interest Rate Agreement” means, with respect to any Person, any interest rate protection agreement, future agreement, option agreement, swap agreement, cap agreement, collar agreement, hedge agreement or other similar agreement or arrangement (including derivative agreements or arrangements), as to which such Person is party or a beneficiary.

 

“Intermediate Holdings” means Sally Investment Holdings LLC, a Delaware limited liability company, and any successor in interest thereto.

 

“Inventory” means goods held for sale, lease or use by a Person in the ordinary course of business, net of any reserve for goods that have been segregated by such Person to be returned to the applicable vendor for credit, as determined in accordance with GAAP.

 

“Investment” in any Person by any other Person means any direct or indirect advance, loan or other extension of credit (other than to customers, dealers, licensees, franchisees, suppliers, directors, officers or employees of any Person in the ordinary course of business) or capital contribution (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others) to, or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by, such Person.  For purposes of the definition of “Unrestricted Subsidiary” and Section 6.7 only, (i) “Investment” shall include the portion (proportionate to the Company’s equity interest in such Subsidiary) of the Fair Market Value of the net assets of any Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary, provided that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue to have a permanent “Investment” in an Unrestricted Subsidiary in an amount (if positive) equal to (x) the Company’s “Investment” in such Subsidiary at the time of such redesignation less (y) the portion (proportionate to the Company’s equity interest in such Subsidiary) of the Fair Market Value of the net assets of such Subsidiary at the time of such redesignation, and (ii) any property transferred to or from an Unrestricted Subsidiary shall be valued at its Fair Market Value at the

 

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time of such transfer.  Guarantees shall not be deemed to be Investments.  The amount of any Investment outstanding at any time shall be the original cost of such Investment, reduced (at the Company’s option) by any dividend, distribution, interest payment, return of capital, repayment or other amount or value received in respect of such Investment; provided, that to the extent that the amount of Restricted Payments outstanding at any time pursuant to Section 6.7(a) is so reduced by any portion of any such amount or value that would otherwise be included in the calculation of Consolidated Net Income, such portion of such amount or value shall not be so included for purposes of calculating the amount of Restricted Payments that may be made pursuant to Section 6.7(a).

 

“Investment Grade Rating” means a rating of Baa3 or better by Moody’s and BBB- or better by S&P (or, in either case, the equivalent of such rating by such organization), or an equivalent rating by any other Rating Agency.

 

“Issue Date” means the first date on which Initial Notes are issued.

 

“Issuers” means the Company and the Co-Issuer.

 

“Liabilities” means, collectively, any and all claims, obligations, liabilities, causes of actions, actions, suits, proceedings, investigations, judgments, decrees, losses, damages, fees, costs and expenses (including without limitation interest, penalties and fees and disbursements of attorneys, accountants, investment bankers and other professional advisors), in each case whether incurred, arising or existing with respect to third parties or otherwise at any time or from time to time.

 

“Management Advances” means (1) loans or advances made to directors, officers or employees of any Parent, the Company or any Restricted Subsidiary (x) in respect of travel, entertainment or moving-related expenses incurred in the ordinary course of business, (y) in respect of moving-related expenses incurred in connection with any closing or consolidation of any facility, or (z) in the ordinary course of business and (in the case of this clause (z)) not exceeding $7.5 million in the aggregate outstanding at any time, (2) promissory notes of Management Investors acquired in connection with the issuance of Management Stock to such Management Investors, (3) Management Guarantees, or (4) other Guarantees of borrowings by Management Investors in connection with the purchase of Management Stock, which Guarantees are permitted under Section 6.6.

 

“Management Guarantees” means guarantees (x) of up to an aggregate principal amount outstanding at any time of $20.0 million of borrowings by Management Investors in connection with their purchase of Management Stock or (y) made on behalf of, or in respect of loans or advances made to, directors, officers or employees of any Parent, the Company or any Restricted Subsidiary (1) in respect of travel, entertainment and moving-related expenses incurred in the ordinary course of business, or (2) in the ordinary course of business and (in the case of this clause (2)) not exceeding $7.5 million in the aggregate outstanding at any time.

 

“Management Investors” means the officers, directors, employees and other members of the management of any Parent, the Company or any of their respective Subsidiaries, or family members or relatives thereof (provided that, solely for purposes of the definition of “Permitted

 

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Holders,” such relatives shall include only those Persons who are or become Management Investors in connection with estate planning for or inheritance from other Management Investors, as determined in good faith by the Company, which determination shall be conclusive), or trusts, partnerships or limited liability companies for the benefit of any of the foregoing, or any of their heirs, executors, successors and legal representatives, who at any date beneficially own or have the right to acquire, directly or indirectly, Capital Stock of the Company or any Parent.

 

“Management Stock” means Capital Stock of the Company or any Parent (including any options, warrants or other rights in respect thereof) held by any of the Management Investors.

 

“Moody’s” means Moody’s Investors Service, Inc., and its successors.

 

“Net Available Cash” from an Asset Disposition means cash payments received (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring person of Indebtedness or other obligations relating to the properties or assets that are the subject of such Asset Disposition or received in any other non-cash form) therefrom, in each case net of (i) all legal, title and recording tax expenses, commissions and other fees and expenses incurred, and all Federal, state, provincial, foreign and local taxes required to be paid or to be accrued as a liability under GAAP, as a consequence of such Asset Disposition (including as a consequence of any transfer of funds in connection with the application thereof in accordance with Section 6.9, (ii) all payments made, and all installment payments required to be made, on any Indebtedness (x) that is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon such assets, or (y) that must by its terms, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law, be repaid out of the proceeds from such Asset Disposition, including but not limited to any payments required to be made to increase borrowing availability under the Senior ABL Facility (or any other revolving credit facility), (iii) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Disposition, or to any other Person (other than the Company or a Restricted Subsidiary) owning a beneficial interest in the assets disposed of in such Asset Disposition, (iv) any liabilities or obligations associated with the assets disposed of in such Asset Disposition and retained by the Company or any Restricted Subsidiary after such Asset Disposition, including without limitation pension and other post-employment benefit liabilities, liabilities related to environmental matters, and liabilities relating to any indemnification obligations associated with such Asset Disposition, and (v) the amount of any purchase price or similar adjustment (x) claimed by any Person to be owed by the Company or any Restricted Subsidiary, until such time as such claim shall have been settled or otherwise finally resolved, or (y) paid or payable by the Company or any Restricted Subsidiary, in either case in respect of such Asset Disposition.

 

“Net Cash Proceeds,” with respect to any issuance or sale of any securities of the Company or any Subsidiary by the Company or any Subsidiary, or any capital contribution, means the cash proceeds of such issuance, sale or contribution net of attorneys’ fees, accountants’ fees, underwriters’ or placement agents’ fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with such issuance, sale or contribution and net of taxes paid or payable as a result thereof.

 

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“Notes” means the Initial Notes and any Additional Notes and any notes issued in respect thereof pursuant to Section 3.4, 3.7, 3.8, 3.15(c) or 4.8.

 

“Obligations” means, with respect to any Indebtedness, any principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company or any Restricted Subsidiary whether or not a claim for post-filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations, Guarantees of such Indebtedness (or of Obligations in respect thereof), other monetary obligations of any nature and all other amounts payable thereunder or in respect thereof.

 

“Parent” means any of Holding, Intermediate Holdings, and any Other Parent and any other Person that is a Subsidiary of Holding, Intermediate Holdings, or any Other Parent and of which the Company is a Subsidiary.  As used herein, “Other Parent” means a Person of which the Company becomes a Subsidiary after the Issue Date, provided that either (x) immediately after the Company first becomes a Subsidiary of such Person, more than 50% of the Voting Stock of such Person shall be held by one or more Persons that held more than 50% of the Voting Stock of a Parent of the Company immediately prior to the Company first becoming such Subsidiary or (y) such Person shall be deemed not to be an Other Parent for the purpose of determining whether a Change of Control shall have occurred by reason of the Company first becoming a Subsidiary of such Person.

 

“Parent Expenses” means (i) costs (including all professional fees and expenses) incurred by any Parent in connection with its reporting obligations under, or in connection with compliance with, applicable laws or applicable rules of any governmental, regulatory or self-regulatory body or stock exchange, this Indenture or any other agreement or instrument relating to Indebtedness of the Company or any Restricted Subsidiary, including in respect of any reports filed with respect to the Securities Act, Exchange Act or the respective rules and regulations promulgated thereunder, (ii) expenses incurred by any Parent in connection with the acquisition, development, maintenance, ownership, prosecution, protection and defense of its intellectual property and associated rights (including but not limited to trademarks, service marks, trade names, trade dress, patents, copyrights and similar rights, including registrations and registration or renewal applications in respect thereof; inventions, processes, designs, formulae, trade secrets, know-how, confidential information, computer software, data and documentation, and any other intellectual property rights; and licenses of any of the foregoing) to the extent such intellectual property and associated rights relate to the business or businesses of the Company or any Subsidiary thereof, (iii) indemnification obligations of any Parent owing to directors, officers, employees or other Persons under its charter or by-laws or pursuant to written agreements with any such Person, or obligations in respect of director and officer insurance (including premiums therefor), (iv) other operational expenses of any Parent incurred in the ordinary course of business, and (v) fees and expenses incurred by any Parent in connection with any offering of Capital Stock or Indebtedness, (x) where the net proceeds of such offering are intended to be received by or contributed or loaned to the Company or a Restricted Subsidiary, or (y) in a prorated amount of such expenses in proportion to the amount of such net proceeds intended to be so received, contributed or loaned, or (z) otherwise on an interim basis prior to completion of such offering so long as any Parent shall cause the amount of such expenses to be repaid to the

 

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Company or the relevant Restricted Subsidiary out of the proceeds of such offering promptly if completed.

 

“Parent Guarantee” means any guarantee that may from time to time be entered into by any Parent on the Issue Date or after the Issue Date with respect to the Notes.

 

“Parent Guarantor” means any Parent that enters into a Parent Guarantee.

 

“Permitted Holder” means any of the following: (i) any of the CDR Investors; (ii) any of the Management Investors, CDR, and their respective Affiliates; (iii) any investment fund or vehicle managed, sponsored or advised by CDR or any Affiliate thereof, and any Affiliate of or successor to any such investment fund or vehicle; (iv) any limited or general partners of, or other investors in, any CDR Investor or any Affiliate thereof, or any such investment fund or vehicle; and (v) any Person acting in the capacity of an underwriter (solely to the extent that and for so long as such Person is acting in such capacity) in connection with a public or private offering of Capital Stock of any Parent or the Company.  In addition, any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) whose status as a “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) constitutes or results in a Change of Control in respect of which a Change of Control Offer is made in accordance with the requirements of this Indenture, together with its Affiliates, shall thereafter constitute Permitted Holders.

 

“Permitted Investment” means an Investment by the Company or any Restricted Subsidiary in, or consisting of, any of the following:

 

(i) a Restricted Subsidiary, the Company, or a Person that will, upon the making of such Investment, become a Restricted Subsidiary;

 

(ii) another Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, or is liquidated into, the Company or a Restricted Subsidiary;

 

(iii) Temporary Cash Investments or Cash Equivalents;

 

(iv) receivables owing to the Company or any Restricted Subsidiary, if created or acquired in the ordinary course of business;

 

(v) any securities or other Investments received as consideration in, or retained in connection with, sales or other dispositions of property or assets, including Asset Dispositions made in compliance with Section 6.9;

 

(vi) securities or other Investments received in settlement of debts created in the ordinary course of business and owing to, or of other claims asserted by, the Company or any Restricted Subsidiary, or as a result of foreclosure, perfection or enforcement of any Lien, or in satisfaction of judgments, including in connection with any bankruptcy proceeding or other reorganization of another Person;

 

(vii) Investments in existence or made pursuant to legally binding written commitments in existence on the Issue Date;

 

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(viii) Currency Agreements, Interest Rate Agreements, Commodities Agreements and related Hedging Obligations, which obligations are Incurred in compliance with Section 6.6;

 

(ix) pledges or deposits (x) with respect to leases or utilities provided to third parties in the ordinary course of business or (y) otherwise described in the definition of “Permitted Liens” or made in connection with Liens permitted under Section 6.11;

 

(x) (1) Investments in or by any Special Purpose Subsidiary, or in connection with a Financing Disposition by or to or in favor of any Special Purpose Entity, including Investments of funds held in accounts permitted or required by the arrangements governing such Financing Disposition or any related Indebtedness, or (2) any promissory note issued by the Company, or any Parent, provided that if such Parent receives cash from the relevant Special Purpose Entity in exchange for such note, an equal cash amount is contributed by any Parent to the Company;

 

(xi) bonds secured by assets leased to and operated by the Company or any Restricted Subsidiary that were issued in connection with the financing of such assets so long as the Company or any Restricted Subsidiary may obtain title to such assets at any time by paying a nominal fee, canceling such bonds and terminating the transaction;

 

(xii) the Notes;

 

(xiii) any Investment to the extent made using Capital Stock of the Company (other than Disqualified Stock), or Capital Stock of any Parent, as consideration;

 

(xiv) Management Advances;

 

(xv) Investments in Related Businesses in an aggregate amount outstanding at any time not to exceed the greater of $50.0 million and 5.75% of Consolidated Tangible Assets;

 

(xvi) any transaction to the extent it constitutes an Investment that is permitted by and made in accordance with Section 6.10(b) (except transactions described in clauses (i), (v) and (vi) of such paragraph); and

 

(xvii) other Investments in an aggregate amount outstanding at any time not to exceed the greater of $50.0 million and 5.75% of Consolidated Tangible Assets.

 

If any Investment pursuant to clause (xv) or (xvii) above is made in any Person that is not a Restricted Subsidiary and such Person thereafter becomes a Restricted Subsidiary, such Investment shall thereafter be deemed to have been made pursuant to clause (i) above and not clause (xv) or (xvii) above for so long as such Person continues to be a Restricted Subsidiary.

 

“Permitted Liens” means:

 

(i) Liens for taxes, assessments or other governmental charges not yet delinquent or the nonpayment of which in the aggregate would not reasonably be expected to have a material adverse effect on the Company and its Restricted Subsidiaries or that are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on

 

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the books of the Company or a Subsidiary thereof, as the case may be, in accordance with GAAP;

 

(ii) carriers’, warehousemen’s, mechanics’, landlords’, materialmen’s, repairmen’s or other like Liens arising in the ordinary course of business in respect of obligations that are not overdue for a period of more than 60 days or that are bonded or that are being contested in good faith and by appropriate proceedings;

 

(iii) pledges, deposits or Liens in connection with workers’ compensation, unemployment insurance and other social security and other similar legislation or other insurance-related obligations (including, without limitation, pledges or deposits securing liability to insurance carriers under insurance or self-insurance arrangements);

 

(iv) pledges, deposits or Liens to secure the performance of bids, tenders, trade, government or other contracts (other than for borrowed money), obligations for utilities, leases, licenses, statutory obligations, completion guarantees, surety, judgment, appeal or performance bonds, other similar bonds, instruments or obligations, and other obligations of a like nature incurred in the ordinary course of business;

 

(v) easements (including reciprocal easement agreements), rights-of-way, building, zoning and similar restrictions, utility agreements, covenants, reservations, restrictions, encroachments, charges, and other similar encumbrances or title defects incurred, or leases or subleases granted to others, in the ordinary course of business, which do not in the aggregate materially interfere with the ordinary conduct of the business of the Company and its Subsidiaries, taken as a whole;

 

(vi) Liens existing on, or provided for under written arrangements existing on, the Issue Date, or (in the case of any such Liens securing Indebtedness of the Company or any of its Subsidiaries existing or arising under written arrangements existing on the Issue Date) securing any Refinancing Indebtedness in respect of such Indebtedness so long as the Lien securing such Refinancing Indebtedness is limited to all or part of the same property or assets (plus improvements, accessions, proceeds or dividends or distributions in respect thereof) that secured (or under such written arrangements could secure) the original Indebtedness;

 

(vii) (1) mortgages, liens, security interests, restrictions, encumbrances or any other matters of record that have been placed by any developer, landlord or other third party on property over which the Company or any Restricted Subsidiary of the Company has easement rights or on any leased property and subordination or similar agreements relating thereto and (2) any condemnation or eminent domain proceedings affecting any real property;

 

(viii) Liens securing Indebtedness (including Liens securing any Obligations in respect thereof) consisting of Hedging Obligations, Purchase Money Obligations or Capitalized Lease Obligations Incurred in compliance with Section 6.6;

 

(ix) Liens arising out of judgments, decrees, orders or awards in respect of which the Company shall in good faith be prosecuting an appeal or proceedings for review, which appeal or proceedings shall not have been finally terminated, or if the period within which such appeal or proceedings may be initiated shall not have expired;

 

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(x) leases, subleases, licenses or sublicenses to third parties;

 

(xi) Liens securing Indebtedness (including Liens securing any Obligations in respect thereof) consisting of (1) Indebtedness Incurred in compliance with Section 6.6(b)(i), Section 6.6(b)(iv), Section 6.6(b)(v), Section 6.6(b)(vii), Section 6.6(b)(viii), Section 6.6(b)(ix) or Section 6.6(b)(xi), or Section 6.6(b)(iii) (other than the Notes and Refinancing Indebtedness Incurred in respect of Indebtedness described in Section 6.6(a)), (2) Bank Indebtedness, (3) the Notes, (4) Indebtedness of any Restricted Subsidiary that is not a Subsidiary Guarantor, (5) Indebtedness or other obligations of any Special Purpose Entity, or (6) obligations in respect of Management Advances or Management Guarantees; in each case including Liens securing any Guarantee of any thereof;

 

(xii) Liens existing on property or assets of a Person at the time such Person becomes a Subsidiary of the Company (or at the time the Company or a Restricted Subsidiary acquires such property or assets, including any acquisition by means of a merger or consolidation with or into the Company or any Restricted Subsidiary); provided, however, that such Liens are not created in connection with, or in contemplation of, such other Person becoming such a Subsidiary (or such acquisition of such property or assets), and that such Liens are limited to all or part of the same property or assets (plus improvements, accessions, proceeds or dividends or distributions in respect thereof) that secured (or, under the written arrangements under which such Liens arose, could secure) the obligations to which such Liens relate;

 

(xiii) Liens on Capital Stock, Indebtedness or other securities of an Unrestricted Subsidiary that secure Indebtedness or other obligations of such Unrestricted Subsidiary;

 

(xiv) any encumbrance or restriction (including, but not limited to, put and call agreements) with respect to Capital Stock of any joint venture or similar arrangement pursuant to any joint venture or similar agreement;

 

(xv) Liens securing Indebtedness (including Liens securing any Obligations in respect thereof) consisting of Refinancing Indebtedness Incurred in respect of any Indebtedness secured by, or securing any refinancing, refunding, extension, renewal or replacement (in whole or in part) of any other obligation secured by, any other Permitted Liens, provided that any such new Lien is limited to all or part of the same property or assets (plus improvements, accessions, proceeds or dividends or distributions in respect thereof) that secured (or, under the written arrangements under which the original Lien arose, could secure) the obligations to which such Liens relate;

 

(xvi) Liens (1) arising by operation of law (or by agreement to the same effect) in the ordinary course of business, (2) on property or assets under construction (and related rights) in favor of a contractor or developer or arising from progress or partial payments by a third party relating to such property or assets, (3) on receivables (including related rights), (4) on cash set aside at the time of the Incurrence of any Indebtedness or government securities purchased with such cash, in either case to the extent that such cash or government securities prefund the payment of interest on such Indebtedness and are held in an escrow account or similar arrangement to be applied for such purpose, (5) securing or arising by reason of any netting or set-off arrangement entered into in the ordinary course of banking or other trading activities,

 

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(6) in favor of the Company or any Restricted Subsidiary (other than Liens on property or assets of the Company or any Subsidiary Guarantor in favor of any Restricted Subsidiary that is not a Subsidiary Guarantor), (7) arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into in the ordinary course of business, (8) relating to pooled deposit or sweep accounts to permit satisfaction of overdraft, cash pooling or similar obligations incurred in the ordinary course of business, (9) attaching to commodity trading or other brokerage accounts incurred in the ordinary course of business, (10) arising in connection with repurchase agreements permitted under Section 6.6 on assets that are the subject of such repurchase agreements or (11) in favor of any Special Purpose Entity in connection with any Financing Disposition; and

 

(xvii) other Liens securing obligations incurred in the ordinary course of business, which obligations do not exceed $25.0 million at any time outstanding.

 

“Predecessor Notes” of any particular Note means every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and, for the purposes of this definition, any Note authenticated and delivered under Section 3.8 in lieu of a mutilated, lost, destroyed or stolen Note shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Note.

 

“Preferred Stock” as applied to the Capital Stock of any corporation means Capital Stock of any class or classes (however designated) that by its terms is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation.

 

“Prospectus Supplement” means the prospectus supplement, dated May 15, 2012, relating to the offering of the Notes.

 

“Purchase Money Obligations” means any Indebtedness Incurred to finance or refinance the acquisition, leasing, construction or improvement of property (real or personal) or assets, and whether acquired through the direct acquisition of such property or assets or the acquisition of the Capital Stock of any Person owning such property or assets, or otherwise.

 

“Rating Agency” means Moody’s or S&P or, if Moody’s or S&P or both shall not make a rating on the Notes publicly available, a nationally recognized statistical rating agency or agencies, as the case may be, selected by the Company which shall be substituted for Moody’s or S&P or both, as the case may be.

 

“Receivable” means a right to receive payment pursuant to an arrangement with another Person pursuant to which such other Person is obligated to pay, as determined in accordance with GAAP.

 

“refinance” means refinance, refund, replace, renew, repay, modify, restate, defer, substitute, supplement, reissue, resell or extend (including pursuant to any defeasance or discharge mechanism); and the terms “refinances,” “refinanced” and “refinancing” as used for any purpose in this Indenture shall have a correlative meaning.

 

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“Refinancing Indebtedness” means Indebtedness that is Incurred to refinance any Indebtedness existing on the date of this Indenture or Incurred in compliance with this Indenture (including Indebtedness of the Company that refinances Indebtedness of any Restricted Subsidiary (to the extent permitted in this Indenture) and Indebtedness of any Restricted Subsidiary that refinances Indebtedness of another Restricted Subsidiary) including Indebtedness that refinances Refinancing Indebtedness; provided, that (1) if the Indebtedness being refinanced is Subordinated Obligations or Guarantor Subordinated Obligations, the Refinancing Indebtedness has a final Stated Maturity at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the final Stated Maturity of the Indebtedness being refinanced (or if shorter, the Notes), (2) such Refinancing Indebtedness is Incurred in an aggregate principal amount (or if issued with original issue discount, an aggregate issue price) that is equal to or less than the sum of (x) the aggregate principal amount (or if issued with original issue discount, the aggregate accreted value) then outstanding of the Indebtedness being refinanced, plus (y) fees, underwriting discounts, premiums and other costs and expenses incurred in connection with such Refinancing Indebtedness and (3) Refinancing Indebtedness shall not include (x) Indebtedness of a Restricted Subsidiary that is not the Co-Issuer or a Subsidiary Guarantor that refinances Indebtedness of the Company, the Co-Issuer or a Subsidiary Guarantor that could not have been initially Incurred by such Restricted Subsidiary pursuant to Section 6.6 or (y) Indebtedness of the Company or a Restricted Subsidiary that refinances Indebtedness of an Unrestricted Subsidiary.

 

“Related Business” means those businesses in which the Company or any of its Subsidiaries is engaged on the date of this Indenture, or that are similar, related, complementary, incidental or ancillary thereto or extensions, developments or expansions thereof.

 

“Related Taxes” means (x) any taxes, charges or assessments, including but not limited to sales, use, transfer, rental, ad valorem, value-added, stamp, property, consumption, franchise, license, capital, net worth, gross receipts, excise, occupancy, intangibles or similar taxes, charges or assessments (other than federal, state or local taxes measured by income and federal, state or local withholding imposed by any government or other taxing authority on payments made by any Parent other than to another Parent), required to be paid by any Parent by virtue of its being incorporated or having Capital Stock outstanding (but not by virtue of owning stock or other equity interests of any corporation or other entity other than the Company, any of its Subsidiaries or any Parent), or being a holding company parent of the Company, any of its Subsidiaries or any Parent or receiving dividends from or other distributions in respect of the Capital Stock of the Company, any of its Subsidiaries or any Parent, or having guaranteed any obligations of the Company or any Subsidiary thereof, or having made any payment in respect of any of the items for which the Company or any of its Subsidiaries is permitted to make payments to any Parent pursuant to Section 6.7, or acquiring, developing, maintaining, owning, prosecuting, protecting or defending its intellectual property and associated rights (including but not limited to receiving or paying royalties for the use thereof) relating to the business or businesses of the Company or any Subsidiary thereof, (y) any taxes attributable to any taxable period (or portion thereof) ending on or prior to the Issue Date, or (z) any other federal, state, foreign, provincial or local taxes measured by income for which any Parent is liable up to an amount not to exceed, with respect to federal taxes, the amount of any such taxes that the Company and its Subsidiaries would have been required to pay on a separate company basis, or on a consolidated basis as if the Company had filed a consolidated return on behalf of an affiliated group (as defined in Section 1504 of the Code or an analogous provision of state, local or foreign law) of which it

 

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were the common parent, or with respect to state and local taxes, the amount of any such taxes that the Company and its Subsidiaries would have been required to pay on a separate company basis, or on a combined basis as if the Company had filed a combined return on behalf of an affiliated group consisting only of the Company and its Subsidiaries.

 

“Restricted Payment Transaction” means any Restricted Payment permitted pursuant to Section 6.7, any Permitted Payment, any Permitted Investment, or any transaction specifically excluded from the definition of the term “Restricted Payment” (including pursuant to the exception contained in clause (i) and the parenthetical exclusions contained in clauses (ii) and (iii) of such definition).

 

“Restricted Subsidiary” means any Subsidiary of the Company other than an Unrestricted Subsidiary.

 

“Senior ABL Agreement” means the Credit Agreement, dated as of November 12, 2010, among the Company, Beauty Systems Group LLC, Sally Beauty Supply LLC, the other borrowers and guarantors party thereto from time to time, the lenders party thereto from time to time, and Bank of America, N.A., as Administrative Agent, Collateral Agent, Canadian Agent and Canadian Collateral Agent, as such agreement may be amended, supplemented, waived or otherwise modified from time to time or refunded, refinanced, restructured, replaced, renewed, repaid, increased or extended from time to time (whether in whole or in part, whether with the original administrative agent and lenders or other agents and lenders or otherwise, and whether provided under the original Senior ABL Agreement or other credit agreements or otherwise).

 

“Senior ABL Facility” means the collective reference to the Senior ABL Agreement, any Loan Documents (as defined therein), any notes and letters of credit issued pursuant thereto and any guarantee and collateral agreement, patent and trademark security agreement, mortgages, letter of credit applications and other guarantees, pledge agreements, security agreements and collateral documents, and other instruments and documents, executed and delivered pursuant to or in connection with any of the foregoing, in each case as the same may be amended, supplemented, waived or otherwise modified from time to time, or refunded, refinanced, restructured, replaced, renewed, repaid, increased or extended from time to time (whether in whole or in part, whether with the original agent and lenders or other agents and lenders or otherwise, and whether provided under the original Senior ABL Agreement or one or more other credit agreements, indentures (including this Indenture) or financing agreements or otherwise).  Without limiting the generality of the foregoing, the term “Senior ABL Facility” shall include any agreement (i) changing the maturity of any Indebtedness Incurred thereunder or contemplated thereby, (ii) adding Subsidiaries of the Company as additional borrowers or guarantors thereunder, (iii) increasing the amount of Indebtedness Incurred thereunder or available to be borrowed thereunder or (iv) otherwise altering the terms and conditions thereof.

 

“Senior Indebtedness” means any Indebtedness of the Company or any Restricted Subsidiary other than, in the case of the Company, Subordinated Obligations, in the case of the Co-Issuer, Co-Issuer Subordinated Obligations, and, in the case of any Subsidiary Guarantor, Guarantor Subordinated Obligations.

 

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“Significant Subsidiary” means any Restricted Subsidiary that would be a “significant subsidiary” of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC, as such Regulation is in effect on the Issue Date.

 

“Special Purpose Entity” means (x) any Special Purpose Subsidiary or (y) any other Person that is engaged in the business of acquiring, selling, collecting, financing or refinancing Receivables, accounts (as defined in the Uniform Commercial Code as in effect in any jurisdiction from time to time), other accounts and/or other receivables, and/or related assets.

 

“Special Purpose Financing” means any financing or refinancing of assets consisting of or including Receivables of the Company or any Restricted Subsidiary that have been transferred to a Special Purpose Entity or made subject to a Lien in a Financing Disposition.

 

“Special Purpose Financing Fees” means distributions or payments made directly or by means of discounts with respect to any participation interest issued or sold in connection with, and other fees paid to a Person that is not a Restricted Subsidiary in connection with, any Special Purpose Financing.

 

“Special Purpose Financing Undertakings” means representations, warranties, covenants, indemnities, guarantees of performance and (subject to clause (y) of the proviso below) other agreements and undertakings entered into or provided by the Company or any of its Restricted Subsidiaries that the Company determines in good faith (which determination shall be conclusive) are customary or otherwise necessary or advisable in connection with a Special Purpose Financing or a Financing Disposition; provided that (x) it is understood that Special Purpose Financing Undertakings may consist of or include (i) reimbursement and other obligations in respect of notes, letters of credit, surety bonds and similar instruments provided for credit enhancement purposes or (ii) Hedging Obligations, or other obligations relating to Interest Rate Agreements, Currency Agreements or Commodities Agreements entered into by the Company or any Restricted Subsidiary, in respect of any Special Purpose Financing or Financing Disposition, and (y) subject to the preceding clause (x) any such other agreements and undertakings shall not include any Guarantee of Indebtedness of a Special Purpose Subsidiary by the Company or a Restricted Subsidiary that is not a Special Purpose Subsidiary.

 

“Special Purpose Subsidiary” means a Subsidiary of the Company that (a) is engaged solely in (x) the business of acquiring, selling, collecting, financing or refinancing Receivables, accounts (as defined in the Uniform Commercial Code as in effect in any jurisdiction from time to time) and other accounts and receivables (including any thereof constituting or evidenced by chattel paper, instruments or general intangibles), all proceeds thereof and all rights (contractual and other), collateral and other assets relating thereto, and (y) any business or activities incidental or related to such business, and (b) is designated as a “Special Purpose Subsidiary” by the Company.

 

“Special Record Date” for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 3.9 of the Base Indenture.

 

“S&P” means Standard & Poor’s Ratings Group, a division of The McGraw-Hill Companies, Inc., and its successors.

 

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“Subordinated Obligations” means any Indebtedness of the Company (whether outstanding on the date of this Indenture or thereafter Incurred) that is expressly subordinated in right of payment to the Notes pursuant to a written agreement.

 

“Subsidiary Guarantee” means any guarantee that may from time to time be entered into by a Restricted Subsidiary of the Company on the Issue Date or after the Issue Date pursuant to Section 6.12.

 

“Subsidiary Guarantor” means any Restricted Subsidiary of the Company that enters into a Subsidiary Guarantee.

 

“Successor Company” shall have the meaning assigned thereto in clause (i) under Section 7.1.

 

“Tax Sharing Agreement” means the Tax Sharing Agreement, dated as of November 16, 2006, among the Company, Holding and Intermediate Holdings, as the same may be amended, supplemented, waived or otherwise modified from time to time in accordance with the terms thereof and of this Indenture.

 

“Temporary Cash Investments” means any of the following: (i) any investment in (x) direct obligations of the United States of America, a member state of the European Union or any country in whose currency funds are being held pending their application in the making of an investment or capital expenditure by the Company or a Restricted Subsidiary in that country or with such funds, or any agency or instrumentality of any thereof or obligations Guaranteed by the United States of America or a member state of the European Union or any country in whose currency funds are being held pending their application in the making of an investment or capital expenditure by the Company or a Restricted Subsidiary in that country or with such funds, or any agency or instrumentality of any of the foregoing, or obligations guaranteed by any of the foregoing or (y) direct obligations of any foreign country recognized by the United States of America rated at least “A” by S&P or “A-1” by Moody’s (or, in either case, the equivalent of such rating by such organization or, if no rating of S&P or Moody’s then exists, the equivalent of such rating by any nationally recognized rating organization), (ii) overnight bank deposits, and investments in time deposit accounts, certificates of deposit, bankers’ acceptances and money market deposits (or, with respect to foreign banks, similar instruments) maturing not more than one year after the date of acquisition thereof issued by (x) any bank or other institutional lender under a Credit Facility or any affiliate thereof or (y) a bank or trust company that is organized under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America having capital and surplus aggregating in excess of $250.0 million (or the foreign currency equivalent thereof) and whose long term debt is rated at least “A” by S&P or “A-1” by Moody’s (or, in either case, the equivalent of such rating by such organization or, if no rating of S&P or Moody’s then exists, the equivalent of such rating by any nationally recognized rating organization) at the time such Investment is made, (iii) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (i) or (ii) above entered into with a bank meeting the qualifications described in clause (ii) above, (iv) Investments in commercial paper, maturing not more than 270 days after the date of acquisition, issued by a Person (other than that of the Company or any of its Subsidiaries), with a rating at the time as of which any Investment therein is made of “P-2” (or

 

27

 

higher) according to Moody’s or “A-2” (or higher) according to S&P (or, in either case, the equivalent of such rating by such organization or, if no rating of S&P or Moody’s then exists, the equivalent of such rating by any nationally recognized rating organization), (v) Investments in securities maturing not more than one year after the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least “A” by S&P or “A” by Moody’s (or, in either case, the equivalent of such rating by such organization or, if no rating of S&P or Moody’s then exists, the equivalent of such rating by any nationally recognized rating organization), (vi) Preferred Stock (other than of the Company or any of its Subsidiaries) having a rating of “A” or higher by S&P or “A2” or higher by Moody’s (or, in either case, the equivalent of such rating by such organization or, if no rating of S&P or Moody’s then exists, the equivalent of such rating by any nationally recognized rating organization), (vii) investment funds investing 95% of their assets in securities of the type described in clauses (i)-(vi) above (which funds may also hold reasonable amounts of cash pending investment and/or distribution), (viii) any money market deposit accounts issued or offered by a domestic commercial bank or a commercial bank organized and located in a country recognized by the United States of America, in each case, having capital and surplus in excess of $250.0 million (or the foreign currency equivalent thereof), or investments in money market funds subject to the risk limiting conditions of Rule 2a-7 (or any successor rule) of the SEC under the Investment Company Act of 1940, as amended, and (ix) similar investments approved by the Board of Directors in the ordinary course of business.

 

“Trade Payables” means, with respect to any Person, any accounts payable or any indebtedness or monetary obligation to trade creditors created, assumed or guaranteed by such Person arising in the ordinary course of business in connection with the acquisition of goods or services.

 

“Trust Officer” means, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person’s knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture.

 

“Unrestricted Subsidiary” means (i) any Subsidiary of the Company that at the time of determination is an Unrestricted Subsidiary, as designated by the Board of Directors in the manner provided below, and (ii) any Subsidiary of an Unrestricted Subsidiary.  The Board of Directors may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary of the Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any Lien on any property of, the Company or any other Restricted Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided, that (A) such designation was made at or prior to the Issue Date, or (B) the Subsidiary to be so designated has total consolidated assets of $1,000 or less or (C) if such Subsidiary has consolidated assets greater than $1,000, then such designation would be permitted under Section 6.7.  The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, that immediately

 

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after giving effect to such designation (x) the Company could Incur at least $1.00 of additional Indebtedness under Section 6.6(a) or (y) the Consolidated Coverage Ratio would be greater than it was immediately prior to giving effect to such designation or (z) such Subsidiary shall be a Special Purpose Subsidiary with no Indebtedness outstanding other than Indebtedness that can be Incurred (and upon such designation shall be deemed to be Incurred and outstanding) pursuant to Section 6.6(b).  Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution of the Company’s Board of Directors giving effect to such designation and an Officer’s Certificate of the Company certifying that such designation complied with the foregoing provisions.

 

(b)  Section 1.1 of the Base Indenture shall be amended so that the following definitions in the Base Indenture shall be deleted in their entirety and replaced with the following:

 

“Affiliate” of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person.  For the purposes of this definition, “control” when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

 

“Board of Directors” means, for any Person, the board of directors or other governing body of such Person or, if such Person does not have such a board of directors or other governing body and is owned or managed by a single entity, the Board of Directors of such entity, or, in either case, any committee thereof duly authorized to act on behalf of such Board of Directors.  Unless otherwise provided, “Board of Directors” means the Board of Directors of the Company.

 

“Business Day” means a day other than a Saturday, Sunday or other day on which commercial banking institutions are authorized or required by law to close in New York City (or any other city in which a Paying Agent maintains its office).

 

“Company” means Sally Holdings LLC, a Delaware limited liability company, and any successor in interest thereto.

 

“Company Request” or “Company Order” is replaced with: “Company Request,” “Company Order” and “Company Consent” mean, respectively, a written request, order or consent signed in the name of the Company by an Officer of the Company.

 

“Corporate Trust Office” means the office of the Trustee at which at any particular time its corporate trust business shall be administered, which office on the Issue Date is located at 45 Broadway, 14th Floor, New York, NY 10006.

 

“Default” means any event or condition that is, or after notice or passage of time or both would be, an Event of Default.

 

“Depositary” means The Depository Trust Company, its nominees and successors.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

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“GAAP” means generally accepted accounting principles in the United States of America as in effect on the Issue Date (for purposes of the definitions of the terms “Borrowing Base,” “Consolidated Coverage Ratio,”  “Consolidated EBITDA,” “Consolidated Interest Expense,” “Consolidated Net Income,” “Consolidated Tangible Assets,” “Consolidated Total Indebtedness,” “Consolidated Total Leverage Ratio,” “Foreign Borrowing Base” and “Indebtedness,” all defined terms in this Indenture to the extent used in or relating to any of the foregoing definitions, and all ratios and computations based on any of the foregoing definitions) and as in effect from time to time (for all other purposes of this Indenture), including those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession.  All ratios and computations based on GAAP contained in this Indenture shall be computed in conformity with GAAP.

 

“Guarantee” means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness or other obligation of any other Person; provided that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business.  The term “Guarantee” used as a verb has a corresponding meaning.

 

“Holder” is replaced with: “Holder” or “Noteholder” means the Person in whose name a Note is registered in the Note Register.

 

“interest,” with respect to the Notes, means interest on the Notes and, except for purposes of Article XI, additional or special interest pursuant to the terms of any Note.

 

“Interest Payment Date” means, when used with respect to any Note and any installment of interest thereon, the date specified in such Note as the fixed date on which such installment of interest is due and payable, as set forth in such Note.

 

“Lien” means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof).

 

“Officer” means, with respect to the Company, the Co-Issuer or any other obligor upon the Notes, the Chairman of the Board, the President, the Chief Executive Officer, the Chief Financial Officer, any Vice President, the Controller, the Treasurer or the Secretary (a) of such Person or (b) if such Person is owned or managed by a single entity, of such entity (or any other individual designated as an “Officer” for the purposes of this Indenture by the Board of Directors).

 

“Officer’s Certificate” means, with respect to the Company, the Co-Issuer or any other obligor upon the Notes, a certificate signed by one Officer of such Person and delivered to the Trustee.

 

“Opinion of Counsel” means a written opinion from legal counsel who is reasonably acceptable to the Trustee.  The counsel may be an employee of or counsel to the Company or the Trustee.

 

30

 

“Outstanding,” when used with respect to Notes means, as of the date of determination, all Notes theretofore authenticated and delivered under this Indenture, except:

 

(i)            Notes theretofore cancelled by the Trustee or delivered to the Trustee for cancellation;

 

(ii)           Notes paid pursuant to Section 3.8 or Notes for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent in trust for the Holders of such Notes, provided that, if such Notes are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor reasonably satisfactory to the Trustee has been made; and

 

(iii)          Notes in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to this Indenture.

 

A Note does not cease to be Outstanding because the Company or any Affiliate of the Company holds the Note, provided that in determining whether the Holders of the requisite amount of Outstanding Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Notes owned by the Company or any Affiliate of the Company shall be disregarded and deemed not to be Outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such request, demand, authorization, direction, notice, consent or waiver, only Notes which the Trustee actually knows are so owned shall be so disregarded.  Notes so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the reasonable satisfaction of the Trustee the pledgee’s right to act with respect to such Notes and that the pledgee is not the Company or an Affiliate of the Company.

 

“Paying Agent” means any Person authorized by the Company to pay the principal of (and premium, if any) or interest on any Notes on behalf of the Company; provided that neither the Company nor any of its Affiliates shall act as Paying Agent for purposes of Section 14.2 or Section 10.5.  The Trustee will initially act as Paying Agent for the Notes.

 

“Person” means any individual, corporation, partnership, joint venture, association, joint-stock company, limited liability company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.

 

“Place of Payment” means a city or any political subdivision thereof in which any Paying Agent appointed pursuant to Article III is located.

 

“Redemption Date,” when used with respect to any Note to be redeemed or purchased, means the date fixed for such redemption or purchase by or pursuant to this Indenture and the Notes.

 

“Regular Record Date” for the interest payable on any Interest Payment Date means the date specified for that purpose in Section 3.16.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

31

 

“Stated Maturity” means, with respect to any security, the date specified in such security as the fixed date on which the payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency).

 

“Subsidiary” of any Person means any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other equity interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by (i) such Person or (ii) one or more Subsidiaries of such Person.

 

“TIA” means the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-7bbbb) as in effect on the date of this Indenture, except as otherwise provided in this Indenture.

 

“Trustee” means the party named as such in the first paragraph of this Indenture until a successor replaces it and, thereafter, means the successor.

 

“U.S. Government Obligation” means (x) any security that is (i) a direct obligation of the United States of America for the payment of which the full faith and credit of the United States of America is pledged or (ii) an obligation of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case under the preceding clause (i) or (ii) is not callable or redeemable at the option of the issuer thereof, and (y) any depositary receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any U.S. Government Obligation that is specified in clause (x) above and held by such bank for the account of the holder of such depositary receipt, or with respect to any specific payment of principal of or interest on any U.S. Government Obligation that is so specified and held, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depositary receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal or interest evidenced by such depositary receipt.

 

“Voting Stock” of an entity means all classes of Capital Stock of such entity then outstanding and normally entitled to vote in the election of directors or all interests in such entity with the ability to control the management or actions of such entity.

 

(c)  Section 1.2 of the Base Indenture shall be deleted in its entirety and replaced with the following:

 

SECTION 1.2               INCORPORATION BY REFERENCE OF TIA

 

Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture.  This Indenture is subject to the mandatory provisions of the TIA, which are incorporated by reference in and made a part of this Indenture.  Any terms incorporated by reference in this Indenture that are defined by the TIA, defined by

 

32

 

any TIA reference to another statute or defined by SEC rule under the TIA, have the meanings so assigned to them therein.  The following TIA terms have the following meanings:

 

“indenture securities” means the Notes.

 

“indenture security holder” means a Noteholder.

 

“indenture to be qualified” means this Indenture.

 

“indenture trustee” or “institutional trustee” means the Trustee.

 

“obligor” on the indenture securities means the Company, the Co-Issuer, any Parent Guarantor, any Subsidiary Guarantor, and any successor or other obligor on the indenture securities.

 

(d)  Section 1.3 of the Base Indenture shall be deleted and replaced in its entirety by the following:

 

SECTION 1.3                 RULES OF CONSTRUCTION

 

For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires:

 

(1)  the terms defined in this Indenture have the meanings assigned to them in this Indenture;

 

(2)  “or” is not exclusive;

 

(3)  all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP;

 

(4)  the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision;

 

(5)  all references to “$” or “dollars” shall refer to the lawful currency of the United States of America;

 

(6)  the words “include,” “included” and “including,” as used herein, shall be deemed in each case to be followed by the phrase “without limitation,” if not expressly followed by such phrase or the phrase “but not limited to”;

 

(7)  words in the singular include the plural, and words in the plural include the singular;

 

(8)  references to sections of, or rules under, the Securities Act shall be deemed to include substitute, replacement or successor sections or rules adopted by the SEC from time to time; and

 

(9)  any reference to a Section, Article or clause refers to such Section, Article or clause of this Indenture.

 

33

 

(e)  The following shall be added to the Base Indenture as Section 1.4:

 

SECTION 1.4                 OTHER DEFINITIONS

 

	
 
    	
Term
    	
 
    	
Defined in
   Section
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
“Act”
    	
 
    	
 
    	
13.4
    	
 
    	
 
    
	
 
    	
“Affiliate Transaction”
    	
 
    	
 
    	
6.10
    	
 
    	
 
    
	
 
    	
“Agent Members”
    	
 
    	
 
    	
3.15
    	
 
    	
 
    
	
 
    	
“Amendment”
    	
 
    	
 
    	
6.8
    	
 
    	
 
    
	
 
    	
“Applicable Premium”
    	
 
    	
 
    	
4.1
    	
 
    	
 
    
	
 
    	
“Authentication Order”
    	
 
    	
 
    	
3.3
    	
 
    	
 
    
	
 
    	
“Bankruptcy Law”
    	
 
    	
 
    	
8.1
    	
 
    	
 
    
	
 
    	
“Change of Control Offer”
    	
 
    	
 
    	
6.13
    	
 
    	
 
    
	
 
    	
“Covenant Defeasance”
    	
 
    	
 
    	
10.3
    	
 
    	
 
    
	
 
    	
“Custodian”
    	
 
    	
 
    	
8.1
    	
 
    	
 
    
	
 
    	
“Defaulted Interest”
    	
 
    	
 
    	
3.9
    	
 
    	
 
    
	
 
    	
“Defeasance”
    	
 
    	
 
    	
10.2
    	
 
    	
 
    
	
 
    	
“Defeased Notes”
    	
 
    	
 
    	
10.1
    	
 
    	
 
    
	
 
    	
“Event of Default”
    	
 
    	
 
    	
8.1
    	
 
    	
 
    
	
 
    	
“Excess Proceeds”
    	
 
    	
 
    	
6.9
    	
 
    	
 
    
	
 
    	
“Expiration Date”
    	
 
    	
 
    	
13.4
    	
 
    	
 
    
	
 
    	
“Initial Agreement”
    	
 
    	
 
    	
6.8
    	
 
    	
 
    
	
 
    	
“Initial Lien”
    	
 
    	
 
    	
6.11
    	
 
    	
 
    
	
 
    	
“Notice of Default”
    	
 
    	
 
    	
8.1
    	
 
    	
 
    
	
 
    	
“Offer”
    	
 
    	
 
    	
6.9
    	
 
    	
 
    
	
 
    	
“Parent Guaranteed Obligations”
    	
 
    	
 
    	
12.1
    	
 
    	
 
    
	
 
    	
“Permitted Payment”
    	
 
    	
 
    	
6.7
    	
 
    	
 
    
	
 
    	
“Redemption Amount”
    	
 
    	
 
    	
4.1
    	
 
    	
 
    
	
 
    	
“Redemption Price”
    	
 
    	
 
    	
4.1
    	
 
    	
 
    
	
 
    	
“Refinancing Agreement”
    	
 
    	
 
    	
6.8
    	
 
    	
 
    
	
 
    	
“Regular Record Date”
    	
 
    	
 
    	
3.16
    	
 
    	
 
    
	
 
    	
“Reporting Date”
    	
 
    	
 
    	
6.4
    	
 
    	
 
    
	
 
    	
“Restricted Payment”
    	
 
    	
 
    	
6.7
    	
 
    	
 
    
	
 
    	
“Reversion Date”
    	
 
    	
 
    	
6.14
    	
 
    	
 
    
	
 
    	
“Subsidiary Guaranteed Obligations”
    	
 
    	
 
    	
12.1
    	
 
    	
 
    
	
 
    	
“Successor Company”
    	
 
    	
 
    	
7.1
    	
 
    	
 
    
	
 
    	
“Suspended Covenants”
    	
 
    	
 
    	
6.14
    	
 
    	
 
    
	
 
    	
“Suspension Date”
    	
 
    	
 
    	
6.14
    	
 
    	
 
    
	
 
    	
“Suspension Period”
    	
 
    	
 
    	
6.14
    	
 
    	
 
    
	
 
    	
“Treasury Rate”
    	
 
    	
 
    	
4.1
    	
 
    	
 
    

 

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ARTICLE III

 

SECURITY FORMS

 

SECTION 301              Form of Notes

 

In accordance with Article II of the Base Indenture, the Initial Notes and any Additional Notes shall be issued in the form of one or more permanent global Notes in substantially the form set forth in Exhibit A to this Supplemental Indenture (each, a “Global Note” and, together with any other global Notes that are issued and authenticated pursuant to this Indenture, the “Global Notes”) deposited with the Trustee, as custodian for the Depositary or its nominee, for credit to an account of an Agent Member, and shall be duly executed by each Issuer and authenticated by the Trustee as provided in the Indenture.  The aggregate principal amount of a Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depositary or its nominee, as hereinafter provided.  If any Additional Notes are issued in an offering not registered under the Securities Act, any additional modifications to the form of such Note, including any requisite private placement legends will be set forth in a supplemental indenture at the time such Additional Notes are issued.

 

ARTICLE IV

 

THE NOTES

 

SECTION 401.             Title and Terms

 

The aggregate principal amount of Notes that may be authenticated and delivered and Outstanding under the Indenture is not limited.  The Initial Notes will be issued in an aggregate principal amount of $700.0 million.  The Notes shall vote and consent together on all matters as one class, and none of the Notes will have the right to vote or consent as a class separate from one another on any matter.

 

The Notes shall be known and designated as the “5.75% Senior Notes due 2022” of the Issuers.  The final Stated Maturity of the Notes shall be June 1, 2022.  Interest on the Outstanding principal amount of Notes will accrue at the rate of 5.75% per annum and will be payable semi-annually in arrears on June 1 and December 1 in each year, commencing on December 1, 2012, to holders of record on the immediately preceding May 15 and November 15, respectively (each such May 15 and November 15, a “Regular Record Date”).  Interest on the Initial Notes will accrue from the most recent date to which interest has been paid or duly provided for or, if no interest has been paid, from May 18, 2012; and interest on any Additional Notes will accrue (or will be deemed to have accrued) from the most recent date to which interest has been paid or duly provided for or, if no interest has been paid on such Additional Notes, from the Interest Payment Date immediately preceding the date of issuance of such Additional Notes or, if the date of issuance of such Additional Notes is an Interest Payment Date, from such date of issuance, provided that if any Note is surrendered for exchange on or after a record date for an Interest Payment Date that will occur on or after the date of such exchange,

 

35

 

interest on the Notes received in exchange thereof will accrue from the date of such Interest Payment Date.

 

Additional Notes will vote (or consent) as a class with the other Notes and otherwise be treated as Notes for all purposes of this Indenture.  If any Additional Notes are issued in an offering not registered under the Securities Act, any additional transfer restrictions and similar or related provisions may be set forth in a supplemental indenture at the time such Additional Notes are issued.

 

SECTION 402              Changes to Article III of the Base Indenture

 

(a)  Section 3.2 of the Base Indenture shall be deleted in its entirety and replaced with the following:

 

SECTION 3.2                 DENOMINATIONS

 

The Notes shall be issuable only in fully registered form, without coupons, and only in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof.

 

(b)  Section 3.3 of the Base Indenture shall be deleted in its entirety and replaced with the following:

 

SECTION 3.3                                                                                                                          EXECUTION, AUTHENTICATION AND DELIVERY AND DATING

 

The Notes shall be executed on behalf of each Issuer by one Officer of such Issuer.  The signature of any such Officer on the Notes may be manual or by facsimile or PDF transmission.

 

Notes bearing the manual or facsimile signature of an individual who was at any time an Officer of an Issuer shall bind such Issuer, notwithstanding that such individual has ceased to hold such office prior to the authentication and delivery of such Notes or did not hold such office at the date of such Notes.

 

At any time and from time to time after the execution and delivery of this Supplemental Indenture, the Issuers may deliver Notes executed by the Issuers to the Trustee for authentication; and the Trustee shall authenticate and deliver (i) Initial Notes for original issue in the aggregate principal amount not to exceed $700.0 million and (ii) Additional Notes in one or more series from time to time for original issue in aggregate principal amounts specified by the Company, in either case specified in clauses (i) and (ii) above, upon a written order of the Company in the form of an Officer’s Certificate of the Company (an “Authentication Order”).  Such Officer’s Certificate shall specify the amount of Notes to be authenticated and the date on which the Notes are to be authenticated, the “CUSIP,” “ISIN,” “Common Code” or other similar identification numbers of such Notes, if any, whether the Notes are to be Initial Notes or Additional Notes and whether the Notes are to be issued as one or more Global Notes or Physical Notes and such other information as the Company may include or the Trustee may reasonably request and the Trustee shall be fully protected in conclusively relying on such Authentication Order.

 

All Notes shall be dated the date of their authentication.

 

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No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Note a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder.

 

ARTICLE V

 

REDEMPTION

 

SECTION 501              Changes to Article IV of the Base Indenture

 

Sections 4.1 through 4.7 enumerated in Article IV of the Base Indenture shall be deleted and replaced in their entirety by the following:

 

SECTION 4.1                 RIGHT OF REDEMPTION

 

(a)  The Notes will be redeemable, at the Company’s option, in whole or in part, at any time and from time to time on and after June 1, 2017 and prior to maturity at the applicable redemption price set forth below. Such redemption may be made upon notice mailed by first-class mail to each Holder’s registered address in accordance with Section 4.5.  The Company may provide in such notice that payment of the redemption price and the performance of the Company’s obligations with respect to such redemption may be performed by another Person. Any such redemption and notice may, in the Company’s discretion, be subject to the satisfaction of one or more conditions precedent, including but not limited to the occurrence of a Change of Control. The Notes will be so redeemable at the following redemption prices (expressed as a percentage of principal amount), plus accrued and unpaid interest, if any, to the relevant Redemption Date (subject to Section 3.9), if redeemed during the 12-month period commencing on June 1 of the years set forth below:

 

	
 
    	
Redemption Period
    	
 
    	
Price
    	
 
    	
 
    
	
 
    	
2017 
    	
 
    	
102.875
    	
%
    	
 
    
	
 
    	
2018 
    	
 
    	
101.917
    	
%
    	
 
    
	
 
    	
2019 
    	
 
    	
100.958
    	
%
    	
 
    
	
 
    	
2020 and thereafter 
    	
 
    	
100.000
    	
%
    	
 
    

 

(b)           In addition, at any time and from time to time on or prior to June 1, 2015, the Company at its option may redeem Notes in an aggregate principal amount equal to up to 35% of the original aggregate principal amount of the Notes (including the principal amount of any Additional Notes), with funds in an equal aggregate amount (the “Redemption Amount”) not exceeding the aggregate proceeds of one or more Equity Offerings, at a redemption price (expressed as a percentage of principal amount thereof) of 105.750%, plus accrued and unpaid interest, if any, to the Redemption Date (subject to Section 3.9); provided, however, that an aggregate principal amount of Notes equal to at least 65% of the original aggregate principal amount of Notes (including the principal amount of any Additional Notes) must remain outstanding after each such redemption.

 

37

 

The Company may make such redemption upon notice mailed by first-class mail to each Holder’s registered address in accordance with Section 4.5 (but in no event more than 180 days after the completion of the related Equity Offering). The Company may provide in such notice that payment of the redemption price and performance of the Company’s obligations with respect to such redemption may be performed by another Person. Any such notice may be given prior to the completion of the related Equity Offering, and any such redemption or notice may, at the Company’s discretion, be subject to the satisfaction of one or more conditions precedent, including but not limited to the completion of the related Equity Offering.

 

(c)           At any time prior to June 1, 2017, Notes may also be redeemed or purchased (by the Company or any other Person) in whole or in part, at the Company’s option, at a price (the “Redemption Price”) equal to 100% of the principal amount thereof plus the Applicable Premium as of, and accrued but unpaid interest, if any, to, the Redemption Date (subject to Section 3.9). Such redemption or purchase may be made upon notice mailed by first-class mail to each Holder’s registered address in accordance with Section 4.5. The Company may provide in such notice that payment of the Redemption Price and performance of the Company’s obligations with respect to such redemption or purchase may be performed by another Person. Any such redemption, purchase or notice may, at the Company’s discretion, be subject to the satisfaction of one or more conditions precedent, including but not limited to the occurrence of a Change of Control.

 

“Applicable Premium” means, with respect to a Note at any Redemption Date, the greater of (i) 1.0% of the principal amount of such Note and (ii) the excess of (A) the present value at such Redemption Date of (1) the redemption price of such Note on June 1, 2017 (such redemption price being that described in Section 4.1(a)), plus (2) all required remaining scheduled interest payments due on such Note through such date, computed using a discount rate equal to the Treasury Rate plus 50 basis points, over (B) the principal amount of such Note on such Redemption Date.  Calculation of the Applicable Premium will be made by the Company or on behalf of the Company by such Person as the Company shall designate; provided that such calculation shall not be a duty or obligation of the Trustee.

 

“Treasury Rate” means, with respect to a Redemption Date, the yield to maturity at the time of computation of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15(519) that has become publicly available at least two Business Days prior to such Redemption Date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from such Redemption Date to June 1, 2017; provided, however, that if the period from the Redemption Date to such date is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the period from the Redemption Date to such date is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used.

 

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SECTION 4.2                 APPLICABILITY OF ARTICLE

 

Redemption or purchase of Notes as permitted by Section 4.1 shall be made in accordance with this Article IV.

 

SECTION 4.3                 ELECTION TO REDEEM; NOTICE TO TRUSTEE

 

In case of any redemption at the election of the Company of less than all of the Notes, the Company shall, at least two Business Days (but not more than 60 days) prior to the date on which notice is required to be mailed or caused to be mailed to Holders pursuant to Section 4.5, notify the Trustee of such Redemption Date and of the principal amount of Notes to be redeemed.

 

SECTION 4.4                 SELECTION BY TRUSTEE OF NOTES TO BE REDEEMED

 

In the case of any partial redemption, selection of the Notes for redemption will be made by the Trustee not more than 60 days prior to the Redemption Date on a pro rata basis, by lot or by such other method as the Trustee in its sole discretion shall deem to be fair and appropriate, all in accordance with the procedures of the Depositary, although no Note of $2,000 in original principal amount or less will be redeemed in part.

 

The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed.  On and after the Redemption Date, interest will cease to accrue on Notes or portions thereof called for redemption.

 

For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Notes shall relate, in the case of any Note redeemed or to be redeemed only in part, to the portion of the principal of such Note that has been or is to be redeemed.

 

SECTION 4.5                 NOTICE OF REDEMPTION

 

Notice of redemption or purchase as provided in Section 4.1 shall be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Notes to be redeemed, at such Holder’s address appearing in the Note Register.

 

Any such notice shall identify the Notes to be redeemed (including CUSIP, ISIN or Common Code number(s)) and shall state:

 

(1)  the expected Redemption Date,

 

(2) the redemption price (or the formula by which the redemption price will be determined),

 

(3)  if less than all Outstanding Notes are to be redeemed, the identification (and, in the case of partial redemption, the portion of the respective principal amounts) of the Notes to be redeemed,

 

39

 

(4)  that, on the Redemption Date, the redemption price will become due and payable upon each such Note, and that, unless the Company defaults in making such redemption payment or the Paying Agent is prohibited from making such payment pursuant to the terms of this Indenture, interest thereon shall cease to accrue from and after said date, and

 

(5)  the place where such Notes are to be surrendered for payment of the redemption price.

 

In addition, if such redemption, purchase or notice is subject to satisfaction of one or more conditions precedent, as permitted by Section 4.1, such notice shall describe each such condition, and if applicable, shall state that, in the Company’s discretion, the Redemption Date may be delayed until such time as any or all such conditions shall be satisfied, or such redemption or purchase may not occur and such notice may be rescinded in the event that any or all such conditions shall not have been satisfied by the Redemption Date, or by the Redemption Date as so delayed.

 

The Company may provide in such notice that payment of the redemption price and the performance of the Company’s obligations with respect to such redemption may be performed by another Person.

 

Notice of such redemption or purchase of Notes to be so redeemed or purchased at the election of the Company shall be given by the Company or, at the Company’s request (made to the Trustee at least 40 days (or such shorter period as shall be satisfactory to the Trustee) prior to the Redemption Date), by the Trustee in the name and at the expense of the Company.  Any such request will set forth the information to be stated in such notice, as provided by this Section 4.5.

 

The notice if mailed in the manner herein provided shall be conclusively presumed to have been given, whether or not the Holder receives such notice.  In any case, failure to give such notice by mail or any defect in the notice to the Holder of any Note designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Note.

 

SECTION 4.6                 DEPOSIT OF REDEMPTION PRICE

 

On or prior to 11:00 a.m., New York City time, on any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, the Company shall segregate and hold in trust as provided in Section 6.3) an amount of money sufficient to pay the redemption price of, and any accrued and unpaid interest on, all the Notes or portions thereof which are to be redeemed on that date.

 

SECTION 4.7                 NOTES PAYABLE ON REDEMPTION DATE

 

Notice of redemption having been given as provided in this Article IV, the Notes so to be redeemed shall, on the Redemption Date, become due and payable at the redemption price herein specified and from and after such date (unless the Company shall default in the payment of the redemption price or the Paying Agent is prohibited from paying the redemption price pursuant to the terms of this Indenture) such Notes shall cease to bear interest.  Upon surrender of such Notes for redemption in accordance with such notice, such Notes shall be paid by the Company

 

40

 

at the redemption price.  Installments of interest whose Interest Payment Date is on or prior to the Redemption Date shall be payable to the Holders of such Notes registered as such on the relevant Regular Record Dates according to their terms and the provisions of Section 3.9.

 

On and after any Redemption Date, if money sufficient to pay the redemption price of and any accrued and unpaid interest on Notes called for redemption shall have been made available in accordance with Section 4.6, the Notes (or the portions thereof) called for redemption will cease to accrue interest and the only right of the Holders of such Notes (or portions thereof) will be to receive payment of the redemption price of and, subject to the last sentence of the preceding paragraph, any accrued and unpaid interest on such Notes (or portions thereof) to the Redemption Date.  If any Note (or portion thereof) called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate borne by the Note (or portion thereof).

 

SECTION 4.8                 NOTES REDEEMED IN PART

 

Any Note that is to be redeemed only in part shall be surrendered at the Place of Payment (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or its attorney duly authorized in writing) and the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Note without service charge, a new Note or Notes, of any authorized denomination as requested by such Holder in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Note so surrendered.

 

ARTICLE VI

 

SINKING FUNDS

 

SECTION 601              Applicability of Article V of the Base Indenture

 

Article V (“Sinking Funds”) of the Base Indenture shall not be applicable to the Notes.

 

ARTICLE VII

 

COVENANTS

 

SECTION 701              Changes to Article VI of the Base Indenture

 

Section 6.1 through 6.7 enumerated in Article VI of the Base Indenture shall be deleted in their entirety and replaced with the following:

 

SECTION 6.1                 PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST

 

The Issuers shall duly and punctually pay the principal of (and premium, if any) and interest on the Notes in accordance with the terms of the Notes and this Indenture.  Principal amount (and premium, if any) and interest on the Notes shall be considered paid on the date due if either Issuer shall have deposited with the Paying Agent (if other than the Company or a

 

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wholly-owned Domestic Subsidiary of the Company) as of 11:00 a.m. New York City time on the due date money in immediately available funds and designated for and sufficient to pay all principal amount (and premium, if any) and interest then due.

 

SECTION 6.2                 MAINTENANCE OF OFFICE OR AGENCY

 

(a)  The Company shall maintain in the United States an office or agency where Notes may be presented or surrendered for payment, where Notes may be surrendered for transfer or exchange and where notices and demands to or upon the Issuers in respect of the Notes and this Indenture may be served.  The Company shall give prompt written notice to the Trustee of the location, and of any change in the location, of such office or agency.  If at any time the Company shall fail to maintain such office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee.

 

(b)  The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all purposes and may from time to time rescind such designations.

 

The Company hereby designates the Corporate Trust Office of the Trustee or its Agent, as such office or agency of the Company in accordance with Section 3.6.

 

SECTION 6.3                 MONEY FOR PAYMENTS TO BE HELD IN TRUST

 

If the Company shall at any time act as Paying Agent, it shall, on or before 11:00 a.m., New York City time, on each due date of the principal of (and premium, if any) or interest on, any of the Notes, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and shall promptly notify the Trustee of its action or failure so to act.

 

If the Company is not acting as Paying Agent, it shall, on or prior to 11:00 a.m., New York City time, on each due date of the principal of (and premium, if any) or interest on, any Notes, deposit with a Paying Agent a sum sufficient to pay the principal (and premium, if any) or interest, so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company shall promptly notify the Trustee of its action or failure so to act.

 

If the Company is not acting as Paying Agent, the Company shall cause any Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section 6.3, that such Paying Agent shall

 

(i)    hold all sums held by it for the payment of principal of (and premium, if any) or interest on Notes in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided;

 

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(ii)   give the Trustee notice of any default by the Issuers (or any other obligor upon the Notes) in the making of any such payment of principal (and premium, if any) or interest;

 

(iii)  at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent; and

 

(iv)  acknowledge, accept and agree to comply in all respects with the provisions of this Indenture and TIA relating to the duties, rights and liabilities of such Paying Agent.

 

The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money.

 

Any money deposited with the Trustee or any Paying Agent, or then held by either Issuer, in trust for the payment of the principal of (and premium, if any) or interest on any Note and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by either Issuer) shall be discharged from such trust; and the Holder of such Note shall thereafter, as an unsecured general creditor, look only to the Issuers for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of either Issuer as trustee thereof, shall thereupon cease.

 

SECTION 6.4                 SEC REPORTS

 

Notwithstanding that the Company may not be required to be or remain subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act, the Company will file with the SEC (unless such filing is not permitted under the Exchange Act or by the SEC), so long as the Notes are Outstanding, the annual reports, information, documents and other reports that the Company is required to file with the SEC pursuant to such Section 13(a) or 15(d) or would be so required to file if the Company were so subject.  The Company will also, within 15 days after the date on which the Company was so required to file or would be so required to file if the Company were so subject, transmit by mail to all Holders, as their names and addresses appear in the Note Register, and to the Trustee (or make available on a Company website) copies of any such information, documents and reports (without exhibits) so required to be filed.  Notwithstanding the foregoing, if any audited or reviewed financial statements or information required to be included in any such filing are not reasonably available on a timely basis as a result of the Company’s accountants not being “independent” (as defined pursuant to the Exchange Act and the rules and regulations of the SEC thereunder), the Company may, in lieu of making such filing or transmitting or making available the information, documents and reports so required to be filed, elect to make a filing on an alternative form or transmit or make available unaudited or unreviewed financial statements or information substantially similar to such

 

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required audited or reviewed financial statements or information, provided that (a) the Company shall in any event be required to make such filing and so transmit or make available such audited or reviewed financial statements or information no later than the first anniversary of the date on which the same was otherwise required pursuant to the preceding provisions of this paragraph (such initial date, the “Reporting Date”) and (b) if the Company makes such an election and such filing has not been made, or such information, documents and reports have not been transmitted or made available, as the case may be, within 90 days after such Reporting Date, liquidated damages will accrue on the Notes at a rate of 0.50% per annum from the date that is 90 days after such Reporting Date to the earlier of (x) the date on which such filing has been made, or such information, documents and reports have been transmitted or made available, as the case may be, and (y) the first anniversary of such Reporting Date (provided that not more than 0.50% per annum in liquidated damages shall be payable for any period regardless of the number of such elections by the Company).  The Company will be deemed to have satisfied the requirements of this Section 6.4 if any Parent files and provides reports, documents and information of the types otherwise so required, in each case within the applicable time periods, and the Company is not required to file such reports, documents and information separately under the applicable rules and regulations of the SEC (after giving effect to any exemptive relief) because of the filings by such Parent.  The Company also will comply with the other provisions of TIA § 314(a).  The Trustee shall have no responsibility or liability whatsoever for determining whether or not such filings have occurred.  Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee’s receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officer’s Certificates).

 

SECTION 6.5                 STATEMENT AS TO DEFAULT

 

Each Issuer shall deliver to the Trustee, within 120 days after the end of each fiscal year of the Company ending after October 1, 2012, an Officer’s Certificate (which may be a single Officer’s Certificate for both Issuers) to the effect that to the best knowledge of the signer thereof on behalf of such Issuer, such Issuer is or is not in default in the performance and observance of any of the terms, provisions and conditions of this Indenture applicable to such Issuer (without regard to any period of grace or requirement of notice provided hereunder) and, if such Issuer shall be in default, specifying all such defaults and the nature and status thereof of which such signer may have knowledge.  To the extent required by the TIA, each Guarantor shall comply with TIA § 314(a)(4).  The individual signing any certificate given by any Person pursuant to this Section 6.5 shall be the principal executive, financial or accounting officer of such Person, in compliance with TIA § 314(a)(4).

 

SECTION 6.6                 LIMITATION ON INDEBTEDNESS

 

(a)  The Company will not, and will not permit any Restricted Subsidiary to, Incur any Indebtedness; provided, however, that the Company or any Restricted Subsidiary may Incur Indebtedness if on the date of the Incurrence of such Indebtedness, after giving effect to the Incurrence thereof, the Consolidated Coverage Ratio would be greater than 2.00:1.00.

 

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(b)           Notwithstanding the foregoing paragraph (a), the Company and its Restricted Subsidiaries may Incur the following Indebtedness:

 

(i)            Indebtedness Incurred pursuant to any Credit Facility (including but not limited to in respect of letters of credit or bankers’ acceptances issued or created thereunder) and Indebtedness Incurred other than under any Credit Facility, and (without limiting the foregoing), in each case, any Refinancing Indebtedness in respect thereof, in a maximum principal amount at any time outstanding not exceeding in the aggregate the amount equal to (A) $1,200.0 million, plus (B) the greater of (x) $400.0 million and (y) an amount equal to (1) the Borrowing Base less (2) the aggregate principal amount of Indebtedness Incurred by Special Purpose Subsidiaries that are Domestic Subsidiaries and then outstanding pursuant to clause (ix) of this paragraph (b), plus (C) in the event of any refinancing of any such Indebtedness, the aggregate amount of fees, underwriting discounts, premiums and other costs and expenses incurred in connection with such refinancing;

 

(ii)           Indebtedness (A) of any Restricted Subsidiary to the Company or (B) of the Company or any Restricted Subsidiary to any Restricted Subsidiary; provided, that any subsequent issuance or transfer of any Capital Stock of such Restricted Subsidiary to which such Indebtedness is owed, or other event, that results in such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any other subsequent transfer of such Indebtedness (except to the Company or a Restricted Subsidiary) will be deemed, in each case, an Incurrence of such Indebtedness by the issuer thereof not permitted by this clause (ii);

 

(iii)          Indebtedness represented by the Notes (other than any Additional Notes), any Indebtedness (other than the Indebtedness described in clause (ii) above) outstanding on the Issue Date and any Refinancing Indebtedness Incurred in respect of any Indebtedness described in this clause (iii) or paragraph (a) above;

 

(iv)          Purchase Money Obligations and Capitalized Lease Obligations, and any Refinancing Indebtedness with respect thereto, in an aggregate principal amount at any time outstanding not exceeding an amount equal to the greater of $100.0 million and 11.5% of Consolidated Tangible Assets;

 

(v)           Indebtedness consisting of accommodation guarantees for the benefit of trade creditors of the Company or any of its Restricted Subsidiaries;

 

(vi)          (A) Guarantees by the Company or any Restricted Subsidiary of Indebtedness or any other obligation or liability of the Company or any Restricted Subsidiary (other than any Indebtedness Incurred by the Company or such Restricted Subsidiary, as the case may be, in violation of this Section 6.6), or (B) without limiting Section 6.11, Indebtedness of the Company or any Restricted Subsidiary arising by reason of any Lien granted by or applicable to such Person securing Indebtedness of the Company or any Restricted Subsidiary (other than any Indebtedness Incurred by the Company or such Restricted Subsidiary, as the case may be, in violation of this Section 6.6);

 

(vii)         Indebtedness of the Company or any Restricted Subsidiary (A) arising from the honoring of a check, draft or similar instrument of such Person drawn against insufficient

 

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funds, provided that such Indebtedness is extinguished within five Business Days of its Incurrence, or (B) consisting of guarantees, indemnities, obligations in respect of earnouts or other purchase price adjustments, or similar obligations, Incurred in connection with the acquisition or disposition of any business, assets or Person;

 

(viii)        Indebtedness of the Company or any Restricted Subsidiary in respect of (A) letters of credit, bankers’ acceptances or other similar instruments or obligations issued, or relating to liabilities or obligations incurred, in the ordinary course of business (including those issued to governmental entities in connection with self-insurance under applicable workers’ compensation statutes), or (B) completion guarantees, surety, judgment, appeal or performance bonds, or other similar bonds, instruments or obligations, provided, or relating to liabilities or obligations incurred, in the ordinary course of business, or (C) Hedging Obligations, entered into for bona fide hedging purposes, or (D) Management Guarantees, or (E) the financing of insurance premiums in the ordinary course of business, or (F) netting, overdraft protection and other arrangements arising under standard business terms of any bank at which the Company or any Restricted Subsidiary maintains an overdraft, cash pooling or other similar facility or arrangement;

 

(ix)           Indebtedness (A) of a Special Purpose Subsidiary secured by a Lien on all or part of the assets disposed of in, or otherwise Incurred in connection with, a Financing Disposition or (B) otherwise Incurred in connection with a Special Purpose Financing; provided that (1) such Indebtedness is not recourse to the Company or any Restricted Subsidiary that is not a Special Purpose Subsidiary (other than with respect to Special Purpose Financing Undertakings), (2) in the event such Indebtedness shall become recourse to the Company or any Restricted Subsidiary that is not a Special Purpose Subsidiary (other than with respect to Special Purpose Financing Undertakings), such Indebtedness will be deemed to be, and must be classified by the Company as, Incurred at such time (or at the time initially Incurred) under one or more of the other provisions of this covenant for so long as such Indebtedness shall be so recourse; and (3) in the event that at any time thereafter such Indebtedness shall comply with the provisions of the preceding subclause (1), the Company may classify such Indebtedness in whole or in part as Incurred under this Section 6.6(b)(ix);

 

(x)            Indebtedness of any Person that is assumed by the Company or any Restricted Subsidiary in connection with its acquisition of assets from such Person or any Affiliate thereof or is issued and outstanding on or prior to the date on which such Person was acquired by the Company or any Restricted Subsidiary or merged or consolidated with or into any Restricted Subsidiary (other than Indebtedness Incurred to finance, or otherwise Incurred in connection with, such acquisition), provided that on the date of such acquisition, merger or consolidation, after giving effect thereto, either (A) the Company could Incur at least $1.00 of additional Indebtedness pursuant to paragraph (a) above or (B) the Consolidated Coverage Ratio of the Company would equal or exceed the Consolidated Coverage Ratio of the Company immediately prior to giving effect thereto; and any Refinancing Indebtedness with respect to any such Indebtedness;

 

(xi)           Indebtedness of the Company or any Restricted Subsidiary in an aggregate principal amount at any time outstanding not exceeding an amount equal to (A) (1) the Foreign Borrowing Base less (2) the aggregate principal amount of Indebtedness Incurred by Special

 

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Purpose Subsidiaries that are Foreign Subsidiaries and then outstanding pursuant to clause (ix) of this paragraph (b) plus (B) in the event of any refinancing of any Indebtedness Incurred under this clause (xi), the aggregate amount of fees, underwriting discounts, premiums and other costs and expenses incurred in connection with such refinancing;

 

(xii)          Contribution Indebtedness and any Refinancing Indebtedness with respect thereto; and

 

(xiii)         Indebtedness of the Company or any Restricted Subsidiary in an aggregate principal amount at any time outstanding not exceeding an amount equal to the greater of $85.0 million and 9.75% of Consolidated Tangible Assets.

 

(c)           For purposes of determining compliance with, and the outstanding principal amount of any particular Indebtedness Incurred pursuant to and in compliance with, this Section 6.6, (i) any other obligation of the obligor on such Indebtedness (or of any other Person who could have Incurred such Indebtedness under this Section 6.6) arising under any Guarantee, Lien or letter of credit, bankers’ acceptance or other similar instrument or obligation supporting such Indebtedness shall be disregarded to the extent that such Guarantee, Lien or letter of credit, bankers’ acceptance or other similar instrument or obligation secures the principal amount of such Indebtedness; (ii) in the event that Indebtedness meets the criteria of more than one of the types of Indebtedness described in paragraph (b) above, the Company, in its sole discretion, shall classify such item of Indebtedness and may include the amount and type of such Indebtedness in one or more of such clauses (including in part under one such clause and in part under another such clause); and (iii) the amount of Indebtedness issued at a price that is less than the principal amount thereof shall be equal to the amount of the liability in respect thereof determined in accordance with GAAP.

 

(d)           For purposes of determining compliance with any dollar-denominated restriction on the Incurrence of Indebtedness denominated in a foreign currency, the dollar-equivalent principal amount of such Indebtedness Incurred pursuant thereto shall be calculated based on the relevant currency exchange rate in effect on the date that such Indebtedness was Incurred, in the case of term Indebtedness, or first committed, in the case of revolving credit Indebtedness, provided that (x) the dollar-equivalent principal amount of any such Indebtedness outstanding on the Issue Date shall be calculated based on the relevant currency exchange rate in effect on the Issue Date, (y) if such Indebtedness is Incurred to refinance other Indebtedness denominated in a foreign currency (or in a different currency from such Indebtedness so being Incurred), and such refinancing would cause the applicable dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, such dollar-denominated restriction shall be deemed not to have been exceeded so long as the principal amount of such refinancing Indebtedness does not exceed (i) the outstanding or committed principal amount (whichever is higher) of such Indebtedness being refinanced plus (ii) the aggregate amount of fees, underwriting discounts, premiums and other costs and expenses incurred in connection with such refinancing and (z) the dollar-equivalent principal amount of Indebtedness denominated in a foreign currency and Incurred pursuant to a Credit Facility shall be calculated based on the relevant currency exchange rate in effect on, at the Company’s option, (i) the Issue Date, (ii) any date on which any of the respective commitments under such Credit Facilities shall be reallocated between or among facilities or subfacilities

 

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thereunder, or on which such rate is otherwise calculated for any purpose thereunder, or (iii) the date of such Incurrence.  The principal amount of any Indebtedness Incurred to refinance other Indebtedness, if Incurred in a different currency from the Indebtedness being refinanced, shall be calculated based on the currency exchange rate applicable to the currencies in which such respective Indebtedness is denominated that is in effect on the date of such refinancing.

 

SECTION 6.7                 LIMITATION ON RESTRICTED PAYMENTS

 

(a)  The Company shall not, and shall not permit any Restricted Subsidiary, directly or indirectly, to (i) declare or pay any dividend or make any distribution on or in respect of its Capital Stock (including any such payment in connection with any merger or consolidation to which the Company is a party) except (x) dividends or distributions payable solely in its Capital Stock (other than Disqualified Stock) and (y) dividends or distributions payable to the Company or any Restricted Subsidiary (and, in the case of any such Restricted Subsidiary making such dividend or distribution, to other holders of its Capital Stock on no more than a pro rata basis, measured by value), (ii) purchase, redeem, retire or otherwise acquire for value any Capital Stock of the Company held by Persons other than the Company or a Restricted Subsidiary (other than any acquisition of Capital Stock deemed to occur upon the exercise of options if such Capital Stock represents a portion of the exercise price thereof), (iii) voluntarily purchase, repurchase, redeem, defease or otherwise voluntarily acquire or retire for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment, any Subordinated Obligations (other than a purchase, repurchase, redemption, defeasance or other acquisition or retirement for value in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of such acquisition or retirement) or (iv) make any Investment (other than a Permitted Investment) in any Person (any such dividend, distribution, purchase, repurchase, redemption, defeasance, other acquisition or retirement or Investment being herein referred to as a “Restricted Payment”), if at the time the Company or such Restricted Subsidiary makes such Restricted Payment and after giving effect thereto:

 

(1)           a Default shall have occurred and be continuing (or would result therefrom);

 

(2)           the Company could not Incur at least an additional $1.00 of Indebtedness pursuant to Section 6.6(a); or

 

(3)           the aggregate amount of such Restricted Payment and all other Restricted Payments (the amount so expended, if other than in cash, to be as determined in good faith by the Board of Directors, whose determination shall be conclusive and evidenced by a resolution of the Board of Directors) declared or made subsequent to the Issue Date and then outstanding would exceed, without duplication, the sum of:

 

(A)          50% of the Consolidated Net Income accrued during the period (treated as one accounting period) beginning on July 1, 2006 to the end of the most recent fiscal quarter ending prior to the date of such Restricted Payment for which consolidated financial statements of the Company are available (or, in case

 

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such Consolidated Net Income shall be a negative number, 100% of such negative number);

 

(B)           the aggregate Net Cash Proceeds and the fair value (as determined in good faith by the Board of Directors) of property or assets received (x) by the Company as capital contributions to the Company after the Issue Date or from the issuance or sale (other than to a Restricted Subsidiary) of its Capital Stock (other than Disqualified Stock) after the Issue Date (other than Excluded Contributions and Contribution Amounts) or (y) by the Company or any Restricted Subsidiary from the issuance and sale by the Company or any Restricted Subsidiary after the Issue Date of Indebtedness that shall have been converted into or exchanged for Capital Stock of the Company (other than Disqualified Stock) or Capital Stock of any Parent, plus the amount of any cash and the fair value (as determined in good faith by the Board of Directors) of any property or assets, received by the Company or any Restricted Subsidiary upon such conversion or exchange;

 

(C)           the aggregate amount equal to the net reduction in Investments in Unrestricted Subsidiaries resulting from (i) dividends, distributions, interest payments, return of capital, repayments of Investments or other transfers of assets to the Company or any Restricted Subsidiary from any Unrestricted Subsidiary, including dividends or other distributions related to dividends or other distributions made pursuant to clause (x) of the following paragraph (b), or (ii) the redesignation of any Unrestricted Subsidiary as a Restricted Subsidiary (valued in each case as provided in the definition of “Investment”), not to exceed in the case of any such Unrestricted Subsidiary the aggregate amount of Investments (other than Permitted Investments) made by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary after the Issue Date; and

 

(D)          in the case of any disposition or repayment of any Investment constituting a Restricted Payment (without duplication of any amount deducted in calculating the amount of Investments at any time outstanding included in the amount of Restricted Payments), an amount in the aggregate equal to the lesser of the return of capital, repayment or other proceeds with respect to all such Investments received by the Company or a Restricted Subsidiary and the initial amount of all such Investments constituting Restricted Payments.

 

(b)           The provisions of Section 6.7(a) will not prohibit any of the following (each, a “Permitted Payment”):

 

(i)            any purchase, redemption, repurchase, defeasance or other acquisition or retirement of Capital Stock of the Company or Subordinated Obligations made by exchange (including any such exchange pursuant to the exercise of a conversion right or privilege in connection with which cash is paid in lieu of the issuance of fractional shares) for, or out of the proceeds of the substantially concurrent issuance or sale of, Capital Stock of the Company (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary) or a substantially concurrent capital contribution to the Company, in each case other than Excluded Contributions and Contribution Amounts;

 

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provided, that the Net Cash Proceeds from such issuance, sale or capital contribution shall be excluded in subsequent calculations under Section 6.7(a)(3)(B);

 

(ii)           any purchase, redemption, repurchase, defeasance or other acquisition or retirement of Subordinated Obligations (w) made by exchange for, or out of the proceeds of the substantially concurrent issuance or sale of, Indebtedness of the Company or Refinancing Indebtedness Incurred in compliance with Section 6.6, (x) from Net Available Cash to the extent permitted by Section 6.9, (y) following the occurrence of a Change of Control (or other similar event described therein as a “change of control”), but only if the Company shall have complied with Section 6.13 and, if required, purchased all Notes tendered pursuant to the offer to repurchase all the Notes required thereby, prior to purchasing or repaying such Subordinated Obligations or (z) constituting Acquired Indebtedness;

 

(iii)          dividends paid within 60 days after the date of declaration thereof if at such date of declaration such dividend would have complied with Section 6.7(a);

 

(iv)          Investments or other Restricted Payments in an aggregate amount outstanding at any time not to exceed the amount of Excluded Contributions;

 

(v)           loans, advances, dividends or distributions by the Company to any Parent to permit any Parent to repurchase or otherwise acquire its Capital Stock (including any options, warrants or other rights in respect thereof), or payments by the Company to repurchase or otherwise acquire Capital Stock of any Parent or the Company (including any options, warrants or other rights in respect thereof), in each case from Management Investors, such payments, loans, advances, dividends or distributions not to exceed an amount (net of repayments of any such loans or advances) equal to (x) (1) $15.0 million, plus (2) $3.0 million multiplied by the number of calendar years that have commenced since the Issue Date, plus (y) the Net Cash Proceeds received by the Company since the Issue Date from, or as a capital contribution from, the issuance or sale to Management Investors of Capital Stock (including any options, warrants or other rights in respect thereof), to the extent such Net Cash Proceeds are not included in any calculation under Section 6.7(a)(3)(B)(x), plus (z) the cash proceeds of key man life insurance policies received by the Company or any Restricted Subsidiary (or by any Parent and contributed to the Company) since the Issue Date to the extent such cash proceeds are not included in any calculation under Section 6.7(a)(3)(A);

 

(vi)          the payment by the Company of, or loans, advances, dividends or distributions by the Company to any Parent to pay, dividends on the common stock or equity of the Company or any Parent following a public offering of such common stock or equity in an amount not to exceed in any fiscal year 6% of the aggregate gross proceeds received by the Company (whether directly, or indirectly through a contribution to common equity capital) in or from such public offering;

 

(vii)         Restricted Payments (including loans or advances) in an aggregate amount outstanding at any time not to exceed an amount (net of repayments of any such loans or

 

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advances) equal to the greater of $50.0 million and 5.75% of Consolidated Tangible Assets;

 

(viii)                        loans, advances, dividends or distributions to any Parent or other payments by the Company or any Restricted Subsidiary (A) pursuant to the Tax Sharing Agreement, or (B) to pay or permit any Parent to pay any Parent Expenses or any Related Taxes;

 

(ix)                                payments by the Company, or loans, advances, dividends or distributions by the Company to any Parent to make payments, to holders of Capital Stock of the Company or any Parent in lieu of issuance of fractional shares of such Capital Stock, not to exceed $5.0 million in the aggregate outstanding at any time;

 

(x)                                   dividends or other distributions of Capital Stock, Indebtedness or other securities of Unrestricted Subsidiaries;

 

(xi)                                the declaration and payment of dividends to holders of any class or series of Disqualified Stock, or of any Preferred Stock of a Restricted Subsidiary, Incurred in accordance with the terms of Section 6.6; and

 

(xii)                             other Restricted Payments if, immediately after giving effect to such Restricted Payment (including the Incurrence of any Indebtedness to finance such payment) as if it had occurred at the beginning of the most recently ended four full fiscal quarters for which consolidated financial statements of the Company are available, the Consolidated Total Leverage Ratio would have been less than or equal to 3.25:1.00;

 

provided, that (A) in the case of clauses (iii), (vi), (ix) and (xii), the net amount of any such Permitted Payment shall be included in subsequent calculations of the amount of Restricted Payments, (B) in the case of clause (v), at the time of any calculation of the amount of Restricted Payments, the net amount of Permitted Payments that have then actually been made under clause (v) that is in excess of 50% of the total amount of Permitted Payments then permitted under clause (v) shall be included in such calculation of the amount of Restricted Payments, (C) in all cases other than pursuant to clauses (A) and (B) immediately above, the net amount of any such Permitted Payment shall be excluded in subsequent calculations of the amount of Restricted Payments and (D) solely with respect to clauses (vii) and (xii), no Default or Event of Default shall have occurred or be continuing at the time of any such Permitted Payment after giving effect thereto.

 

SECTION 6.8                                                  LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED SUBSIDIARIES

 

The Company will not, and will not permit any Restricted Subsidiary to, create or otherwise cause to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to (i) pay dividends or make any other distributions on its Capital Stock or pay any Indebtedness or other obligations owed to the Company, (ii) make any loans or advances to the Company or (iii) transfer any of its property or assets to the Company (provided that dividend or liquidation priority between classes of Capital Stock, or subordination of any obligation (including the application of any remedy bars thereto) to any other obligation,

 

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will not be deemed to constitute such an encumbrance or restriction), except any encumbrance or restriction:

 

(1)                                  pursuant to an agreement or instrument in effect at or entered into on the Issue Date, any Credit Facility, this Indenture or the Notes;

 

(2)                                  pursuant to any agreement or instrument of a Person, or relating to Indebtedness or Capital Stock of a Person, which Person is acquired by or merged or consolidated with or into the Company or any Restricted Subsidiary, or which agreement or instrument is assumed by the Company or any Restricted Subsidiary in connection with an acquisition of assets from such Person, as in effect at the time of such acquisition, merger or consolidation (except to the extent that such Indebtedness was incurred to finance, or otherwise in connection with, such acquisition, merger or consolidation); provided that for purposes of this clause (2), if a Person other than the Company is the Successor Company with respect thereto, any Subsidiary thereof or agreement or instrument of such Person or any such Subsidiary shall be deemed acquired or assumed, as the case may be, by the Company or a Restricted Subsidiary, as the case may be, when such Person becomes such Successor Company;

 

(3)                                  pursuant to an agreement or instrument (a “Refinancing Agreement”) effecting a refinancing of Indebtedness Incurred pursuant to, or that otherwise extends, renews, refunds, refinances or replaces, an agreement or instrument referred to in clause (1) or (2) of this Section 6.8 or this clause (3) (an “Initial Agreement”) or contained in any amendment, supplement or other modification to an Initial Agreement (an “Amendment”); provided, however, that the encumbrances and restrictions contained in any such Refinancing Agreement or Amendment taken as a whole are not materially less favorable to the Holders of the Notes than encumbrances and restrictions contained in the Initial Agreement or Initial Agreements to which such Refinancing Agreement or Amendment relates (as determined in good faith by the Company);

 

(4)                                  (A) that restricts in a customary manner the subletting, assignment or transfer of any property or asset that is subject to a lease, license or similar contract, or the assignment or transfer of any lease, license or other contract, (B) by virtue of any transfer of, agreement to transfer, option or right with respect to, or Lien on, any property or assets of the Company or any Restricted Subsidiary not otherwise prohibited by this Indenture, (C) contained in mortgages, pledges or other security agreements securing Indebtedness of a Restricted Subsidiary to the extent restricting the transfer of the property or assets subject thereto, (D) pursuant to customary provisions restricting dispositions of real property interests set forth in any reciprocal easement agreements of the Company or any Restricted Subsidiary, (E) pursuant to Purchase Money Obligations that impose encumbrances or restrictions on the property or assets so acquired, (F) on cash or other deposits or net worth imposed by customers or suppliers under agreements entered into in the ordinary course of business, (G) pursuant to customary provisions contained in agreements and instruments entered into in the ordinary course of business (including but not limited to leases and joint venture and other similar agreements entered into in the ordinary course of business), (H) that arises or is agreed to in the ordinary course of business and does not detract from the value of property or assets of the Company or any Restricted Subsidiary in any manner material to the Company or such Restricted Subsidiary, or (I) pursuant to Hedging Obligations;

 

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(5)                                  with respect to a Restricted Subsidiary (or any of its property or assets) imposed pursuant to an agreement entered into for the direct or indirect sale or disposition of all or substantially all the Capital Stock or assets of such Restricted Subsidiary (or the property or assets that are subject to such restriction) pending the closing of such sale or disposition;

 

(6)                                  by reason of any applicable law, rule, regulation or order, or required by any regulatory authority having jurisdiction over the Company or any Restricted Subsidiary or any of their businesses; or

 

(7)                                  pursuant to an agreement or instrument (A) relating to any Indebtedness permitted to be Incurred subsequent to the Issue Date pursuant to the provisions of Section 6.6 (i) if the encumbrances and restrictions contained in any such agreement or instrument taken as a whole are not materially less favorable to the Holders of the Notes than the encumbrances and restrictions contained in the Initial Agreements (as determined in good faith by the Company), or (ii) if such encumbrance or restriction is not materially more disadvantageous to the Holders of the Notes than is customary in comparable financings (as determined in good faith by the Company) and either (x) the Company determines in good faith that such encumbrance or restriction will not materially affect the Company’s ability to make principal or interest payments on the Notes or (y) such encumbrance or restriction applies only if a default occurs in respect of a payment or financial covenant relating to such Indebtedness, (B) relating to any sale of receivables by a Foreign Subsidiary or (C) relating to Indebtedness of or a Financing Disposition by or to or in favor of any Special Purpose Entity.

 

SECTION 6.9                                                                                                  LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK

 

(a)  The Company will not, and will not permit any Restricted Subsidiary to, make any Asset Disposition unless

 

(i)                                     the Company or such Restricted Subsidiary receives consideration (including by way of relief from, or by any other Person assuming responsibility for, any liabilities, contingent or otherwise) at the time of such Asset Disposition at least equal to the fair market value of the shares and assets subject to such Asset Disposition, as such fair market value may be determined (and shall be determined, to the extent such Asset Disposition or any series of related Asset Dispositions involves aggregate consideration in excess of $25.0 million) in good faith by the Board of Directors, whose determination shall be conclusive (including as to the value of all noncash consideration),

 

(ii)                                  in the case of any Asset Disposition (or series of related Asset Dispositions) having a fair market value of $15.0 million or more, at least 75% of the consideration therefor (excluding, in the case of an Asset Disposition (or series of related Asset Dispositions), any consideration by way of relief from, or by any other Person assuming responsibility for, any liabilities, contingent or otherwise, that are not Indebtedness) received by the Company or such Restricted Subsidiary is in the form of cash, and

 

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(iii)                               an amount equal to 100% of the Net Available Cash from such Asset Disposition is applied by the Company (or any Restricted Subsidiary, as the case may be) as follows:

 

(A)                              first, either (x) to the extent the Company elects (or is required by the terms of any Bank Indebtedness, any Senior Indebtedness of the Company or any Subsidiary Guarantor or any Indebtedness of a Restricted Subsidiary that is not a Subsidiary Guarantor), to prepay, repay or purchase any such Indebtedness or (in the case of letters of credit, bankers’ acceptances or other similar instruments) cash collateralize any such Indebtedness (in each case other than Indebtedness owed to the Company or a Restricted Subsidiary) within 365 days after the later of the date of such Asset Disposition and the date of receipt of such Net Available Cash, or (y) to the extent the Company or such Restricted Subsidiary elects, to invest in Additional Assets (including by means of an investment in Additional Assets by a Restricted Subsidiary with an amount equal to Net Available Cash received by the Company or another Restricted Subsidiary) within 365 days from the later of the date of such Asset Disposition and the date of receipt of such Net Available Cash, or, if such investment in Additional Assets is a project authorized by the Board of Directors that will take longer than such 365 days to complete, the period of time necessary to complete such project;

 

(B)                                second, to the extent of the balance of such Net Available Cash after application in accordance with clause (A) above (such balance, the “Excess Proceeds”), to make an offer to purchase Notes and (to the extent the Company or such Restricted Subsidiary elects, or is required by the terms thereof) to purchase, redeem or repay any other Senior Indebtedness of the Company or a Restricted Subsidiary, pursuant and subject to Section 6.9(b) and Section 6.9(c) and the agreements governing such other Indebtedness; and

 

(C)                                third, to the extent of the balance of such Net Available Cash after application in accordance with clauses (A) and (B) above, to fund (to the extent consistent with any other applicable provision of this Indenture) any general corporate purpose (including but not limited to the repurchase, repayment or other acquisition or retirement of any Subordinated Obligations);

 

provided, however, that in connection with any prepayment, repayment or purchase of Indebtedness pursuant to clause (A)(x) or (B) above, the Company or such Restricted Subsidiary will retire such Indebtedness and will cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased.

 

Notwithstanding the foregoing provisions of this Section 6.9, the Company and the Restricted Subsidiaries shall not be required to apply any Net Available Cash or equivalent amount in accordance with this Section 6.9 except to the extent that the aggregate Net Available Cash from all Asset Dispositions or equivalent amount that is not applied in accordance with this Section 6.9 exceeds $30.0 million.  If the aggregate principal amount of Notes or other Indebtedness of the Company or a Restricted Subsidiary validly tendered and not withdrawn (or otherwise subject to purchase, redemption or repayment) in connection with an offer pursuant to

 

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clause (B) above exceeds the Excess Proceeds, the Excess Proceeds will be apportioned between such Notes and such other Indebtedness of the Company or a Restricted Subsidiary, with the portion of the Excess Proceeds payable in respect of such Notes to equal the lesser of (x) the Excess Proceeds amount multiplied by a fraction, the numerator of which is the outstanding principal amount of such Notes and the denominator of which is the sum of the outstanding principal amount of the Notes and the outstanding principal amount of the relevant other Indebtedness of the Company or a Restricted Subsidiary, and (y) the aggregate principal amount of Notes validly tendered and not withdrawn.

 

For the purposes of clause (ii) of paragraph (a) above, the following are deemed to be cash: (1) Temporary Cash Investments and Cash Equivalents, (2) the assumption of Indebtedness of the Company (other than Disqualified Stock of the Company) or any Restricted Subsidiary and the release of the Company or such Restricted Subsidiary from all liability on payment of the principal amount of such Indebtedness in connection with such Asset Disposition, (3) Indebtedness of any Restricted Subsidiary that is no longer a Restricted Subsidiary as a result of such Asset Disposition, to the extent that the Company and each other Restricted Subsidiary are released from any Guarantee of payment of the principal amount of such Indebtedness in connection with such Asset Disposition, (4) securities received by the Company or any Restricted Subsidiary from the transferee that are converted by the Company or such Restricted Subsidiary into cash within 180 days, (5) consideration consisting of Indebtedness of the Company or any Restricted Subsidiary, (6) Additional Assets and (7) any Designated Noncash Consideration received by the Company or any of its Restricted Subsidiaries in an Asset Disposition having an aggregate Fair Market Value, taken together with all other Designated Noncash Consideration received pursuant to this clause, not to exceed an aggregate amount at any time outstanding equal to the greater of $50.0 million and 5.75% of Consolidated Tangible Assets (with the Fair Market Value of each item of Designated Noncash Consideration being measured at the time received and without giving effect to subsequent changes in value).

 

(b)                                 In the event of an Asset Disposition that requires the purchase of Notes pursuant to Section 6.9(a)(iii)(B), the Company will be required to purchase Notes tendered pursuant to an offer by the Company for the Notes (the “Offer”) at a purchase price of 100% of their principal amount plus accrued and unpaid interest to the Purchase Date in accordance with the procedures (including prorating in the event of oversubscription) set forth in Section 6.9(c).  If the aggregate purchase price of the Notes tendered pursuant to the Offer is less than the Net Available Cash allotted to the purchase of Notes, the remaining Net Available Cash will be available to the Company for use in accordance with Section 6.9(a)(iii)(B) (to repay other Indebtedness of the Company or a Restricted Subsidiary) or Section 6.9(a)(iii)(C).  The Company shall not be required to make an Offer for Notes pursuant to this Section 6.9 if the Net Available Cash available therefor (after application of the proceeds as provided in Section 6.9(a)(iii)(A)) is less than $30.0 million for any particular Asset Disposition (which lesser amounts shall be carried forward for purposes of determining whether an Offer is required with respect to the Net Available Cash from any subsequent Asset Disposition).  No Note will be repurchased in part if less than $2,000 in original principal amount of such Note would be left outstanding.

 

(c)                                  The Company shall, not later than 45 days after the Company becomes obligated to make an Offer pursuant to this Section 6.9, mail a notice to each Holder with a copy to the Trustee stating: (1) that an Asset Disposition that requires the purchase of a portion of the Notes

 

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has occurred and that such Holder has the right (subject to the prorating described below) to require the Company to purchase a portion of such Holder’s Notes at a purchase price in cash equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase (subject to Section 3.9); (2) the circumstances and relevant facts and financial information regarding such Asset Disposition; (3) the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed; (4) the instructions determined by the Company, consistent with this Section 6.9, that a Holder must follow in order to have its Notes purchased; and (5) the amount of the Offer.  If, upon the expiration of the period for which the Offer remains open, the aggregate principal amount of Notes surrendered by Holder exceeds the amount of the Offer, the Company shall select the Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $2,000 or integral multiples of $1,000 in excess thereof shall be purchased).

 

(d)                                 The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes pursuant to this Section 6.9.  To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section 6.9, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Section 6.9 by virtue thereof.

 

SECTION 6.10                                            LIMITATION ON TRANSACTIONS WITH AFFILIATES

 

(a)  The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into or conduct any transaction or series of related transactions (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of the Company (an “Affiliate Transaction”) unless (i) the terms of such Affiliate Transaction are not materially less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could be obtained at the time in a transaction with a Person who is not such an Affiliate and (ii) if such Affiliate Transaction involves aggregate consideration in excess of $15.0 million, the terms of such Affiliate Transaction have been approved by a majority of the Disinterested Directors.  For purposes of this Section 6.10(a), any Affiliate Transaction shall be deemed to have satisfied the requirements set forth in this Section 6.10(a) if (x) such Affiliate Transaction is approved by a majority of the Disinterested Directors or (y) in the event there are no Disinterested Directors, a fairness opinion is provided by a nationally recognized appraisal or investment banking firm with respect to such Affiliate Transaction.

 

(b)                                 The provisions of Section 6.10(a) will not apply to:

 

(i)                                     any Restricted Payment Transaction,

 

(ii)                                  (1) the entering into, maintaining or performance of any employment contract, collective bargaining agreement, benefit plan, program or arrangement, related trust agreement or any other similar arrangement for or with any employee, officer or director heretofore or hereafter entered into in the ordinary course of business, including vacation, health, insurance, deferred compensation, severance, retirement, savings or other similar plans, programs or arrangements, (2) the payment of compensation, performance of

 

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indemnification or contribution obligations, or any issuance, grant or award of stock, options, other equity-related interests or other securities, to employees, officers or directors in the ordinary course of business, (3) the payment of reasonable fees to directors of the Company or any of its Subsidiaries (as determined in good faith by the Company or such Subsidiary), (4) any transaction with an officer or director in the ordinary course of business not involving more than $100,000 in any one case, or (5) Management Advances and payments in respect thereof (or in reimbursement of any expenses referred to in the definition of such term),

 

(iii)                               any transaction between or among any of the Company, one or more Restricted Subsidiaries, or one or more Special Purpose Entities,

 

(iv)                              any transaction arising out of agreements or instruments in existence on the Issue Date (including, without limitation, the Tax Sharing Agreement), and any payments made pursuant thereto,

 

(v)                                 any transaction in the ordinary course of business on terms not materially less favorable to the Company or the relevant Restricted Subsidiary than those that could be obtained at the time in a transaction with a Person who is not an Affiliate of the Company,

 

(vi)                              any transaction in the ordinary course of business, or approved by a majority of the Board of Directors, between the Company or any Restricted Subsidiary and any Affiliate of the Company controlled by the Company that is a joint venture or similar entity, and

 

(vii)                           any issuance or sale of Capital Stock (other than Disqualified Stock) of the Company or capital contribution to the Company.

 

SECTION 6.11                                            LIMITATION ON LIENS

 

The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, create or permit to exist any Lien (other than Permitted Liens) on any of its property or assets (including Capital Stock of any other Person), whether owned on the date of this Indenture or thereafter acquired, securing any Indebtedness (the “Initial Lien”), unless contemporaneously therewith effective provision is made to secure the Indebtedness due under this Indenture and the Notes or, in respect of Liens on any Restricted Subsidiary’s property or assets, any Subsidiary Guarantee of such Restricted Subsidiary, equally and ratably with (or on a senior basis to, in the case of Subordinated Obligations or Guarantor Subordinated Obligations) such obligation for so long as such obligation is so secured by such Initial Lien.  Any such Lien thereby created in favor of the Notes or any such Subsidiary Guarantee will be automatically and unconditionally released and discharged upon (i) the release and discharge of the Initial Lien to which it relates, (ii) in the case of any such Lien in favor of any such Subsidiary Guarantee, upon the termination and discharge of such Subsidiary Guarantee in accordance with the terms of Section 12.4 or (iii) any sale, exchange or transfer (other than a transfer constituting a transfer of all or substantially all of the assets of the Company that is governed by Section 7.1) to any Person not an Affiliate of the Company of the property or assets secured by such Initial Lien, or of all of the Capital Stock held by the Company or any Restricted Subsidiary in, or all or substantially all the assets of, any Restricted Subsidiary creating such Initial Lien.

 

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SECTION 6.12                                            FUTURE SUBSIDIARY GUARANTORS

 

From and after the Issue Date, the Company will cause each Domestic Subsidiary (other than the Co-Issuer) that guarantees payment by the Company of any Indebtedness of the Company under a Credit Facility or the 2019 Notes to execute and deliver to the Trustee a supplemental indenture or other instrument pursuant to which such Domestic Subsidiary will guarantee payment of the Notes, whereupon such Domestic Subsidiary will become a Subsidiary Guarantor for all purposes under this Indenture.  In addition, the Company may cause any Subsidiary that is not a Subsidiary Guarantor so to guarantee payment of the Notes and become a Subsidiary Guarantor.

 

SECTION 6.13                                            PURCHASE OF NOTES UPON A CHANGE OF CONTROL

 

(a)  Upon the occurrence after the Issue Date of a Change of Control, each Holder of Notes will have the right to require the Company to repurchase all or any part of the Notes of such Holder at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase (subject to Section 3.9); provided, however, that the Company shall not be obligated to repurchase Notes pursuant to this Section 6.13 in the event that it has exercised its right to redeem all of the Notes as provided in Article IV.

 

(b)                                 In the event that, at the time of such Change of Control, the terms of any Bank Indebtedness constituting Designated Senior Indebtedness restrict or prohibit the repurchase of the Notes pursuant to this Section 6.13, then prior to the mailing of the notice to Holders provided for in Section 6.13(c) but in any event not later than 30 days following the date the Company obtains actual knowledge of any Change of Control (unless the Company has exercised its right to redeem all the Notes as provided in Article IV), the Company shall, or shall cause one or more of its Subsidiaries to, (i) repay in full all such Bank Indebtedness subject to such terms or offer to repay in full all such Bank Indebtedness and repay the Bank Indebtedness of each lender who has accepted such offer or (ii) obtain the requisite consent under the agreements governing such Bank Indebtedness to permit the repurchase of the Notes as provided for in Section 6.13(c).  The Company shall first comply with the provisions of the immediately preceding sentence before it shall be required to repurchase Notes pursuant to the provisions set forth in this Section 6.13.  The Company’s failure to comply with the provisions of this Section 6.13(b) or Section 6.13(c) shall constitute an Event of Default described in Section 8.1(iv) and not in Section 8.1(ii).

 

(c)                                  Unless the Company has exercised its right to redeem all the Notes as described in Article IV, the Company shall, not later than 30 days following the date the Company obtains actual knowledge of any Change of Control having occurred, mail a notice (a “Change of Control Offer”) to each Holder with a copy to the Trustee stating: (1) that a Change of Control has occurred or may occur and that such Holder has, or upon such occurrence will have, the right to require the Company to purchase such Holder’s Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on a record date to receive interest on the relevant interest payment date); (2) the circumstances and relevant facts and financial information regarding such Change of Control; (3) the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); (4) the instructions determined by the Company, consistent with this Section 6.13, that a Holder must follow in order

 

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to have its Notes purchased; and (5) if such notice is mailed prior to the occurrence of a Change of Control, that such offer is conditioned on the occurrence of such Change of Control.  No Note will be repurchased in part if less than $2,000 in original principal amount of such Note would be left outstanding.

 

(d)                                 The Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer.

 

(e)                                  The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes pursuant to this Section 6.13.  To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section 6.13, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Section 6.13 by virtue thereof.

 

SECTION 6.14                                            SUSPENSION OF COVENANTS ON ACHIEVEMENT OF INVESTMENT GRADE RATING

 

(a)  If on any day following the Issue Date (i) the Notes have Investment Grade Ratings from both Rating Agencies, and (ii) no Default has occurred and is continuing under this Indenture, then, beginning on that day (the “Suspension Date”) subject to the provisions of the following paragraph, the covenants in Section 6.6, Section 6.7, Section 6.8, Section 6.9, Section 6.10, Section 6.12, and Section 7.1(a)(iii) (collectively, the “Suspended Covenants”) will be suspended.  During any period that the foregoing covenants have been suspended, the Board of Directors may not designate any Subsidiaries of the Company as Unrestricted Subsidiaries unless such designation would have complied with Section 6.7 as if Section 6.7 would have been in effect during such period.

 

(b)                                 If on any day subsequent to the Suspension Date one or both of the Rating Agencies downgrade the ratings assigned to the Notes below an Investment Grade Rating or a Default or an Event of Default occurs and is continuing, the foregoing covenants will be reinstated as of and from such date (any such date, a “Reversion Date”).  The period of time between the Suspension Date and the Reversion Date is referred to as the “Suspension Period.”  Upon such reinstatement, all Indebtedness Incurred during the Suspension Period will be deemed to have been Incurred under the exception provided by Section 6.6(b)(iii).  With respect to Restricted Payments made after any such reinstatement, the amount of Restricted Payments will be calculated as if Section 6.7 had been in effect since the Issue Date but excluding the Suspension Period.  For purposes of Section 6.9, upon the occurrence of a Reversion Date the amount of Excess Proceeds not applied in accordance with such covenant will be deemed to be reset to zero.

 

(c)                                  During the Suspension Period, any reference in the definitions of “Permitted Liens” and “Unrestricted Subsidiary” to Section 6.6 or any provision thereof shall be construed as if such covenant were in effect during the Suspension Period.

 

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Notwithstanding that the Suspended Covenants may be reinstated, no Default or Event of Default will be deemed to have occurred as a result of any failure by the Company or any Subsidiary to comply with the Suspended Covenants during any Suspension Period (or upon termination of the Suspension Period or after that time arising out of events that occurred or actions taken during the Suspension Period) and the Company and any Subsidiary will be permitted, without causing a Default or Event of Default or breach of any kind under this Indenture, to honor, comply with or otherwise perform any contractual commitments or obligations entered into during a Suspension Period following a Reversion Date and to consummate the transactions contemplated thereby.

 

(d)                                 The Company shall deliver promptly to the Trustee an Officer’s Certificate notifying it of the occurrence of any Suspension Date or any Reversion Date.  The Trustee shall have no independent obligation to determine if a Suspension Period has commenced or terminated or to notify Holders regarding the same.

 

ARTICLE VIII

 

SUCCESSOR CORPORATION

 

SECTION 801                                         Changes to Article VII of the Base Indenture

 

Sections 7.1 and 7.2 enumerated in Article VII of the Base Indenture shall be deleted in their entirety and replaced with the following:

 

SECTION 7.1   WHEN THE COMPANY MAY MERGE, ETC.

 

(a) The Company will not consolidate with or merge with or into, or convey, transfer or lease all or substantially all its assets to, any Person, unless:

 

(i)                                     the resulting, surviving or transferee Person (the “Successor Company”) will be a Person organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and the Successor Company (if not the Company) will expressly assume all the obligations of the Company under the Notes and this Indenture by executing and delivering to the Trustee a supplemental indenture in form reasonably satisfactory to the Trustee;

 

(ii)                                  immediately after giving effect to such transaction (and treating any Indebtedness that becomes an obligation of the Successor Company or any Restricted Subsidiary as a result of such transaction as having been Incurred by the Successor Company or such Restricted Subsidiary at the time of such transaction), no Default will have occurred and be continuing;

 

(iii)                               immediately after giving effect to such transaction, either (A) the Successor Company could Incur at least $1.00 of additional Indebtedness pursuant to Section 6.6(a) or (B) the Consolidated Coverage Ratio of the Company (or, if applicable, the Successor Company with respect thereto) would equal or exceed the Consolidated Coverage Ratio of the Company immediately prior to giving effect to such transaction;

 

(iv)                              each Subsidiary Guarantor (other than (x) any Subsidiary Guarantor that will be released from its obligations under its Subsidiary Guarantee in connection with such transaction

 

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and (y) any party to any such consolidation or merger) shall have delivered a supplemental indenture in form reasonably satisfactory to the Trustee, confirming its Subsidiary Guarantee (other than any Subsidiary Guarantee that will be discharged or terminated in connection with such transaction); and

 

(v)                                 the Company will have delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel, each to the effect that such consolidation, merger or transfer complies with the provisions described in this paragraph, provided that (x) in giving such opinion such counsel may rely on an Officer’s Certificate as to compliance with the foregoing clauses (ii) and (iii) and as to any matters of fact, and (y) no Opinion of Counsel will be required for a consolidation, merger or transfer described in Section 7.1(b).

 

Any Indebtedness that becomes an obligation of the Successor Company or any Restricted Subsidiary (or that is deemed to be Incurred by any Restricted Subsidiary that becomes a Restricted Subsidiary) as a result of any such transaction undertaken in compliance with this Section 7.1, and any Refinancing Indebtedness with respect thereto, shall be deemed to have been Incurred in compliance with Section 6.6.

 

(b)                                 Clauses (ii) and (iii) of Section 7.1(a) will not apply to any transaction in which (1) any Restricted Subsidiary consolidates with, merges into or transfers all or part of its assets to the Company or (2) the Company consolidates or merges with or into or transfers all or substantially all its properties and assets to (x) an Affiliate incorporated or organized for the purpose of reincorporating or reorganizing the Company in another jurisdiction or changing its legal structure to a corporation or other entity or (y) a Restricted Subsidiary of the Company so long as all assets of the Company and the Restricted Subsidiaries immediately prior to such transaction (other than Capital Stock of such Restricted Subsidiary) are owned by such Restricted Subsidiary and its Restricted Subsidiaries immediately after the consummation thereof.

 

SECTION 7.2                                                  SUCCESSOR COMPANY SUBSTITUTED

 

Upon any transaction involving the Company in accordance with Section 7.1 in which the Company is not the Successor Company, the Successor Company will succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture, and thereafter the predecessor Company shall be relieved of all obligations and covenants under this Indenture, except that the predecessor Company in the case of a lease of all or substantially all its assets shall not be released from the obligation to pay the principal of and interest on the Notes.

 

ARTICLE IX

 

EVENTS OF DEFAULT AND REMEDIES

 

SECTION 901                                         Changes to Article VIII of the Base Indenture

 

Sections 8.1 through 8.15 enumerated in Article VIII of the Base Indenture shall be deleted in their entirety and replaced with the following:

 

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SECTION 8.1 EVENTS OF DEFAULT

 

An “Event of Default” means the occurrence of the following:

 

(i)                                     a default in any payment of interest on any Note when due, continued for a period of 30 days;

 

(ii)                                  a default in the payment of principal of any Note when due, whether at its Stated Maturity, upon optional redemption, upon required repurchase, upon declaration of acceleration or otherwise;

 

(iii)                               the failure by the Company to comply with its obligations under Section 7.1(a);

 

(iv)                              the failure by the Company to comply for 30 days after the notice specified in the penultimate paragraph of this Section 8.1 with any of its obligations under Section 6.13 (other than a failure to purchase the Notes);

 

(v)                                 the failure by the Company to comply for 60 days after the notice specified in the penultimate paragraph of this Section 8.1 with its other agreements contained in the Notes or this Indenture;

 

(vi)                              the failure by any Guarantor to comply for 45 days after the notice specified in the penultimate paragraph of this Section 8.1 with its obligations under its Subsidiary Guarantee or Parent Guarantee, as applicable;

 

(vii)                           the failure by the Company or any Restricted Subsidiary to pay any Indebtedness within any applicable grace period after final maturity or the acceleration of any such Indebtedness by the holders thereof because of a default, if the total amount of such Indebtedness so unpaid or accelerated exceeds $40.0 million or its foreign currency equivalent; provided, that no Default or Event of Default will be deemed to occur with respect to any such accelerated Indebtedness that is paid or otherwise acquired or retired within 20 Business Days after such acceleration;

 

(viii)                        the taking of any of the following actions by the Company or a Significant Subsidiary, or by each of such other Restricted Subsidiaries that are not Significant Subsidiaries but would in the aggregate constitute a Significant Subsidiary if considered as a single Person, pursuant to or within the meaning of any Bankruptcy Law:

 

(A)  the commencement of a voluntary case;

 

(B)  the consent to the entry of an order for relief against it in an involuntary case;

 

(C)  the consent to the appointment of a Custodian of it or for any substantial part of its property; or

 

(D)  the making of a general assignment for the benefit of its creditors;

 

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(ix)                                a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

 

(A)  is for relief against the Company or any Significant Subsidiary, or against each of such other Restricted Subsidiaries that are not Significant Subsidiaries but would in the aggregate constitute a Significant Subsidiary if considered as a single Person, in an involuntary case;

 

(B)  appoints (x) a Custodian of the Company or any Significant Subsidiary or for any substantial part of its property, or (y) a Custodian of each of such other Restricted Subsidiaries that are not Significant Subsidiaries but would in the aggregate constitute a Significant Subsidiary if considered as a single Person, or for any substantial part of their property in the aggregate; or

 

(C)  orders the winding up or liquidation of the Company or any Significant Subsidiary, or of each of such other Restricted Subsidiaries that are not Significant Subsidiaries but would in the aggregate constitute a Significant Subsidiary if considered as a single Person;

 

and the order or decree remains unstayed and in effect for 60 days;

 

(x)                                   the rendering of any judgment or decree for the payment of money in an amount (net of any insurance or indemnity payments actually received in respect thereof prior to or within 90 days from the entry thereof, or to be received in respect thereof in the event any appeal thereof shall be unsuccessful) in excess of $40.0 million or its foreign currency equivalent against the Company or a Significant Subsidiary, or jointly and severally against other Restricted Subsidiaries that are not Significant Subsidiaries but would in the aggregate constitute a Significant Subsidiary if considered as a single Person, that is not discharged, or bonded or insured by a third Person, if such judgment or decree remains outstanding for a period of 90 days following such judgment or decree and is not discharged, waived or stayed; or

 

(xi)                                the failure of any Parent Guarantee or any Subsidiary Guarantee by a Guarantor that is a Significant Subsidiary to be in full force and effect (except as contemplated by the terms thereof or of this Indenture) or the denial or disaffirmation in writing by any Parent Guarantor or any Subsidiary Guarantor that is a Significant Subsidiary of its obligations under this Indenture or its Parent Guarantee or Subsidiary Guarantee (other than by reason of the termination of this Indenture or such Parent Guarantee or Subsidiary Guarantee or the release of such Parent Guarantee or Subsidiary Guarantee in accordance with such Parent Guarantee or Subsidiary Guarantee or this Indenture), as the case may be, if such Default continues for 10 days.

 

The foregoing will constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body.

 

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The term “Bankruptcy Law” means Title 11, United States Code, or any similar Federal, state or foreign law for the relief of debtors.  The term “Custodian” means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law.

 

However, a Default under clause (iv), (v) or (vi) will not constitute an Event of Default until the Trustee or the Holders of at least 30% in principal amount of the Outstanding Notes notify the Company of the Default and the Company does not cure such Default within the time specified in such clause after receipt of such notice.  Such notice must specify the Default, demand that it be remedied and state that such notice is a “Notice of Default.”  When a Default or an Event of Default is cured, it ceases.

 

The Company shall deliver to the Trustee, within 30 days after the occurrence thereof, written notice in the form of an Officer’s Certificate of any Event of Default under clause (vii) or (x) and any event that with the giving of notice or the lapse of time would become an Event of Default under clause (iv), (v) or (vi), its status and what action the Company is taking or proposes to take with respect thereto.

 

SECTION 8.2                                                  ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT

 

If an Event of Default (other than an Event of Default specified in Section 8.1(viii) or Section 8.1(ix)) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least thirty percent (30%) in principal amount of the Outstanding Notes by notice to the Company and the Trustee, in either case specifying in such notice the respective Event of Default and that such notice is a “notice of acceleration,” may declare the principal of and accrued but unpaid interest on all the Notes to be due and payable. Upon the effectiveness of such a declaration, such principal and interest will be due and payable immediately.

 

Notwithstanding the foregoing, if an Event of Default specified in Section 8.1(viii) or Section 8.1(ix) occurs and is continuing, the principal of and accrued interest on all the Outstanding Notes will ipso facto become immediately due and payable without any declaration or other act on the part of the Trustee or any Holder.  The Holders of a majority in principal amount of the Outstanding Notes by notice to the Company and the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except non-payment of principal or interest that has become due solely because of such acceleration.  No such rescission shall affect any subsequent Default or impair any right consequent thereto.

 

SECTION 8.3 OTHER REMEDIES; COLLECTION SUIT BY TRUSTEE

 

If an Event of Default occurs and is continuing, the Trustee may, but is not obligated under this Section 8.3 to, pursue any available remedy to collect the payment of principal of or interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture.  If an Event of Default specified in Section 8.1(i) or 8.1(ii) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Issuers for the whole amount then due and owing (together with interest on any unpaid interest to the extent lawful) and the amounts provided for in Section 9.7.

 

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SECTION 8.4                                                  TRUSTEE MAY FILE PROOFS OF CLAIM

 

The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Holders allowed in any judicial proceedings relative to the Company, the Co-Issuer or any other obligor upon the Notes, its creditors or its property and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 9.7.

 

No provision of this Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.

 

SECTION 8.5                                                  TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF NOTES

 

All rights of action and claims under this Indenture or the Notes may be prosecuted and enforced by the Trustee without the possession of any of the Notes or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Notes in respect of which such judgment has been recovered.

 

SECTION 8.6                                                  APPLICATION OF MONEY COLLECTED

 

Any money collected by the Trustee pursuant to this Article VIII shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Notes and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:

 

First:  To the payment of all amounts due the Trustee under Section 9.7;

 

Second:  To the payment of the amounts then due and unpaid upon the Notes for principal (and premium, if any) and interest, in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Notes for principal (and premium, if any) and interest, respectively; and

 

Third:  to the Issuers.

 

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SECTION 8.7                                                  LIMITATION ON SUITS

 

Subject to Section 8.8, no Holder may pursue any remedy with respect to this Indenture or the Notes unless:

 

(i)  such Holder has previously given the Trustee written notice that an Event of Default is continuing;

 

(ii) Holders of at least 30% in principal amount of the Outstanding Notes have requested the Trustee in writing to pursue the remedy;

 

(iii) such Holder or Holders have offered to the Trustee security or indemnity reasonably satisfactory to the Trustee against any loss, liability or expense;

 

(iv) the Trustee has not complied with the request within 60 days after receipt of the request and the offer of security or indemnity; and

 

(v)  the Holders of a majority in principal amount of the Outstanding Notes have not given the Trustee a direction inconsistent with the request within such 60-day period.

 

A Holder may not use this Indenture to affect, disturb or prejudice the rights of another Holder, to obtain a preference or priority over another Holder or to enforce any right under this Indenture except in the manner herein provided and for the equal and ratable benefit of all Holders.

 

SECTION 8.8                                                  UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL AND INTEREST

 

Notwithstanding any other provision in this Indenture, the Holder of any Note shall have the absolute and unconditional right to receive payment of the principal of and all (subject to Section 3.9) interest on such Note on the respective Stated Maturity or Interest Payment Dates expressed in such Note and to institute suit for the enforcement of any such payment on or after such respective Stated Maturity or Interest Payment Dates, and such right shall not be impaired without the consent of such Holder.

 

SECTION 8.9                                                  RESTORATION OF RIGHTS AND REMEDIES

 

If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture or any Note and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case the Company, the Co-Issuer, any other obligor upon the Notes, the Trustee and the Holders shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted.

 

SECTION 8.10                                            RIGHTS AND REMEDIES CUMULATIVE

 

No right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given

 

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hereunder or now or hereafter existing at law or in equity or otherwise.  The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

 

SECTION 8.11                                            DELAY OR OMISSION NOT WAIVER

 

No delay or omission of the Trustee or of any Holder of any Note to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein.  Every right and remedy given by this Article VIII or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be.

 

SECTION 8.12                                            CONTROL BY HOLDERS

 

The Holders of not less than a majority in aggregate principal amount of the Outstanding Notes shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee, provided that

 

(1)  such direction shall not be in conflict with any rule of law or with this Indenture, and

 

(2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction.

 

However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or, subject to Section 9.1, that the Trustee determines is unduly prejudicial to the rights of any other Holder or that would involve the Trustee in personal liability; provided, however, that the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction.  Prior to taking any action under this Indenture, the Trustee shall be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action.  This Section 8.12 shall be in lieu of § 316(a)(1)(A) of the TIA, and such § 316(a)(1)(A) of the TIA is hereby expressly excluded from this Indenture and the Notes, as permitted by the TIA.

 

SECTION 8.13                                            WAIVER OF PAST DEFAULTS

 

The Holders of not less than a majority in aggregate principal amount of the Outstanding Notes may on behalf of the Holders of all the Notes waive any past Default hereunder and its consequences, except a Default

 

(1)  in the payment of the principal of or interest on any Note (which may only be waived with the consent of each Holder of Notes affected), or

 

(2)  in respect of a covenant or provision hereof that pursuant to the second paragraph of Section 11.2 cannot be modified or amended without the consent of the Holder of each Outstanding Note affected.

 

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Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon.  In case of any such waiver, the Company, any other obligor upon the Notes, the Trustee and the Holders shall be restored to their former positions and rights hereunder and under the Notes, respectively.  This paragraph of this Section 8.13 shall be in lieu of § 316(a)(1)(B) of the TIA and such § 316(a)(1)(B) of the TIA is hereby expressly excluded from this Indenture and the Notes, as permitted by the TIA.

 

SECTION 8.14                                            UNDERTAKING FOR COSTS

 

All parties to this Indenture agree, and each Holder of any Note by such Holder’s acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture or the Notes, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant.  This Section 8.14 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Notes, or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Note on or after the respective Stated Maturity or Interest Payment Dates expressed in such Note.

 

SECTION 8.15                                            WAIVER OF STAY, EXTENSION OF USURY LAWS

 

Each Issuer agrees (to the extent that it may lawfully do so) that it shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury or other similar law wherever enacted, now or at any time hereafter in force, that would prohibit or forgive such Issuer from paying all or any portion of the principal of (or premium, if any) or interest on the Notes contemplated herein or in the Notes or that may affect the covenants or the performance of this Indenture; and such Issuer (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

 

ARTICLE X

 

TRUSTEE

 

SECTION 1001                                  Changes to Article IX of the Base Indenture

 

(b)  Section 9.2 of the Base Indenture shall be deleted and replaced in its entirety by the following:

 

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SECTION 9.2                                                  CERTAIN RIGHTS OF THE TRUSTEE

 

Subject to the provisions of Section 9.1:

 

(1)                                  the Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;

 

(2)                                  any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order thereof, and any resolution of any Person’s board of directors shall be sufficiently evidenced if certified by an Officer of such Person as having been duly adopted and being in full force and effect on the date of such certificate;

 

(3)                                  whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, conclusively rely upon an Officer’s Certificate of the Company;

 

(4)                                  the Trustee may consult with counsel of its selection and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;

 

(5)                                  the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity reasonably satisfactory to it against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction;

 

(6)                                  the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note, other evidence of indebtedness or other paper or document;

 

(7)                                  the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder;

 

(8)                                  whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, conclusively rely upon an Officer’s Certificate;

 

(9)                                  the Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture;

 

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(10)                            in no event shall the Trustee be responsible or liable for special, indirect, punitive or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action;

 

(11)                            the Trustee shall not be deemed to have notice of any Default or Event of Default unless a Trust Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Notes and this Indenture;

 

(12)                            the rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act on behalf of the Trustee hereunder;

 

(13)                            the Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder; and

 

(14)                            the Trustee may request that the Company deliver a certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture.

 

(b)  Section 9.8 of the Base Indenture shall be deleted and replaced in its entirety by the following:

 

SECTION 9.8                                                  RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR

 

No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of this Section 9.8.

 

The Trustee may resign at any time by giving written notice thereof to the Company.  If the instrument of acceptance by a successor Trustee required by this Section 9.8 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may, at the expense of the Company, petition any court of competent jurisdiction for the appointment of a successor Trustee.

 

The Trustee may be removed at any time by Act of the Holders of a majority in principal amount of the Outstanding Notes, delivered to the Trustee and to the Company in writing not less than 30 days prior to the effective date of such removal.  If the instrument of acceptance by a successor Trustee required by this Section 9.8 shall not have been delivered to the Trustee within 30 days after the giving of such notice of removal, the Trustee being removed may, at the expense of the Company, petition any court of competent jurisdiction for the appointment of a successor Trustee.

 

If at any time:

 

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(1)     the Trustee shall fail to comply with Section 9.13 after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Note for at least six months, or

 

(2)     the Trustee shall cease to be eligible under Section 9.10 and shall fail to resign after written request therefor by the Company or by any such Holder, or

 

(3)     the Trustee shall become incapable of acting or shall be adjudged bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,

 

then, in any such case, (A) the Company may remove the Trustee, or (B) subject to Section 8.13, any Holder who has been a bona fide Holder of a Note for at least six months may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee or Trustees.

 

If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company shall promptly appoint a successor Trustee and shall comply with the applicable requirements of this Section 9.8.  If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Notes delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of this Section 9.8, become the successor Trustee and to that extent supersede the successor Trustee appointed by the Company.  If no successor Trustee shall have been so appointed by the Company or the Holders and accepted appointment in the manner required by this Section 9.8, then, subject to Section 8.13, any Holder who has been a bona fide Holder of a Note for at least six months may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee.

 

The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee to all Holders in the manner provided in Section 13.5.  Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office.

 

In the case of the appointment hereunder of a successor Trustee, every such Successor Trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder.

 

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Upon request of any such successor Trustee, the Issuers shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to above.

 

No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article IX.

 

The Trustee shall have no responsibility or liability for any action or inaction of a successor Trustee.

 

SECTION 1002                 Additions to Article IX of the Base Indenture

 

The following shall be added to Article IX of the Base Indenture as follows:

 

SECTION 9.14                      APPOINTMENT OF AUTHENTICATING AGENT

 

The Trustee may appoint an Authenticating Agent acceptable to the Company to authenticate the Notes.  Any such appointment shall be evidenced by an instrument in writing signed by a Trust Officer, a copy of which instrument shall be promptly furnished to the Company.  Unless limited by the terms of such appointment, an Authenticating Agent may authenticate Notes whenever the Trustee may do so.  Each reference in this Indenture to authentication (or execution of a certificate of authentication) by the Trustee includes authentication (or execution of a certificate of authentication) by such Authenticating Agent.  An Authenticating Agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands.

 

ARTICLE XI

 

LEGAL DEFEASANCE AND COVENANT DEFEASANCE

 

SECTION 1101                 Changes to Article X of the Base Indenture

 

Sections 10.1 through 10.7 enumerated in Article X of the Base Indenture shall be deleted and replaced in their entirety by the following:

 

SECTION 10.1                      THE COMPANY’S OPTION TO EFFECT DEFEASANCE OR COVENANT DEFEASANCE

 

The Company may, concurrently (and not separately) at its option, at any time, elect to have terminated the obligations of the Issuers with respect to Outstanding Notes and to have terminated all of the obligations of the Parent Guarantors and the Subsidiary Guarantors with respect to the Parent Guarantees and the Subsidiary Guarantees, in each case, as set forth in this Article X, and elect to have either Section 10.2 or Section 10.3 be applied to all of the Outstanding Notes (the “Defeased Notes”), upon compliance with the conditions set forth below in Section 10.4.  Either Section 10.2 or Section 10.3 may be applied to the Defeased Notes to any Redemption Date or the Stated Maturity of the Notes.

 

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SECTION 10.2                      DEFEASANCE AND DISCHARGE

 

Upon the Company’s exercise under Section 10.1 of the option applicable to this Section 10.2, each Issuer shall be deemed to have been released and discharged from its obligations with respect to the Defeased Notes on the date the relevant conditions set forth in Section 10.4 below are satisfied (hereinafter, “Defeasance”).  For this purpose, such Defeasance means that the Issuers shall be deemed to have paid and discharged the entire Indebtedness represented by the Defeased Notes, which shall thereafter be deemed to be “Outstanding” only for the purposes of Section 10.5 and the other Sections of this Indenture referred to in clauses (a) and (b) below, and the Issuers and each of the Parent Guarantors and the Subsidiary Guarantors shall be deemed to have satisfied all other obligations under such Notes and this Indenture insofar as such Notes are concerned (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following, which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of Defeased Notes to receive, solely from the trust fund described in Section 10.4 and as more fully set forth in such Section, payments in respect of the principal of and premium, if any, and interest on such Notes when such payments are due, (b) the Company’s obligations with respect to such Defeased Notes under Sections 3.4, 3.6, 3.8, 6.2, and 6.3, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder, including the Trustee’s rights under Section 9.7, and (d) this Article X.  If the Company exercises its option under this Section 10.2, payment of the Notes may not be accelerated because of an Event of Default with respect thereto.  Subject to compliance with this Article X, the Company may, at its option and at any time, exercise its option under this Section 10.2 notwithstanding the prior exercise of its option under Section 10.3 with respect to the Notes.

 

SECTION 10.3                      COVENANT DEFEASANCE

 

Upon the Company’s exercise under Section 10.1 of the option applicable to this Section 10.3, (a) the Company shall be released from its obligations under any covenant or provision contained in Section 6.4 and Sections 6.6 through 6.13, and the provisions of clauses (iii), (iv) and (v) of Section 7.1(a) shall not apply, and (b) the occurrence of any event specified in clause (iv), (v) (with respect to Section 6.4 and Sections 6.6 through 6.13, inclusive), (vi), (vii), (viii) (with respect to Subsidiaries), (ix) (with respect to Subsidiaries), (x) or (xi) of Section 8.1 shall be deemed not to be or result in an Event of Default, in each case with respect to the Defeased Notes on and after the date the conditions set forth below are satisfied (hereinafter, “Covenant Defeasance”), and the Notes shall thereafter be deemed not to be “Outstanding” for the purposes of any direction, waiver, consent or declaration or Act of Holders (and the consequences of any thereof) in connection with such covenants or provisions, but shall continue to be deemed “Outstanding” for all other purposes hereunder.  For this purpose, such Covenant Defeasance means that, with respect to the Outstanding Notes, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant or provision, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or provision or by reason of any reference in any such covenant or provision to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 8.1, but, except as specified above, the remainder of this Indenture and such Outstanding Notes shall be unaffected thereby.

 

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SECTION 10.4                      CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE

 

The following shall be the conditions to application of either Section 10.2 or Section 10.3 to the Outstanding Notes:

 

(1)     The Company shall have irrevocably deposited or caused to be deposited with the Trustee, in trust, money or U.S. Government Obligations, or a combination thereof, in amounts as will be sufficient (without reinvestment), in the opinion of an independent firm of certified public accountants, to pay and discharge the principal of, and premium, if any, and interest on the Defeased Notes to the Stated Maturity or relevant Redemption Date in accordance with the terms of this Indenture and the Notes (provided that if such redemption shall be pursuant to Section 4.1(c), (x) the amount of money or U.S. Government Obligations or a combination thereof that the Company must irrevocably deposit or cause to be deposited shall be determined using an assumed Applicable Premium calculated as of the date of such deposit, and (y) the Company must irrevocably deposit or cause to be deposited additional money in trust on the Redemption Date, as required by Section 4.6, as necessary to pay the Applicable Premium as determined on such date);

 

(2)     No Default or Event of Default shall have occurred and be continuing on the date of such deposit;

 

(3)     Such deposit shall not result in a breach or violation of, or constitute a Default or Event of Default under, this Indenture or any other material agreement or instrument to which the Company is a party or by which it is bound;

 

(4)     In the case of an election under Section 10.2, the Company shall have delivered to the Trustee an Opinion of Counsel from Alston & Bird LLP or other counsel in the United States to the effect that (x) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (y) since the Issue Date, there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm to the effect that, the Holders and beneficial owners of the Outstanding Notes will not recognize income, gain or loss for Federal income tax purposes as a result of such Defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Defeasance had not occurred; provided that such Opinion of Counsel need not be delivered if all Notes theretofore authenticated and delivered (other than (i) Notes that have been destroyed, lost or stolen and that have been replaced or paid as provided in Section 3.8, and (ii) Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 6.3) not theretofore delivered to the Trustee for cancellation have become due and payable, will become due and payable at their Stated Maturity within one year, or are to be called for redemption within one year under arrangements reasonably satisfactory to the Trustee in the name, and at the expense, of the Company;

 

(5)     In the case of an election under Section 10.3, the Company shall have delivered to the Trustee an Opinion of Counsel from Alston & Bird LLP or other counsel in the United States to the effect that the Holders and beneficial owners of the

 

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Outstanding Notes will not recognize income, gain or loss for Federal income tax purposes as a result of such Covenant Defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; and

 

(6)     The Company shall have delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel, each to the effect that all conditions precedent provided for in this Section 10.4 relating to either the Defeasance under Section 10.2 or the Covenant Defeasance under Section 10.3, as the case may be, have been complied with.  In rendering such Opinion of Counsel, counsel may rely on an Officer’s Certificate as to compliance with the foregoing clauses (1), (2) and (3) of this Section 10.4 or as to any matters of fact.

 

SECTION 10.5                      DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS

 

Subject to the provisions of the last paragraph of Section 6.3, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or such other Person that would qualify to act as successor trustee under Article IX, collectively and solely for purposes of this Section 10.5, the “Trustee”) pursuant to Section 10.4 in respect of the Defeased Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium, if any, and interest, but such money need not be segregated from other funds except to the extent required by law.

 

The Company shall pay and indemnify the Trustee and its agents and hold them harmless against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 10.4, or the principal, premium, if any, and interest received in respect thereof, other than any such tax, fee or other charge that by law is for the account of the Holders of the Defeased Notes.

 

Anything in this Article X to the contrary notwithstanding, the Trustee shall deliver to the Company from time to time, upon Company Request, any money or U.S. Government Obligations held by it as provided in Section 10.4 that, in the opinion of a nationally recognized accounting or investment banking firm expressed in a written certification thereof to the Trustee, are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Defeasance or Covenant Defeasance.  Subject to Article IX, the Trustee shall not incur any liability to any Person by relying on such opinion.

 

SECTION 10.6                      REINSTATEMENT

 

If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 10.2 or 10.3, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the obligations of the Issuers and the Parent Guarantors and the Subsidiary Guarantors under this Indenture, the Notes and the Parent Guarantees and the

 

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Subsidiary Guarantees shall be revived and reinstated as though no deposit had occurred pursuant to Section 10.2 or 10.3, as the case may be, until such time as the Trustee or Paying Agent is permitted to apply all such money and U.S. Government Obligations in accordance with Section 10.2 or 10.3, as the case may be; provided, however, that if either Issuer or any Parent Guarantor or Subsidiary Guarantor makes any payment of principal, premium, if any, or interest on any Note following the reinstatement of its obligations, such Issuer or Parent Guarantor or Subsidiary Guarantor, as the case may be, shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money and U.S. Government Obligations held by the Trustee or Paying Agent.

 

SECTION 10.7                      REPAYMENT TO THE COMPANY

 

The Trustee shall pay to the Company upon Company Request any money held by it for the payment of principal or interest that remains unclaimed for two years.  After payment to the Company, Holders entitled to money must look to the Company for payment as general creditors unless an applicable abandoned property law designates another Person and all liability of the Trustee or Paying Agent with respect to such money shall thereupon cease.

 

ARTICLE XII

 

AMENDMENT, SUPPLEMENT OR WAIVER

 

SECTION 1201                 Changes to Article XI of the Base Indenture

 

Sections 11.1 through 11.6 enumerated in Article XI of the Base Indenture shall be deleted and replaced in their entirety by the following:

 

SECTION 11.1                      WITHOUT CONSENT OF HOLDERS

 

Without the consent of the Holders of any Notes, the Company, the Co-Issuer, the Trustee and (as applicable) each Parent Guarantor and Subsidiary Guarantor may amend or supplement this Indenture or the Notes, for any of the following purposes:

 

(1)     to cure any ambiguity, manifest error, omission, defect or inconsistency,

 

(2)     to provide for the assumption by a Successor Company of the obligations of the Company, the Co-Issuer or a Parent Guarantor or Subsidiary Guarantor under this Indenture,

 

(3)     to provide for uncertificated Notes in addition to or in place of certificated Notes,

 

(4)     to add Guarantees with respect to the Notes, to secure the Notes, to confirm and evidence the release, termination or discharge of any Guarantee or Lien with respect to or securing the Notes when such release, termination or discharge is provided for under this Indenture,

 

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(5)     to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power conferred upon the Company,

 

(6)     to provide for or confirm the issuance of Additional Notes,

 

(7)     to conform the text of this Indenture, the Notes or any Parent Guarantee or Subsidiary Guarantee to any provision of the “Description of Notes” section of the Prospectus Supplement (to the extent that such provision in the “Description of Notes” section was intended to be a verbatim recitation of a provision of this Indenture, the Notes or any Parent Guarantee or Subsidiary Guarantee, as provided in an Officer’s Certificate),

 

(8)     to make any change that does not materially adversely affect the rights of any Holder under the Notes or this Indenture, or

 

(9)     to comply with any requirement of the SEC in connection with the qualification of this Indenture under the TIA or otherwise.

 

SECTION 11.2                      WITH CONSENT OF HOLDERS

 

Subject to Section 8.8, the Company, the Co-Issuer, the Trustee and (if applicable) each Parent Guarantor and Subsidiary Guarantor may amend or supplement this Indenture or the Notes with the written consent of the Holders of a majority in aggregate principal amount of the Outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for Notes) and the Holders of not less than a majority in aggregate principal amount of the Outstanding Notes by written notice to the Trustee (including consents obtained in connection with a tender offer or exchange offer for Notes) may waive any existing Default or Event of Default or compliance by the Company, the Co-Issuer or any Parent Guarantor or Subsidiary Guarantor with any provision of this Indenture, the Notes or any Parent Guarantee or Subsidiary Guarantee.

 

Notwithstanding the provisions of this Section 11.2, without the consent of each Holder affected, an amendment or waiver, including a waiver pursuant to Section 8.12, may not:

 

(i)       reduce the principal amount of the Notes whose Holders must consent to an amendment or waiver;

 

(ii)     reduce the rate of or extend the time for payment of interest on any Note;

 

(iii)    reduce the principal of or extend the Stated Maturity of any Note;

 

(iv)   reduce the premium payable upon the redemption of any Note or change the date on which any Note may be redeemed as described in Section  4.1;

 

(v)     make any Note payable in money other than that stated in such Note;

 

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(vi)   impair the right of any Holder to receive payment of principal of and interest on such Holder’s Notes on or after the due dates therefor or to institute suit for the enforcement of any such payment on or with respect to such Holder’s Notes; or

 

(vii)  make any change in the amendment or waiver provisions described in this paragraph.

 

It shall not be necessary for the consent of the Holders under this Section 11.2 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof.

 

After an amendment, supplement or waiver under this Section 11.2 becomes effective, the Company shall mail to the Holders, with a copy to the Trustee, a notice briefly describing the amendment, supplement or waiver.  Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any supplemental indenture or the effectiveness of any such amendment, supplement or waiver.

 

SECTION 11.3                      EXECUTION OF AMENDMENTS, SUPPLEMENTS OR WAIVERS

 

The Trustee shall sign any amendment, supplement or waiver authorized pursuant to this Article XI if the amendment, supplement or waiver does not adversely affect the rights, duties, liabilities or immunities of the Trustee.  If it does, the Trustee may, but need not, sign it.  In signing or refusing to sign such amendment, supplement or waiver, the Trustee shall receive, and shall be fully protected in conclusively relying upon, an Officer’s Certificate and an Opinion of Counsel to the effect that the execution of such amendment, supplement or waiver has been duly authorized, executed and delivered by each Issuer and that, subject to applicable bankruptcy, insolvency, fraudulent transfer, fraudulent conveyance, reorganization, moratorium and other laws now or hereinafter in effect affecting creditors’ rights or remedies generally and to general principles of equity (including standards of materiality, good faith, fair dealing and reasonableness), whether considered in a proceeding at law or at equity, such amendment, supplement or waiver is a valid and binding agreement of such Issuer and the Guarantors, enforceable against such Issuer in accordance with its terms.

 

SECTION 11.4                      REVOCATION AND EFFECT OF CONSENTS

 

Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of that Note or any Note that evidences all or any part of the same debt as the consenting Holder’s Note, even if notation of the consent is not made on any Note.  Subject to the following paragraph of this Section 11.4, any such Holder or subsequent Holder may revoke the consent as to such Holder’s Note by written notice to the Trustee or the Company, received by the Trustee or the Company, as the case may be, before the date on which the Trustee receives an Officer’s Certificate from the Company certifying that the Holders of the requisite principal amount of Notes have consented (and not theretofore revoked such consent) to the amendment, supplement or waiver.  The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver as set forth in Section 13.4.

 

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After an amendment, supplement or waiver becomes effective, it shall bind every Holder of Notes, unless it makes a change described in any of clauses (i) through (vii) of the second paragraph of Section 11.2.  In that case, the amendment, supplement or waiver shall bind each Holder of a Note who has consented to it and every subsequent Holder of such Note or any Note that evidences all or any part of the same debt as the consenting Holder’s Note.

 

SECTION 11.5                      CONFORMITY WITH TIA

 

Every amendment or supplemental indenture executed pursuant to this Article shall conform to the requirements of the TIA as then in effect.

 

SECTION 11.6                      NOTATION ON OR EXCHANGE OF NOTES

 

If an amendment, supplement or waiver changes the terms of a Note, the Trustee shall (if required by the Company and in accordance with the specific direction of the Company) request the Holder of the Note to deliver it to the Trustee.  The Trustee shall (if required by the Company and in accordance with the specific direction of the Company) place an appropriate notation on the Note about the changed terms and return it to the Holder.  Alternatively, if the Company or the Trustee so determines, the Issuers in exchange for the Note shall issue and the Trustee shall authenticate a new Note that reflects the changed terms.  Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver.

 

ARTICLE XIII

 

GUARANTEES

 

SECTION 1301                 Changes to Article XII of the Base Indenture

 

Section 12.1 enumerated in Article XII of the Base Indenture shall be deleted and replaced in its entirety by the following:

 

SECTION 12.1                      GUARANTEES GENERALLY

 

(a)                 Each Parent Guarantor and each Subsidiary Guarantor, as primary obligor and not merely as surety, will jointly and severally, irrevocably and fully and unconditionally Guarantee, on an unsecured senior basis, the punctual payment when due, whether at Stated Maturity, by acceleration or otherwise, of all monetary obligations of the Company under this Indenture and the Notes, whether for principal of or interest on the Notes, expenses, indemnification or otherwise (all such obligations guaranteed by such Parent Guarantors being herein called the “Parent Guaranteed Obligations” and all such obligations guaranteed by such Subsidiary Guarantors being herein called the “Subsidiary Guaranteed Obligations”).

 

The obligations of each Subsidiary Guarantor will be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Subsidiary Guarantor (including but not limited to any Guarantee by it of any Bank Indebtedness) and after giving effect to any collections from or payments made by or on behalf of any other Subsidiary Guarantor in respect of the obligations of such other Subsidiary Guarantor under its Subsidiary

 

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Guarantee or pursuant to its contribution obligations under this Indenture, result in the obligations of such Subsidiary Guarantor under the Subsidiary Guarantee not constituting a fraudulent conveyance or fraudulent transfer under applicable law, or being void or unenforceable under any law relating to insolvency of debtors.

 

(b) (i)          Each Parent Guarantor and each Subsidiary Guarantor hereby agrees that (to the fullest extent permitted by law) its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of this Indenture, the Notes or the obligations of the Company or any other Parent Guarantor or Subsidiary Guarantor to the Holders or the Trustee hereunder or thereunder, the absence of any action to enforce the same, any waiver or consent by any Holder with respect to any provisions hereof or thereof, any release of any other Parent Guarantor or Subsidiary Guarantor, the recovery of any judgment against the Company, any action to enforce the same, whether or not a notation concerning its Parent Guarantee or Subsidiary Guarantee is made on any particular Note, or any other circumstance that might otherwise constitute a legal or equitable discharge or defense of a Parent Guarantor or Subsidiary Guarantor.

 

(ii)                 Each Parent Guarantor and each Subsidiary Guarantor hereby waives (to the fullest extent permitted by law) the benefit of diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that (except as otherwise provided in Section 12.3 or 12.4) its Parent Guarantee or Subsidiary Guarantee, as the case may be, will not be discharged except by complete performance of the obligations contained in the Notes, this Indenture and this Parent Guarantee or Subsidiary Guarantee, as the case may be.  Such Parent Guarantee or Subsidiary Guarantee is a guarantee of payment and not of collection.  Each Parent Guarantor and each Subsidiary Guarantor further agrees (to the fullest extent permitted by law) that, as between it, on the one hand, and the Holders of Notes and the Trustee, on the other hand, subject to this Article XII, (1) the maturity of the obligations guaranteed by its Subsidiary Guarantee may be accelerated as and to the extent provided in Article VIII for the purposes of such Parent Guarantee or Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed by such Parent Guarantee or Subsidiary Guarantee, and (2) in the event of any acceleration of such obligations as provided in Article VIII, such obligations (whether or not due and payable) shall forthwith become due and payable by such Parent Guarantor or Subsidiary Guarantor in accordance with the terms of this Section 12.1 for the purpose of such Parent Guarantee or Subsidiary Guarantee.  Neither the Trustee nor any other Person shall have any obligation to enforce or exhaust any rights or remedies or to take any other steps under any security for the Parent Guaranteed Obligations or Subsidiary Guaranteed Obligations or against the Company or any other Person or any property of the Company or any other Person before the Trustee is entitled to demand payment and performance by any or all Parent Guarantors and Subsidiary Guarantors of their obligations under their respective Parent Guarantees and Subsidiary Guarantees or under this Indenture.

 

(iii)                Until terminated in accordance with Section 12.3 or 12.4, each Parent Guarantee and Subsidiary Guarantee shall remain in full force and effect and continue to be effective should any petition be filed by or against the Company for liquidation or reorganization,

 

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should the Company become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of the Company’s assets, and shall, to the fullest extent permitted by law, continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Notes are, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee on such Notes, whether as a “voidable preference,” “fraudulent transfer” or otherwise, all as though such payment or performance had not been made.  In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Notes shall, to the fullest extent permitted by law, be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.

 

(c)                                  Each Parent Guarantor and each Subsidiary Guarantor that makes a payment or distribution under its Parent Guarantee or Subsidiary Guarantee shall have the right to seek contribution from the Company or any non-paying Parent Guarantor or Subsidiary Guarantor that has also Guaranteed the relevant Parent Guaranteed Obligations or Subsidiary Guaranteed Obligations, as the case may be, in respect of which such payment or distribution is made, so long as the exercise of such right does not impair the rights of the Holders under the Parent Guarantees or Subsidiary Guarantees.

 

(d)                                 Each Parent Guarantor and each Subsidiary Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Indenture and that its Parent Guarantee or Subsidiary Guarantee, as the case may be, and the waiver set forth in Section 12.6, are knowingly made in contemplation of such benefits.

 

(e)                                  Each Parent Guarantor and each Subsidiary Guarantor, pursuant to its Parent Guarantee or Subsidiary Guarantee, also hereby agrees to pay any and all reasonable out-of-pocket expenses (including reasonable counsel fees and expenses) incurred by the Trustee or the Holders in enforcing any rights under its Parent Guarantee or Subsidiary Guarantee.

 

SECTION 12.2                                            CONTINUING GUARANTEES

 

(a)                                  Each Parent Guarantee and each Subsidiary Guarantee shall be a continuing Guarantee and shall (i) subject to Section 12.3 or 12.4, remain in full force and effect until payment in full of the principal amount of all Outstanding Notes (whether by payment at maturity, purchase, redemption, defeasance, retirement or other acquisition) and all other Parent Guaranteed Obligations of the Parent Guarantor or Subsidiary Guaranteed Obligations of the Subsidiary Guarantor then due and owing, (ii) be binding upon such Parent Guarantor or Subsidiary Guarantor and (iii) inure to the benefit of and be enforceable by the Trustee, the Holders and their permitted successors, transferees and assigns.

 

(b)                                 The obligations of each Parent Guarantor and each Subsidiary Guarantor hereunder shall continue to be effective or shall be reinstated, as the case may be, if at any time any payment which would otherwise have reduced or terminated the obligations of any Parent Guarantor or Subsidiary Guarantor hereunder and under its Parent Guarantee or Subsidiary Guarantee (whether such payment shall have been made by or on behalf of the Company or by or on behalf of a Parent Guarantor or Subsidiary Guarantor) is rescinded or reclaimed from any of the Holders upon the insolvency, bankruptcy, liquidation or reorganization of the Company or 

 

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any Parent Guarantor or Subsidiary Guarantor or otherwise, all as though such payment had not been made.

 

SECTION 12.3                                            RELEASE OF PARENT GUARANTEES

 

Notwithstanding the provisions of Section 12.2, Parent Guarantees will be subject to termination and discharge under the circumstances described in this Section 12.3.  Any Parent Guarantor will automatically and unconditionally be released from all obligations under its Parent Guarantee, and such Parent Guarantee shall thereupon terminate and be discharged and of no further force or effect, (i) upon the merger or consolidation of any Parent Guarantor with and into the Company or another Parent Guarantor or Subsidiary Guarantor that is the surviving Person in such merger or consolidation, or upon the liquidation of such Parent Guarantor following the transfer of all of its assets to the Company or another Parent Guarantor or Subsidiary Guarantor, (ii) upon Defeasance or Covenant Defeasance of the Company’s obligations, or satisfaction and discharge of this Indenture or (iii) subject to Section 12.2(b), upon payment in full of the aggregate principal amount of all Notes then Outstanding and all other Parent Guaranteed Obligations then due and owing.

 

Upon any such occurrence specified in this Section 12.3, the Trustee shall execute any documents reasonably required in order to evidence such release, discharge and termination in respect of the applicable Parent Guarantee.

 

SECTION 12.4                                            RELEASE OF SUBSIDIARY GUARANTEES

 

Notwithstanding the provisions of Section 12.2, Subsidiary Guarantees will be subject to termination and discharge under the circumstances described in this Section 12.4.  Any Subsidiary Guarantor will automatically and unconditionally be released from all obligations under its Subsidiary Guarantee, and such Subsidiary Guarantee shall thereupon terminate and be discharged and of no further force or effect, (i) concurrently with any direct or indirect sale or disposition (by merger or otherwise) of any Subsidiary Guarantor or any interest therein in accordance with the terms of this Indenture (including Section 6.9 and Section 7.1) by the Company or a Restricted Subsidiary, following which such Subsidiary Guarantor is no longer a Restricted Subsidiary of the Company, (ii) at any time that such Subsidiary Guarantor is released from all of its obligations under all of its Guarantees of payment by the Company of any Indebtedness of the Company under all then existing Credit Facilities and the 2019 Notes (it being understood that a release subject to contingent reinstatement is still a release, and that if any such Guarantee is so reinstated, such Subsidiary Guarantee shall also be reinstated to the extent that such Subsidiary Guarantor would then be required to provide a Subsidiary Guarantee pursuant to Section 6.12), (iii) upon the merger or consolidation of any Subsidiary Guarantor with and into the Company or another Subsidiary Guarantor that is the surviving Person in such merger or consolidation, or upon the liquidation of such Subsidiary Guarantor following the transfer of all of its assets to the Company or another Subsidiary Guarantor (iv) concurrently with any Subsidiary Guarantor becoming an Unrestricted Subsidiary, (v) upon Defeasance or Covenant Defeasance of the Company’s obligations, or satisfaction and discharge of this Indenture, or (vi) subject to Section 12.2(b), upon payment in full of the aggregate principal amount of all Notes then Outstanding and all other Subsidiary Guaranteed Obligations then due and owing.  In addition, the Company will have the right, upon 30 days’ notice to the Trustee, to cause any Subsidiary 

 

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Guarantor that has not guaranteed payment by the Company of any Indebtedness of the Company under any then existing Credit Facility and the 2019 Notes to be unconditionally released from all obligations under its Subsidiary Guarantee, and such Subsidiary Guarantee shall thereupon terminate and be discharged and of no further force or effect.

 

Upon any such occurrence specified in this Section 12.4, the Trustee shall execute any documents reasonably required in order to evidence such release, discharge and termination in respect of the applicable Subsidiary Guarantee.

 

SECTION 12.5                                            WAIVER OF SUBROGATION

 

Each Parent Guarantor and each Subsidiary Guarantor hereby irrevocably waives any claim or other rights that it may now or hereafter acquire against the Company that arise from the existence, payment, performance or enforcement of the Company’s obligations under the Notes and this Indenture or such Parent Guarantor’s or Subsidiary Guarantor’s obligations under its Parent Guarantee or Subsidiary Guarantee and this Indenture, including any right of subrogation, reimbursement, exoneration, indemnification, and any right to participate in any claim or remedy of any Holder of Notes against the Company, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, until this Indenture is discharged and all of the Notes are discharged and paid in full.  If any amount shall be paid to any Parent Guarantor or Subsidiary Guarantor in violation of the preceding sentence and the Notes shall not have been paid in full, such amount shall be deemed to have been paid to such Parent Guarantor or Subsidiary Guarantor for the benefit of, and held in trust for the benefit of, the Holders of the Notes, and shall forthwith be paid to the Trustee for the benefit of such Holders to be credited and applied upon the Notes, whether matured or unmatured, in accordance with the terms of this Indenture.

 

SECTION 12.6                                            NOTATION NOT REQUIRED

 

Neither the Company nor any Parent Guarantor or Subsidiary Guarantor shall be required to make a notation on the Notes to reflect any Parent Guarantee or Subsidiary Guarantee or any release, termination or discharge thereof.

 

SECTION 12.7                                            SUCCESSORS AND ASSIGNS OF GUARANTORS

 

All covenants and agreements in this Indenture by each Parent Guarantor and Subsidiary Guarantor shall bind its respective successors and assigns, whether so expressed or not.

 

SECTION 12.8                                            EXECUTION AND DELIVERY OF GUARANTEES

 

The Company shall cause each Restricted Subsidiary that is required to become a Subsidiary Guarantor pursuant to Section 6.12, each Subsidiary of the Company that the Company causes to become a Subsidiary Guarantor pursuant to Section 6.12, and each Parent of the Company that elects to become a Parent Guarantor to promptly execute and deliver to the Trustee a Supplemental Indenture substantially in the form set forth in Exhibit B to the Supplemental Indenture, or otherwise in form and substance reasonably satisfactory to the Trustee, evidencing its Parent Guarantee or Subsidiary Guarantee on substantially the terms set forth in this Article XII.  Concurrently therewith, the Company shall deliver to the Trustee an 

 

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Opinion of Counsel in form and substance reasonably satisfactory to the Trustee to the effect that such Supplemental Indenture has been duly authorized, executed and delivered by such Parent or Restricted Subsidiary and that, subject to applicable bankruptcy, insolvency, fraudulent transfer, fraudulent conveyance, reorganization, moratorium and other laws now or hereafter in effect affecting creditors’ rights or remedies generally and to general principles of equity (including standards of materiality, good faith, fair dealing and reasonableness), whether considered in a proceeding at law or at equity, such Supplemental Indenture is a valid and binding agreement of such Parent or Restricted Subsidiary, enforceable against such Parent or Restricted Subsidiary in accordance with its terms.

 

SECTION 12.9                                            NOTICES

 

Notice to any Parent Guarantor or Subsidiary Guarantor shall be sufficient if addressed to such Parent Guarantor or Subsidiary Guarantor care of the Company at the address, place and manner provided in Section 13.5.

 

ARTICLE XIV

MISCELLANEOUS

 

SECTION 1401                                  Changes to Article XIII of the Base Indenture

 

Sections 13.1 through 13.18 enumerated in Article XIII of the Base Indenture shall be deleted and replaced in their entirety by the following:

 

SECTION 13.1                                            CONFLICT WITH TIA

 

If any provision hereof limits, qualifies or conflicts with a provision of the TIA that is required under the TIA to be a part of and govern this Indenture, the latter provision shall control.  If any provision of this Indenture modifies or excludes any provision of the TIA that may be so modified or excluded, the latter provision shall be deemed (i) to apply to this Indenture as so modified or (ii) to be excluded, as the case may be.

 

SECTION 13.2                                            COMPLIANCE CERTIFICATES AND OPINIONS

 

Upon any application or request by the Company or by any other obligor upon the Notes (including the Co-Issuer or any Guarantor) to the Trustee to take any action under any provision of this Indenture, the Company or such other obligor (including the Co-Issuer or any Guarantor), as the case may be, shall furnish to the Trustee such certificates and opinions as may be required under the TIA.  Each such certificate or opinion shall be given in the form of one or more Officer’s Certificates, if to be given by an Officer, or an Opinion of Counsel, if to be given by counsel, and shall comply with the requirements of the TIA and any other requirements set forth in this Indenture.  Notwithstanding the foregoing, in the case of any such request or application as to which the furnishing of any Officer’s Certificate or Opinion of Counsel is specifically required by any provision of this Indenture relating to such particular request or application, no additional certificate or opinion need be furnished.

 

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Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (except for certificates provided for in Section 6.5) shall include:

 

(1) a statement that the individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto;

 

(2)  a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

 

(3)  a statement that, in the opinion of such individual, he or she made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been complied with; and

 

(4)  a statement as to whether, in the opinion of such individual, such condition or covenant has been complied with.

 

SECTION 13.3                                            FORM OF DOCUMENTS DELIVERED TO TRUSTEE

 

In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

 

Any certificate or opinion of an Officer may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such Officer knows that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous.  Any such certificate or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an Officer or Officers to the effect that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows that the certificate or opinion or representations with respect to such matters are erroneous.

 

Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.

 

SECTION 13.4                                            ACTS OF NOTEHOLDERS; RECORD DATES

 

(a)  Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee, and, where it is hereby expressly required, to the Company, as the case may be.  Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “Act” of the Holders signing such instrument or instruments.  Proof of 

 

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execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 9.1) conclusive in favor of the Trustee, the Company and any other obligor upon the Notes, if made in the manner provided in this Section 13.4.

 

(b)  The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of any notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof.  Where such execution is by an officer of a corporation or a member of a partnership or other legal entity other than an individual, on behalf of such corporation or partnership or entity, such certificate or affidavit shall also constitute sufficient proof of such Person’s authority.  The fact and date of the execution of any such instrument or writing, or the authority of the person executing the same, may also be proved in any other manner that the Trustee deems sufficient.

 

(c)  The ownership of Notes shall be proved by the Note Register.

 

(d)  Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Note shall bind the Holder of every Note issued upon the transfer thereof or in exchange therefor or in lieu thereof, in respect of anything done, suffered or omitted to be done by the Trustee, the Company or any other obligor upon the Notes in reliance thereon, whether or not notation of such action is made upon such Note.

 

(e) (i)  The Company may set any day as a record date for the purpose of determining the Holders of Outstanding Notes entitled to give, make or take any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Indenture to be given, made or taken by Holders of Notes, provided that the Company may not set a record date for, and the provisions of this paragraph shall not apply with respect to, the giving or making of any notice, declaration, request or direction referred to in the next paragraph.  If any record date is set pursuant to this paragraph, the Holders of Outstanding Notes on such record date (or their duly designated proxies), and no other Holders, shall be entitled to take the relevant action, whether or not such Persons remain Holders after such record date; provided that no such action shall be effective hereunder unless taken on or prior to the applicable Expiration Date by Holders of the requisite principal amount of Outstanding Notes on such record date.  Nothing in this paragraph shall be construed to prevent the Company from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be cancelled and of no effect), and nothing in this paragraph shall be construed to render ineffective any action taken by Holders of the requisite principal amount of Outstanding Notes on the date such action is taken.  Promptly after any record date is set pursuant to this paragraph, the Company, at its expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Trustee in writing and to each Holder of Notes in the manner set forth in Section 13.6.

 

(ii)  The Trustee may set any day as a record date for the purpose of determining the Holders of Outstanding Notes entitled to join in the giving or making of (A) any Notice of 

 

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Default, (B) any declaration of acceleration referred to in Section 8.2, (C) any request to institute proceedings referred to in Section 8.7(ii) or (D) any direction referred to in Section 8.12, in each case with respect to Notes.  If any record date is set pursuant to this paragraph, the Holders of Outstanding Notes on such record date, and no other Holders, shall be entitled to join in such notice, declaration, request or direction, whether or not such Holders remain Holders after such record date; provided that no such action shall be effective hereunder unless taken on or prior to the applicable Expiration Date by Holders of the requisite principal amount of Outstanding Notes on such record date.  Nothing in this paragraph shall be construed to prevent the Trustee from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be cancelled and of no effect), and nothing in this paragraph shall be construed to render ineffective any action taken by Holders of the requisite principal amount of Outstanding Notes on the date such action is taken.  Promptly after any record date is set pursuant to this paragraph, the Trustee, at the Company’s expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Company in writing and to each Holder of Notes in the manner set forth in Section 13.6.

 

(iii)  With respect to any record date set pursuant to this Section 13.4, the party hereto that sets such record dates may designate any day as the “Expiration Date” and from time to time may change the Expiration Date to any earlier or later day; provided that no such change shall be effective unless notice of the proposed new Expiration Date is given to the Company or the Trustee, whichever such party is not setting a record date pursuant to this Section 13.4(e) in writing, and to each Holder of Notes in the manner set forth in Section 13.6, on or prior to the existing Expiration Date.  If an Expiration Date is not designated with respect to any record date set pursuant to this Section, the party hereto that set such record date shall be deemed to have initially designated the 180th day after such record date as the Expiration Date with respect thereto, subject to its right to change the Expiration Date as provided in this paragraph.  Notwithstanding the foregoing, no Expiration Date shall be later than the 180th day after the applicable record date.

 

(iv)  Without limiting the foregoing, a Holder entitled hereunder to take any action hereunder with regard to any particular Note may do so with regard to all or any part of the principal amount of such Note or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such principal amount.

 

(v)  Without limiting the generality of the foregoing, a Holder, including the Depositary, that is the Holder of a Global Note, may make, give or take, by a proxy or proxies duly appointed in writing, any request, demand, authorization, direction, notice, consent, waiver or other action provided in this Indenture to be made, given or taken by Holders, and the Depositary, as the Holder of a Global Note, may provide its proxy or proxies to the beneficial owners of interests in any such Global Note through such depositary’s standing instructions and customary practices.

 

(vi)  The Company may fix a record date for the purpose of determining the persons who are beneficial owners of interests in any Global Note held by the Depositary entitled under the procedures of such depositary to make, give or take, by a proxy or proxies duly appointed 

 

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in writing, any request, demand, authorization, direction, notice, consent, waiver or other action provided in this Indenture to be made, given or taken by Holders.  If such a record date is fixed, the Holders on such record date or their duly appointed proxy or proxies, and only such persons, shall be entitled to make, give or take such request, demand, authorization direction, notice consent, waiver or other action, whether or not such Holders remain Holders after such record date.  No such request, demand, authorization, direction, notice, consent, waiver or other action shall be valid or effective if made, given or taken more than 90 days after such record date.

 

SECTION 13.5                                            NOTICES, ETC., TO TRUSTEE AND COMPANY

 

Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with,

 

(1)  the Trustee by any Holder or by the Company or by any other obligor upon the Notes shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing (including telecopy and e-mail in PDF format) to or with the Trustee at 45 Broadway, 14th Floor, New York, NY 10006, Attention: Corporate Trust Services — Administrator for Sally Holdings LLC (telecopier:  (212) 515-1589 or at any other address furnished in writing to the Company by the Trustee, or

 

(2)  the Company or the Co-Issuer by the Trustee or by any Holder shall be sufficient for every purpose hereunder if in writing and mailed, first-class postage prepaid, to the Company at Sally Holdings LLC, 3001 Colorado Boulevard, Denton, TX 76210, Attention: Chief Financial Officer (telephone: (940) 898-7500; telecopier: (940) 297-3560); with copies to Alston & Bird LLP, One Atlanta Center, 1201 West Peachtree Street, Atlanta, Georgia 30309-3424, Attention: Scott Ortwein, or at any other address previously furnished in writing to the Trustee by the Company.

 

The Company or the Trustee, by notice to the other, may designate additional or different addresses for subsequent notices or communications.

 

SECTION 13.6                                            NOTICES TO HOLDERS; WAIVER

 

Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, or by overnight air courier guaranteeing next day delivery, to each Holder affected by such event, at such Holder’s address as it appears in the Note Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice.  In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders.

 

Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice.  Waivers of notice by Holders shall be filed with 

 

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the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.

 

In case, by reason of the suspension of regular mail service, or by reason of any other cause, it shall be impossible to mail notice of any event as required by any provision of this Indenture, then such notification as shall be made with the approval of the Trustee (such approval not to be unreasonably withheld) shall constitute a sufficient notification for every purpose hereunder.

 

SECTION 13.7                                            EFFECT OF HEADING AND TABLE OF CONTENTS

 

The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.

 

SECTION 13.8                                            SUCCESSORS AND ASSIGNS

 

All covenants and agreements in this Indenture by the Company or the Co-Issuer shall bind its respective successors and assigns, whether so expressed or not.  All agreements of the Trustee in this Indenture shall bind its successors.

 

SECTION 13.9                                            SEPARABILITY CLAUSE

 

In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

 

SECTION 13.10                                      BENEFITS OF INDENTURE

 

Nothing in this Indenture or in the Notes, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, any Paying Agent and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture.

 

SECTION 13.11                                      GOVERNING LAW

 

THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.  THE TRUSTEE, THE COMPANY, ANY OTHER OBLIGOR IN RESPECT OF THE NOTES AND (BY THEIR ACCEPTANCE OF THE NOTES) THE HOLDERS AGREE TO SUBMIT TO THE JURISDICTION OF ANY UNITED STATES FEDERAL OR STATE COURT LOCATED IN THE BOROUGH OF MANHATTAN, IN THE CITY OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE NOTES.

 

SECTION 13.12                                      LEGAL HOLIDAYS

 

In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Note shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or of the Notes) payment of interest or principal and premium (if any) 

 

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need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity, and no interest shall accrue on such payment for the intervening period.

 

	
SECTION 13.13
    	
NO   PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, INCORPORATORS AND   STOCKHOLDERS
    

 

No director, officer, employee, incorporator or stockholder of the Company, the Co-Issuer, any Parent Guarantor, any Subsidiary Guarantor or any Subsidiary of any thereof shall have any liability for any obligation of the Company, the Co-Issuer, any Parent Guarantor or any Subsidiary Guarantor under this Indenture, the Notes or any Subsidiary Guarantee, or for any claim based on, in respect of, or by reason of, any such obligation or its creation.  Each Noteholder, by accepting the Notes, waives and releases all such liability.  The waiver and release are part of the consideration for issuance of the Notes.

 

	
SECTION 13.14
    	
EXHIBITS   AND SCHEDULES
    

 

All exhibits and schedules attached hereto are by this reference made a part hereof with the same effect as if herein set forth in full.

 

	
SECTION 13.15
    	
COUNTERPARTS
    

 

This Indenture may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. The exchange of copies of this Indenture and of signature pages by facsimile or PDF transmission shall constitute effective execution and delivery of this Indenture as to the parties hereto and may be used in lieu of the original Indenture for all purposes.  Signatures of the parties hereto transmitted by facsimile or PDF shall be deemed to be their original signatures for all purposes.

 

	
SECTION 13.16
    	
COMPANY   AS AGENT FOR CO-ISSUER
    

 

To the fullest extent permitted by the TIA and any other applicable law, the Co-Issuer hereby appoints the Company as its attorney-in-fact, which appointment is coupled with an interest, to take any action that this Indenture may require or permit the Co-Issuer to take, including the giving of any certification, opinion, order, request, consent or notice and the setting of any record date, such appointment to remain in effect until the Co-Issuer shall otherwise notify the Trustee in writing.

 

	
SECTION 13.17
    	
CONSENT   TO JURISDICTION
    

 

The Company, the Co-Issuer and each Guarantor hereby irrevocably and unconditionally submits, for itself and its property, to the jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Indenture and any of the Notes, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court.  Each of the parties hereto agrees that a final judgment in any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court.  Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.  Nothing in this Indenture shall affect any right that the Trustee, Agent, or Holder any otherwise have to bring any action or proceeding relating to this Indenture against the Company, the Co-Issuer or any Guarantor or their properties in the courts of any jurisdiction to enforce any judgment, order or process entered by such courts situate within the State of New

 

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York or to enjoin any violations hereof or for relief ancillary hereto or otherwise to collect on loans or enforce the payment of any Notes or to enforce, protect or maintain their rights and Claims or for any other lawful purpose.  The Company, the Co-Issuer and each Guarantor further agrees that any action or proceeding brought against the Trustee, Agent or any Holder, if brought by the Company, the Co-Issuer or any Parent Guarantor or Subsidiary Guarantor, shall be brought only in New York State or, to the extent permitted by law, in such Federal Court.

 

SECTION 13.18                                      WAIVER OF JURY TRIAL

 

EACH OF THE COMPANY, THE CO-ISSUER AND EACH GUARANTOR PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS INDENTURE, ANY NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 13.18.

 

SECTION 13.19                                      FORCE MAJEURE

 

In no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being understood that the Trustee shall use reasonable efforts that are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

 

SECTION 13.20                                      USA PATRIOT ACT

 

The parties hereto acknowledge that in accordance with Section 326 of the USA PATRIOT Act, the Trustee, like all financial institutions and in order to help fight the funding of terrorism and money laundering, is required to obtain, verify, and record information that identifies each person or legal entity that establishes a relationship or opens an account with the Trustee. The parties to this Indenture agree that they will provide the Trustee with such information as it may request in order for the Trustee to satisfy the requirements of the USA PATRIOT Act.

 

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ARTICLE XV

 SATISFACTION AND DISCHARGE

 

SECTION 1501                                  Addition of Article XIV of the Base Indenture

 

(a)  The following shall be added to the Base Indenture as Article XIV:

 

SECTION 14.1                                            SATISFACTION AND DISCHARGE OF INDENTURE

 

This Indenture shall be discharged and shall cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Notes herein expressly provided for), as to all outstanding Notes and related Guarantees, and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when

 

(i)                                     either

 

(a)                                  all Notes theretofore authenticated and delivered (other than (i) Notes that have been destroyed, lost or stolen and that have been replaced or paid as provided in Section 3.8, and (ii) Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 6.3) have been delivered to the Trustee cancelled or for cancellation; or

 

(b)                                 all such Notes not theretofore delivered to the Trustee cancelled or for cancellation

 

(1)                                  have become due and payable, or

 

(2)                                  will become due and payable at their Stated Maturity within one year, or

 

(3)                                  have been or are to be called for redemption within one year under arrangements reasonably satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company,

 

(ii)                                  the Company has irrevocably deposited or caused to be deposited with the Trustee money, U.S. Government Obligations or a combination thereof, sufficient (without reinvestment) to pay and discharge the entire Indebtedness on such Notes not theretofore delivered to the Trustee cancelled or for cancellation, for principal (and premium, if any) and interest to the date of such deposit (in the case of Notes that have become due and payable), or to the Stated Maturity or Redemption Date, as the case may be (provided that if such redemption shall be pursuant to Section 4.1(c), (x) the amount of money or U.S. Government Obligations, or a combination thereof, that the Company must irrevocably deposit or cause to be deposited shall be determined using an assumed Applicable Premium calculated as of the date of such deposit, and (y) the Company must 

 

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irrevocably deposit or cause to be deposited additional money in trust on the Redemption Date, as required by Section 4.6, as necessary to pay the Applicable Premium as determined on such date);

 

(iii)                               the Company has paid or caused to be paid all other sums then payable hereunder by the Company; and

 

(iv)                              the Company has delivered to the Trustee an Officer’s Certificate of the Company and an Opinion of Counsel each to the effect that all conditions precedent provided for in this Section 14.1 relating to the satisfaction and discharge of this Indenture have been complied with, provided that any such counsel may rely on any Officer’s Certificate as to matters of fact (including as to compliance with the foregoing clauses (i), (ii) and (iii)).

 

Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 9.7 and, if money shall have been deposited with the Trustee pursuant to Section 14.1(ii), the obligations of the Trustee under Section 14.2 shall survive.

 

SECTION 14.2                                            APPLICATION OF TRUST MONEY

 

Subject to the provisions of the last paragraph of Section 6.3, all money and/or U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee pursuant to Section 14.1 shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest on the Notes; but such money need not be segregated from other funds except to the extent required by law.

 

ARTICLE XVI

 HOLDERS’ LISTS AND REPORTS BY TRUSTEE AND THE COMPANY

 

SECTION 1601                                  Addition of Article XV of the Base Indenture

 

The following shall be added to the Base Indenture as Article XV:

 

SECTION 15.1                                            THE COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS

 

The Company will furnish or cause to be furnished to the Trustee

 

(1)  semi-annually, not more than 10 days after each Regular Record Date, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of such Regular Record Date, and

 

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(2) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished;

 

provided, however, that if and to the extent and so long as the Trustee shall be the Note Registrar, no such list need be furnished pursuant to this Section 15.1.

 

SECTION 15.2                                            PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS

 

The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list, if any, furnished to the Trustee as provided in Section 15.1 and the names and addresses of Holders received by the Trustee in its capacity as Note Registrar; provided, however, that if and so long as the Trustee shall be the Note Registrar, the Note Register shall satisfy the requirements relating to such list.  None of the Company, the Co-Issuer, any Guarantor or the Trustee or any other Person shall be under any responsibility with regard to the accuracy of such list.  The Trustee may destroy any list furnished to it as provided in Section 15.1 upon receipt of a new list so furnished.

 

The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Notes, and the corresponding rights and privileges of the Trustee, shall be as provided by the TIA.

 

Every Holder of Notes, by receiving and holding the same, agrees with the Issuers and the Trustee that neither the Company nor the Co-Issuer, nor the Trustee, nor any agent of any of them, shall be held accountable by reason of any disclosure of information as to names and addresses of Holders made pursuant to the TIA.

 

SECTION 15.3                                            REPORTS BY TRUSTEE

 

Within 60 days after each May 15, beginning with May 15, 2013, the Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the TIA at the times and in the manner provided pursuant thereto for so long as any Notes remain outstanding.  A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee or any applicable listing agent with each stock exchange upon which any Notes are listed, with the SEC and with the Company.  The Company will promptly notify the Trustee in writing when any Notes are listed on any stock exchange and of any delisting thereof.

 

ARTICLE XVII

 ADDITIONAL TERMS OF THE SUPPLEMENTAL INDENTURE

 

SECTION 1701                                  Interpretation of Base and Supplemental Indenture

 

The Base Indenture, as supplemented and amended by this Supplemental indenture, is in all respects ratified and confirmed, and the Base Indenture and this Supplemental Indenture shall be read, taken and construed as one and the same instrument.  All provisions included in this 

 

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Supplemental Indenture supersede any similar provisions included in the Base Indenture unless not permitted by law.

 

SECTION 1702                                  Successors and Assigns

 

All covenants and agreements in this Supplemental Indenture by the Company or the Co-Issuer shall bind its respective successors and assigns, whether so expressed or not.  All agreements of the Trustee in this Supplemental Indenture shall bind its successors.

 

SECTION 1703                                  Severability

 

In case any provision in this Supplemental Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

 

SECTION 1704                                  Benefits of Indenture

 

Nothing in this Supplemental Indenture or in the Notes, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, any Paying Agent and the Holders, any benefit or any legal or equitable right, remedy or claim under this Supplemental Indenture.

 

SECTION 1705                                  Governing Law

 

THIS SUPPLEMENTAL INDENTURE AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.  THE TRUSTEE, THE COMPANY, ANY OTHER OBLIGOR IN RESPECT OF THE NOTES AND (BY THEIR ACCEPTANCE OF THE NOTES) THE HOLDERS AGREE TO SUBMIT TO THE JURISDICTION OF ANY UNITED STATES FEDERAL OR STATE COURT LOCATED IN THE BOROUGH OF MANHATTAN, IN THE CITY OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SUPPLEMENTAL INDENTURE OR THE NOTES.

 

SECTION 1706                                  Effect of Headings

 

The Article and Section headings in this Supplemental Indenture are for convenience only and shall not be deemed to alter or affect the meaning or interpretation of any provisions hereof.

 

SECTION 1707                                  Duplicate Originals

 

This Supplemental Indenture may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. The exchange of copies of this Supplemental Indenture and of signature pages by facsimile or PDF transmission shall constitute effective execution and delivery of this Supplemental Indenture as to the parties hereto and may be used in lieu of the original 

 

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Supplemental Indenture for all purposes.  Signatures of the parties hereto transmitted by facsimile or PDF shall be deemed to be their original signatures for all purposes.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, all as of the date first written above.

 

	
 
    	
SALLY   HOLDINGS LLC
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Mark J. Flaherty
    
	
 
    	
 
    	
Name:   Mark J. Flaherty
    
	
 
    	
 
    	
Title:   Senior Vice President and CFO
    
	
 
    	
 
    	
 
    
	
 
    	
SALLY   CAPITAL INC.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Mark J. Flaherty
    
	
 
    	
 
    	
Name:   Mark J. Flaherty
    
	
 
    	
 
    	
Title:   Senior Vice President and CFO
    

 

 

	
 
    	
SALLY   BEAUTY HOLDINGS, INC.
    
	
 
    	
SALLY   INVESTMENT HOLDINGS LLC
    
	
 
    	
ARMSTRONG   MCCALL HOLDINGS L.L.C.
    
	
 
    	
BEAUTY   HOLDING LLC
    
	
 
    	
SALLY   BEAUTY INTERNATIONAL FINANCE LLC
    
	
 
    	
DIORAMA   SERVICES COMPANY, LLC
    
	
 
    	
SALLY   BEAUTY DISTRIBUTION LLC
    
	
 
    	
BEAUTY   SYSTEMS GROUP LLC
    
	
 
    	
SALLY   BEAUTY SUPPLY LLC
    
	
 
    	
ARMSTRONG   McCALL MANAGEMENT L.C.
    
	
 
    	
SALON   SUCCESS INTERNATIONAL, LLC
    
	
 
    	
ARMSTRONG   McCALL, L.P.
    
	
 
    	
ARMSTRONG   McCALL HOLDINGS, INC.
    
	
 
    	
BRENTWOOD   BEAUTY LABORATORIES
    
	
 
    	
 
    	
INTERNATIONAL,   INC.
    
	
 
    	
BEYOND   THE ZONE, INC.
    
	
 
    	
COLORESSE,   INC.
    
	
 
    	
ENERGY   OF BEAUTY, INC.
    
	
 
    	
ESTHETICIAN   SERVICES, INC.
    
	
 
    	
FOR   PERMS ONLY, INC.
    
	
 
    	
HIGH   INTENSITY PRODUCTS, INC.
    
	
 
    	
ION   PROFESSIONAL PRODUCTS, INC.
    
	
 
    	
LAND   OF DREAMS, INC.
    
	
 
    	
MIRACLE   LANE, INC.
    
	
 
    	
VENIQUE,   INC.
    
	
 
    	
NAIL   LIFE, INC.
    
	
 
    	
NEW   IMAGE PROFESSIONAL PRODUCTS, INC.
    
	
 
    	
PROCARE   LABORATORIES, INC.
    
	
 
    	
SALLY   BEAUTY DISTRIBUTION OF OHIO, INC.
    
	
 
    	
SATIN   STRANDS, INC.
    
	
 
    	
SEXY   PRODUCTS, INC.
    
	
 
    	
SILK   ELEMENTS, INC.
    
	
 
    	
POWER   IQ, INC.
    
	
 
    	
DESIGN   LENGTHS, INC.
    
	
 
    	
FEMME   COUTURE INTERNATIONAL, INC.
    
	
 
    	
GENERIC   VALUE PRODUCTS, INC.
    
	
 
    	
INNOVATIONS   — SUCCESSFUL SALON SERVICES
    
	
 
    	
 
    	
ARNOLDS,   INC.
    
	
 
    	
NEKA   SALON SUPPLY, INC.
    
	
 
    	
AERIAL   COMPANY, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
As   Guarantors
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Mark J. Flaherty
    
	
 
    	
 
    	
Name:   Mark J. Flaherty
    
	
 
    	
 
    	
Title:   Senior Vice President and CFO
    

 

2

 

	
 
    	
WELLS   FARGO BANK, NATIONAL ASSOCIATION,
    
	
 
    	
as   Trustee
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Martin Reed
    
	
 
    	
 
    	
Name:   Martin Reed
    
	
 
    	
 
    	
Title:   Vice President
    

 

3

 

EXHIBIT A

 

Form of Initial Note

(FACE OF NOTE)

 

THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY.  THIS NOTE IS EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY.

 

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS TO BE MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

 

 

SALLY HOLDINGS LLC

 

and

 

SALLY CAPITAL INC.

 

5.75% Senior Notes due 2022

 

	
CUSIP No. 79546V AJ5
    
	
No.
    	
$
    

 

Each of Sally Holdings LLC, a limited liability company duly organized and existing under the laws of the State of Delaware (and its successors and assigns, the “Company”), and Sally Capital Inc., a corporation duly organized and existing under the laws of the State of Delaware (and its successors and assigns, the “Co-Issuer” and, together with the Company, the “Issuers”), hereby jointly and severally promises to pay to                       , or registered assigns, the principal sum of $                   ([                      ] United States Dollars) (or such lesser or greater amount as shall be outstanding hereunder from time to time in accordance with Section 3.15 of the Indenture referred to on the reverse hereof) (the “Principal Amount”) on June 1, 2022.  The Company promises to pay interest semi-annually in arrears on June 1 and December 1 in each year, commencing December 1, 2012, at the rate of 5.75% per annum, until the Principal Amount is paid or made available for payment. Interest on this Note will accrue from the most recent date to which interest on this Note or any of its Predecessor Notes has been paid or duly provided for or, if no interest has been paid, from the Issue Date.  Interest on the Notes shall be computed on the basis of a 360-day year of twelve 30-day months.  The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on the Regular Record Date for such interest, which shall be the May 15 or November 15 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date.  Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Notes not more than 15 days nor less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture.

 

Payment of the principal of (and premium, if any) and interest on this Note will be made at the Corporate Trust Office of the Trustee, or such other office or agency of the Company maintained for that purpose; provided, however, that at the option of the Company payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Note Register.

 

Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.

 

2

 

Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

 

3

 

IN WITNESS WHEREOF, the Issuers have caused this instrument to be duly executed.

 

 

	
 
    	
SALLY   HOLDINGS LLC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
SALLY   CAPITAL INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

4

 

This is one of the Notes referred to in the within-mentioned Indenture.

 

	
 
    	
WELLS   FARGO BANK,
    
	
 
    	
NATIONAL   ASSOCIATION
    
	
 
    	
As   Trustee
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
Authorized   Signatory
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Dated:
    	
 
    	
 
    

 

5

 

(REVERSE OF NOTE)

 

This Note is one of the duly authorized issue of 5.75% Senior Notes due 2022 of the Issuers (herein called the “Notes”), issued under an Indenture, dated as of May 18, 2012 (the “Base Indenture”) as supplemented by the Supplemental Indenture, dated as of May 18, 2012 (the “Supplemental Indenture” and collectively, the “Indenture,” which term shall have the meanings assigned to it in such instrument), among the Company and the Co-Issuer, as joint and several Issuers, the Parent Guarantors and Subsidiary Guarantors from time to time parties thereto, and Wells Fargo Bank, National Association, as Trustee (herein called the “Trustee,” which term includes any successor trustee under the Indenture), and reference is hereby made to the Indenture for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, any other obligor upon this Note, the Trustee and the Holders of the Notes and of the terms upon which the Notes are, and are to be, authenticated and delivered.  The terms of the Notes include those stated in the Indenture and those made a part of the Indenture by reference to the Trust Indenture Act of 1939, as amended, as in effect from time to time (the “TIA”).  The Notes are subject to all such terms, and Holders are referred to the Indenture and the TIA for a statement of such terms.  Additional Notes may be issued under the Indenture which will vote as a class with the Notes and otherwise be treated as Notes for purposes of the Indenture.

 

All terms used in this Note that are defined in the Indenture shall have the meanings assigned to them in the Indenture.

 

This Note may hereafter be entitled to certain other senior Parent Guarantees and senior Subsidiary Guarantees made for the benefit of the Holders.  Reference is made to Article XII of the Indenture for terms relating to such Parent Guarantees and Subsidiary Guarantees, including the release, termination and discharge thereof.  Neither the Company nor any Parent Guarantor or Subsidiary Guarantor shall be required to make any notation on this Note to reflect any Parent Guarantee or Subsidiary Guarantee or any such release, termination or discharge.

 

The Notes will be redeemable, at the Company’s option, in whole or in part, at any time and from time to time on and after June 1, 2017 and prior to maturity at the applicable redemption price set forth below. Such redemption may be made upon notice mailed by first-class mail to each Holder’s registered address in accordance with the Indenture.  The Company may provide in such notice that payment of the redemption price and the performance of the Company’s obligations with respect to such redemption may be performed by another Person.  Any such redemption and notice may, in the Company’s discretion, be subject to the satisfaction of one or more conditions precedent, including but not limited to the occurrence of a Change of Control.  The Notes will be so redeemable at the following redemption prices (expressed as a percentage of principal amount), plus accrued and unpaid interest, if any, to the relevant Redemption Date (subject to the right of Holders of record on the relevant Regular Record Date to receive interest due on the relevant Interest Payment Date), if redeemed during the 12-month period commencing on June 1 of the years set forth below:

 

6

 

	
Period
    	
 
    	
Redemption Price
    	
 
    
	
2017 
    	
 
    	
102.875
    	
%
    
	
2018 
    	
 
    	
101.917
    	
%
    
	
2019 
    	
 
    	
100.958
    	
%
    
	
2020 and thereafter 
    	
 
    	
100.000
    	
%
    

 

In addition, at any time and from time to time on or prior to June 1, 2015, the Company at its option may redeem Notes in an aggregate principal amount equal to up to 35% of the original aggregate principal amount of Notes (including the principal amount of any Additional Notes), with funds in an equal aggregate amount not exceeding the aggregate proceeds of one or more Equity Offerings, at a redemption price (expressed as a percentage of principal amount thereof) of 105.750%, plus accrued and unpaid interest, if any, to the Redemption Date (subject to the right of Holders of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date); provided, however, that an aggregate principal amount of Notes equal to at least 65% of the original aggregate principal amount of Notes (including the principal amount of any Additional Notes) must remain outstanding after each such redemption.  The Company may make such redemption upon notice mailed by first-class mail to each Holder’s registered address in accordance with the Indenture (but in no event more than 180 days after the completion of the related Equity Offering).  The Company may provide in such notice that payment of the redemption price and performance of the Company’s obligations with respect to such redemption may be performed by another Person.  Any such notice may be given prior to the completion of the related Equity Offering, and any such redemption or notice may, at the Company’s discretion, be subject to the satisfaction of one or more conditions precedent, including the completion of the related Equity Offering.

 

At any time prior to June 1, 2017, Notes may also be redeemed or purchased (by the Company or any other Person) in whole or in part, at the Company’s option, at a price equal to 100% of the principal amount thereof plus the Applicable Premium as of, and accrued but unpaid interest, if any, to, the Redemption Date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date). Such redemption or purchase may be made upon notice mailed by first-class mail to each Holder’s registered address in accordance with the Indenture.  The Company may provide in such notice that payment of the Redemption Price and performance of the Company’s obligations with respect to such redemption or purchase may be performed by another Person.  Any such redemption, purchase or notice may, at the Company’s discretion, be subject to the satisfaction of one or more conditions precedent, including but not limited to the occurrence of a Change of Control.

 

The Indenture provides that, upon the occurrence after the Issue Date of a Change of Control, each Holder will have the right to require that the Company repurchase all or any part of such Holder’s Notes at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of such repurchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date); provided, however, that the Company shall not be obligated to repurchase Notes in the event it has exercised its right to redeem all the Notes as described above.

 

The Notes will not be entitled to the benefit of a sinking fund.

 

7

 

The Indenture contains provisions for defeasance at any time of the entire Indebtedness of this Note or certain restrictive covenants and certain Events of Default with respect to this Note, in each case upon compliance with certain conditions set forth in the Indenture.

 

If an Event of Default with respect to the Notes shall occur and be continuing, the principal of and accrued but unpaid interest on the Notes may be declared due and payable in the manner and with the effect provided in the Indenture.

 

The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuers and the rights of the Holders of the Notes to be effected under the Indenture at any time by the Issuers and the Trustee with the consent of the Holders of at least a majority in principal amount of the Notes at the time Outstanding to be affected.  The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Notes at the time Outstanding, on behalf of the Holders of all Notes, to waive compliance by the Issuers with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences.  Any such consent or waiver by the Holder of this Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note.

 

As provided in and subject to the provisions of the Indenture, the Holder of this Note shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to the Notes, the Holders of not less than 30% in principal amount of the Notes at the time Outstanding shall have made written request to the Trustee to pursue such remedy in respect of such Event of Default as Trustee and offered the Trustee security or indemnity reasonably satisfactory to it against any loss, liability or expense, and the Trustee shall not have received from the Holders of a majority in principal amount of Notes at the time Outstanding a direction inconsistent with such request, and shall have failed to institute any such proceeding, for 60 days after receipt of such notice, request and offer of security or indemnity.  The foregoing shall not apply to any suit instituted by the Holder of this Note for the enforcement of any payment of principal hereof or any premium or interest hereon on or after the respective due dates expressed herein.

 

No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the joint and several obligation of each Issuer, which is absolute and unconditional, to pay the principal of and any premium and interest on this Note at the times, place and rate, and in the coin or currency, herein prescribed.

 

As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Note is registrable in the Note Register, upon surrender of this Note for registration of transfer at the office or agency of the Company in a Place of Payment, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Note Registrar duly executed by, the Holder hereof or such Holder’s attorney duly authorized in writing, and thereupon one or more new Notes of like tenor, of authorized

 

8

 

denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.

 

The Notes are issuable only in fully registered form without coupons in minimum denominations of $2,000 and any integral multiple of $1,000 in excess thereof.  As provided in the Indenture and subject to certain limitations therein set forth, the Notes are exchangeable for a like aggregate principal amount of Notes of like tenor of a different authorized denomination, as requested by the Holder surrendering the same.

 

No service charge shall be made for any such registration, transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or other governmental charge payable in connection therewith.

 

Prior to due presentment of this Note for registration or transfer, the Company, the Co-Issuer, any other obligor in respect of this Note, the Trustee and any agent of any of them may treat the Person in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note be overdue, and none of the Company, the Co-Issuer, any other obligor upon this Note, the Trustee nor any such agent shall be affected by notice to the contrary.

 

No director, officer, employee, incorporator or stockholder, as such, of the Company, the Co-Issuer, any Parent Guarantor, any Subsidiary Guarantor or any Subsidiary of any thereof shall have any liability for any obligation of the Company, the Co-Issuer, any Parent Guarantor or any Subsidiary Guarantor under the Indenture, the Notes, any Parent Guarantee or any Subsidiary Guarantee, or for any claim based on, in respect of, or by reason of, any such obligation or its creation.  Each Holder, by accepting this Note, hereby waives and releases all such liability.  The waiver and release are part of the consideration for issuance of the Notes.

 

THE INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.  THE TRUSTEE, THE COMPANY, THE CO-ISSUER, ANY OTHER OBLIGOR IN RESPECT OF THE NOTES AND (BY THEIR ACCEPTANCE OF THE NOTES) THE HOLDERS, AGREE TO SUBMIT TO THE JURISDICTION OF ANY UNITED STATES FEDERAL OR STATE COURT LOCATED IN THE BOROUGH OF MANHATTAN, IN THE CITY OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE INDENTURE, THE NOTES, THE PARENT GUARANTEES OR THE SUBSIDIARY GUARANTEES.

 

9

 

[FORM OF CERTIFICATE OF TRANSFER]

 

FOR VALUE RECEIVED the undersigned holder hereby sell(s), assign(s) and transfer(s) unto

 

 

Insert Taxpayer Identification No.

 

 

	
(Please print or typewrite name and address   including zip code of assignee)
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    

 

the within Note and all rights thereunder, hereby irrevocably constituting and appointing

 

	
 
    	
 
    

 

attorney to transfer such Note on the books of the Company with full power of substitution in the premises.

 

NOTICE:  The signature to this assignment must correspond with the name as written upon the face of the within-mentioned instrument in every particular, without alteration or any change whatsoever.

 

	
Signature   Guarantee:
    	
 
    	
 
    

 

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Note Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

 

10

 

OPTION OF HOLDER TO ELECT PURCHASE

 

If you wish to have this Note purchased by the Company pursuant to Section 6.9 or 6.13 of the Indenture, check the box:  [    ].

 

If you wish to have a portion of this Note purchased by the Company pursuant to Section 6.9 or 6.13 of the Indenture, state the amount (in principal amount) below:

 

$

 

	
Date:
    	
 
    	
 
    
	
 
    	
 
    
	
Your   Signature:
    	
 
    	
 
    
	
 
    	
 
    
	
(Sign   exactly as your name appears on the other side of this Note)
    	
 
    
	
 
    	
 
    
	
Signature   Guarantee:
    	
 
    	
 
    
					

 

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Note Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

 

11

 

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE

 

The following increases or decreases in this Global Note have been made:

 

	
 
    	
 
    	
Amount of decreases in
    	
 
    	
Amount of increases in
    	
 
    	
Principal amount
    	
 
    	
Signature
    	
 
    
	
 
    	
 
    	
Principal
    	
 
    	
Principal
    	
 
    	
of this Global Note
    	
 
    	
of authorized signatory of
    	
 
    
	
Date of
    	
 
    	
Amount of this
    	
 
    	
Amount of this Global
    	
 
    	
following such decreases or
    	
 
    	
Trustee or Notes
    	
 
    
	
Exchange
    	
 
    	
Global Note
    	
 
    	
Note
    	
 
    	
increases
    	
 
    	
Custodian
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

12

 

EXHIBIT B

 

Form of Supplemental Indenture in Respect of Parent Guarantees and Subsidiary Guarantees

 

SUPPLEMENTAL INDENTURE, dated as of [                  ] (this “Supplemental Indenture”), among [name of Guarantor(s)] (the “New Guarantor(s)”), Sally Holdings LLC, a limited liability company duly organized and existing under the laws of the State of Delaware (and its successors and assigns, the “Company”), and Sally Capital Inc., a corporation duly organized and existing under the laws of the State of Delaware (and its successors and assigns, the “Co-Issuer” and, together with the Company, the “Issuers”), and each other then existing Parent Guarantor and Subsidiary Guarantor under the Indenture referred to below (the “Existing Guarantors”), and Wells Fargo Bank, National Association, as Trustee under the Indenture referred to below.

 

W I T N E S S E T H:

 

WHEREAS, the Issuers and the Trustee have heretofore become parties to an Indenture, dated as of May 18, 2012 (the “Base Indenture”), as supplemented by the Supplemental Indenture, dated as of May 18, 2012 among the Issuers, the Existing Guarantors and the Trustee, (the “Supplemental Indenture” and, together with the Base Indenture and as further amended, supplemented, waived or otherwise modified, the “Indenture”), providing for the issuance of 5.75% Senior Notes due 2022  of the Issuers (the “Notes”);

 

WHEREAS, Section 12.8 of the Indenture provides that the Company is required to cause the Subsidiary Guarantors to execute and deliver to the Trustee a supplemental indenture pursuant to which the Subsidiary Guarantors shall guarantee the Issuers’ Subsidiary Guaranteed Obligations under the Notes pursuant to a Subsidiary Guarantee on the terms and conditions set forth herein and in Article XII of the Indenture;

 

WHEREAS, the Company is permitted to add Parent Guarantors as additional Guarantors under the terms of the Indenture;

 

WHEREAS, each New Guarantor desires to enter into this supplemental indenture for good and valuable consideration, including substantial economic benefit in that the financial performance and condition of such New Guarantor is dependent on the financial performance and condition of the Parent Guarantors, the Subsidiary Guarantors and the Issuers, the obligations hereunder of which such New Guarantor has guaranteed, and on such New Guarantor’s access to working capital through the Company’s credit facilities; and

 

WHEREAS, pursuant to Section 11.1 of the Indenture, the parties hereto are authorized to execute and deliver this Supplemental Indenture to amend the Indenture, without the consent of any Holder;

 

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the New

 

13

 

Guarantor(s), the Issuers, the Existing Guarantors and the Trustee mutually covenant and agree for the benefit of the Holders of the Notes as follows:

 

1.  Defined Terms.  As used in this Supplemental Indenture, terms defined in the Indenture or in the preamble or recital hereto are used herein as therein defined.  The words “herein,” “hereof” and “hereby” and other words of similar import used in this Supplemental Indenture refer to this Supplemental Indenture as a whole and not to any particular Section hereof.

 

2.  Agreement to Guarantee.  [The] [Each] New Guarantor hereby agrees, jointly and severally with [all] [any] other Parent Guarantors and Subsidiary Guarantors and fully and unconditionally, to guarantee the Parent Guaranteed Obligations and the Subsidiary Guaranteed Obligations under the Indenture and the Notes, as the case may be, on the terms and subject to the conditions set forth in Article XII of the Indenture and to be bound by (and shall be entitled to the benefits of) all other applicable provisions of the Indenture as a Parent Guarantor or a Subsidiary Guarantor, as the case may be.  The Parent Guarantee or Subsidiary Guarantee, as the case may be, of each Parent Guarantor or Subsidiary Guarantor is subject to the subordination provisions of the Indenture.

 

3.  Termination, Release and Discharge.  [The] [Each] New Guarantor’s  Guarantee of the Notes shall terminate and be of no further force or effect, and [the] [each] New  Guarantor shall be released and discharged from all obligations in respect of its Guarantee of the Notes, as and when provided in Section 12.3 or 12.4, as applicable, of the Indenture.

 

4.  Parties.  Nothing in this Supplemental Indenture is intended or shall be construed to give any Person, other than the Holders and the Trustee, any legal or equitable right, remedy or claim under or in respect of [the] [each] New Guarantor’s Guarantee of the Notes or any provision contained herein or in Article XII of the Indenture.

 

5.  Governing Law.  THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.  THE TRUSTEE, THE COMPANY, THE CO-ISSUER, ANY OTHER OBLIGOR IN RESPECT OF THE NOTES AND (BY THEIR ACCEPTANCE OF THE NOTES) THE HOLDERS AGREE TO SUBMIT TO THE JURISDICTION OF ANY UNITED STATES FEDERAL OR STATE COURT LOCATED IN THE BOROUGH OF MANHATTAN, IN THE CITY OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SUPPLEMENTAL INDENTURE.

 

6.  Ratification of Indenture; Supplemental Indentures Part of Indenture.  Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect.  This Supplemental Indenture shall form a part of the Indenture for all purposes, and every Holder of Notes heretofore or hereafter authenticated and delivered shall be bound

 

14

 

hereby.  The Trustee makes no representation or warranty as to the validity or sufficiency of this Supplemental Indenture or as to the accuracy of the recitals to this Supplemental Indenture.

 

7.  Counterparts.  The parties hereto may sign one or more copies of this Supplemental Indenture in counterparts, all of which together shall constitute one and the same agreement.  The exchange of copies of this Supplemental Indenture and of signature pages by facsimile or PDF transmission shall constitute effective execution and delivery of this Supplemental Indenture as to the parties hereto and may be used in lieu of the original Supplemental Indenture for all purposes.  Signatures of the parties hereto transmitted by facsimile or PDF shall be deemed to be their original signatures for all purposes.

 

8.  Headings.  The Section headings herein are for convenience of reference only and shall not be deemed to alter or affect the meaning or interpretation of any provisions hereof.

 

15

 

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written.

 

	
 
    	
[NAME   OF NEW GUARANTOR(S)], as [Parent Guarantor] [Subsidiary Guarantor]
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
SALLY HOLDINGS LLC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
SALLY CAPITAL INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
[EXISTING GUARANTORS]
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
WELLS   FARGO BANK, NATIONAL ASSOCIATION, as Trustee
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

16Exhibit 10.1

 

EXECUTION VERSION

 

 

 

 

SALLY HOLDINGS LLC

SALLY CAPITAL INC.

 

$700,000,000

 

5.75% Senior Notes due 2022

 

UNDERWRITING AGREEMENT

 

 

Dated May 15, 2012

 

 

 

 

1

 

Merrill Lynch, Pierce, Fenner & Smith

Incorporated

One Bryant Park

New York, New York 10036

 

Credit Suisse Securities (USA) LLC

Eleven Madison Avenue

New York, New York 10010

 

Wells Fargo Securities, LLC

One Wells Fargo Center

301 South College Street

Charlotte, North Carolina 28202

 

Deutsche Bank Securities Inc.

60 Wall Street, 4th Floor

New York, New York 10005

 

Goldman, Sachs & Co.

200 West Street

New York, New York 10282

 

J.P. Morgan Securities LLC

383 Madison Avenue

New York, New York 10179

 

RBC Capital Markets, LLC

Three World Financial Center

200 Vesey Street

8th Floor

New York, New York 10281

 

Ladies and Gentlemen:

 

Sally Holdings LLC, a Delaware limited liability company (the “Company”), and Sally Capital Inc., a Delaware corporation (the “Co-Issuer” and, together with the Company, the “Issuers”), propose, subject to the terms and conditions stated herein, to issue and sell to the Underwriters named in Schedule I hereto (the “Underwriters”), acting severally and not jointly, the respective amounts set forth in such Schedule I of $700,000,000 aggregate principal amount of the Issuers’ 5.75% Senior Notes due 2022 (the “Notes”).  Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”) has agreed to act as the representative of the several Underwriters (the “Representative”) in connection with the offering and sale of the Notes.

 

The Securities (as defined below) will be issued pursuant to an indenture, to be dated as of May 18, 2012 (the “Base Indenture”), among the Issuers, the Guarantors (as defined below)

 

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and Wells Fargo Bank, National Association, as trustee (the “Trustee”), as supplemented by a supplemental indenture, to be dated as of the Closing Date (the “Supplemental Indenture” and together with the Base Indenture, the “Indenture”).  The Notes will be issued only in book-entry form in the name of Cede & Co., as nominee of The Depository Trust Company (the “Depository”), pursuant to a blanket letter of representations, to be dated on or before the Closing Date (as defined in Section 2 hereof) (the “DTC  Agreement”), between the Issuers and the Depository.

 

The payment of principal of, premium, if any, and interest on the Notes will be fully and unconditionally guaranteed on a senior unsecured basis, jointly and severally, by (i) the entities listed on the signature pages hereof as “Guarantors” and (ii) any subsidiary of the Guarantors and/or the Issuers formed or acquired after the Closing Date that executes an additional guarantee in accordance with the terms of the Indenture, and their respective successors and assigns (collectively, the “Guarantors”), pursuant to their guarantees (the “Guarantees”).  The Notes and the Guarantees attached thereto are herein collectively referred to as the “Securities.”

 

This Agreement, the DTC Agreement, the Securities and the Indenture are referred to herein as the “Transaction Documents.”

 

1.             Each of the Issuers and the Guarantors, jointly and severally, represents and warrants to, and agrees with, each of the Underwriters that:

 

(a)           An automatic shelf registration statement on Form S-3 (File No. 333-181351) covering the public offering and sale by the Issuers from time to time of debt securities, including the Securities, has been filed with the Securities and Exchange Commission (the “Commission”), which automatic shelf registration statement became effective pursuant to Rule 462(e) under the Securities Act of 1933, as amended (the “Act”); and no stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto, or preventing or suspending the use of any Preliminary Prospectus or the Prospectus, has been issued pursuant to Rule 401(g)(2) or otherwise and no proceeding for that purpose has been initiated or, to the knowledge of the Issuers and the Guarantors, threatened by the Commission pursuant to Section 8A of the Act or otherwise (any preliminary prospectus included in the Registration Statement or filed with the Commission pursuant to Rule 424(b) of the rules and regulations of the Commission under the Act (“Rule 424(b)”), including the documents incorporated or deemed to be incorporated by reference therein pursuant to Item 12 of Form S-3 under the Act, are collectively referred to herein as a “Preliminary Prospectus”); the various parts of the Registration Statement, including (i) any post-effective amendment thereto, each in the form heretofore delivered to the Underwriters, (ii) the exhibits and any schedules thereto at such time, (iii) the documents incorporated or deemed to be incorporated by reference therein at such time pursuant to Item 12 of Form S-3 under the Act and (iv) the documents otherwise deemed to be a part thereof as of such time pursuant to Rule 430B under the Act (“Rule 430B”), are hereinafter collectively called the “Registration Statement” (provided, however, that the “Registration Statement” without reference to a time means such registration statement as amended by any post-effective amendments thereto as of the time of the first contract of sale for the Securities, which time shall be considered the “new effective date” of such registration statement with respect to the Securities within the meaning of paragraph (f)(2) of Rule 430B, including the exhibits and schedules thereto as of such time, the documents incorporated or

 

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deemed incorporated by reference therein at such time pursuant to Item 12 of Form S-3 under the Act and the documents otherwise deemed to be a part thereof as of such time pursuant to the Rule 430B); the Preliminary Prospectus dated May 15, 2012, relating to the Securities (including any documents incorporated by reference therein) in the form first filed pursuant to the provisions of Rule 424(b) is hereinafter called the “Pricing Prospectus”; the final prospectus relating to the Securities (to be prepared and filed by the Company in accordance with the provisions of Rule 424(b)) in the form first furnished or made available to the Underwriters for use in connection with the offering of the Securities, including the documents incorporated or deemed to be incorporated by reference therein pursuant to Item 12 of Form S-3 under the Act, are collectively referred to herein as the “Prospectus”; and any “issuer free writing prospectus” as defined in Rule 433 under the Act relating to the Securities is hereinafter called an “Issuer Free Writing Prospectus”);

 

(b)           Sally Beauty Holdings, Inc. (the “Parent”) and the Issuers meet the requirements for use of Form S-3 under the Act.  The Registration Statement is an “automatic shelf registration statement” (as defined in Rule 405 under the Act (“Rule 405”)) that has been filed with the Commission not earlier than three years prior to the date hereof; no notice of objection of the Commission to the use of such Registration Statement has been issued by the Commission and no proceeding for that purpose or pursuant to Section 8A of the Act against the Parent or either of the Issuers or related to the offering has been initiated or threatened by the Commission; and the Securities have been and remain eligible for registration by the Issuers on such automatic shelf registration statement;

 

(c)           No order preventing or suspending the use of any Preliminary Prospectus or any Issuer Free Writing Prospectus has been issued by the Commission, and each Preliminary Prospectus dated on or after May 15, 2012, at the time of filing thereof, conformed in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder, and did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Issuers by any Underwriter through the Representative expressly for use therein;

 

(d)           The documents incorporated or deemed to be incorporated by reference in the Registration Statement, the Pricing Prospectus and the Prospectus, when they became effective or at the time they were or hereafter are filed with the Commission, complied and will comply in all material respects with the requirements of the Act, the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder (the “Exchange Act”) and, when taken together with the Pricing Disclosure Package, did not as of the Applicable Time, and at the Closing Date will not, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading;

 

(e)           For the purposes of this Agreement, the “Applicable Time” is 3:45 p.m. (New York City time) on the date of this Agreement.  The Pricing Prospectus, as supplemented by the Issuer Free Writing Prospectuses, including the Final Term Sheet (as defined herein), and

 

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other information listed on Schedule III(a) (collectively, the “Pricing Disclosure Package”), as of the Applicable Time, did not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; no Issuer Free Writing Prospectus listed on Schedule III(b) hereto conflicts with the information contained in the Registration Statement, the Pricing Prospectus or the Prospectus; and each Issuer Free Writing Prospectus, to the extent not superseded or modified by any subsequent Issuer Free Writing Prospectus, as supplemented by and taken together with the Pricing Disclosure Package as of the Applicable Time, did not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to statements or omissions made in an Issuer Free Writing Prospectus in reliance upon and in conformity with information furnished in writing to the Issuers by any Underwriter through the Representative expressly for use therein;

 

(f)            The Registration Statement conforms, and the Prospectus and any further amendments or supplements to the Registration Statement and the Prospectus will conform, in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder and do not and will not, (i) as to each part of the Registration Statement, as of its effectiveness and at each deemed effective date with respect to the Underwriters pursuant to Rule 430(B)(f)(2) under the Act, and (ii) as to the Prospectus and any amendment or supplement thereto, as of its date and at the Closing Date, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of the Prospectus, in light of the circumstances under which they were made); provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Issuers by any Underwriter through the Representative expressly for use therein;

 

(g)           (A) At the original effectiveness of the Registration Statement, (B) at the time of the most recent amendment thereto for the purposes of complying with Section 10(a)(3) of the Act (whether such amendment was by post-effective amendment, incorporated report filed pursuant to Section 13 or 15(d) of the Act or form of prospectus), (C) at the time the Issuers or any person acting on their behalf (within the meaning, for this clause only, of Rule 163(c) under the Act) made any offer relating to the Securities in reliance on the exemption of Rule 163 under the Act, and (D) as of the Applicable Time, the Parent and the Issuers were and are “well-known seasoned issuers” (as defined in Rule 405);

 

(h)           The Parent, the Issuers and their consolidated subsidiaries, taken together as a whole, have not sustained since the date of the latest audited financial statements included in the Pricing Prospectus any material loss or material interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth in the Pricing Prospectus; and, since the respective dates as of which information is given in the Registration Statement and the Pricing Prospectus, there has not been any material change in the capital stock or long-term debt of the Parent and its consolidated subsidiaries, taken together as a whole, or any material adverse change, or any development involving a prospective material adverse change, in or affecting the general affairs, management, financial position, stockholders’ equity

 

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or results of operations of the Parent, the Issuers and their subsidiaries, taken as a whole, otherwise than as set forth or contemplated in the Pricing Prospectus;

 

(i)            The Parent, the Issuers and their subsidiaries collectively have good title in fee simple to, or have valid rights to lease or otherwise use, all items of real property, and title to, or valid rights to lease or otherwise use, all personal property, which are material to the business of the Parent, the Issuers and their subsidiaries, taken as a whole (collectively, the “Business”), free and clear of all liens, encumbrances, claims and title defects (collectively, “Liens”) that would reasonably be expected to have a material adverse effect on the financial position, stockholders’ equity or results of operations of the Parent, the Issuers and their subsidiaries, taken as a whole (a “Material Adverse Effect”), other than Liens securing or otherwise permitted by indebtedness described in the Pricing Prospectus, and except as do not materially interfere with the use of such properties;

 

(j)            Each of the Parent, the Issuers and the Guarantors has been duly incorporated or formed, as applicable, and is validly existing as a corporation, limited partnership or limited liability company, as applicable, in good standing under the laws of the jurisdiction of its incorporation or organization, and has corporate, partnership or limited liability company, as applicable, power and authority to own its properties and conduct its business as described in the Pricing Prospectus and to enter into and perform its obligations under each of the Transaction Documents to which it is a party.  Each of the Parent, the Issuers and the Guarantors has been duly qualified as a foreign corporation, limited partnership or limited liability company, as applicable, for the transaction of business and is in good standing or equivalent status (if applicable) under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, except where the failure to be so organized or to be so qualified or have such corporate or other power or authority would not reasonably be expected to have a Material Adverse Effect; each of the Company’s subsidiaries is listed on Schedule II hereto;

 

(k)           All of the issued shares of capital stock of the Parent have been duly and validly authorized and issued and are fully paid and non-assessable; none of the outstanding shares of capital stock of the Parent were issued in violation of the preemptive or other similar rights of any securityholder of the Parent; all of the issued shares of capital stock of each of the Company and the Co-Issuer have been duly and validly authorized and issued and are fully paid and non-assessable and are owned directly or indirectly by the Parent; none of the outstanding shares of capital stock of the Company and the Co-Issuer were issued in violation of the preemptive or other similar rights of any securityholder of the Company and the Co-Issuer; all of the issued shares of capital stock of each of the Guarantors that is a corporation have been duly and validly authorized and issued, are fully paid and non-assessable and, to the extent that a Guarantor is a partnership or a limited liability company, all of the issued equity interests of each such Guarantor have been duly and validly authorized and issued and, in each case, except as otherwise set forth in the Pricing Prospectus and except for the Parent, are owned directly or indirectly by the Company (or, in the case of Sally Investment Holdings LLC, is owned by the Parent), free and clear of all liens, encumbrances, equities or claims, other than Liens granted under or otherwise permitted by indebtedness described in the Pricing Prospectus, as the same may be amended, supplemented, waived or otherwise modified from time to time, or refunded,

 

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refinanced, restructured, replaced, renewed, repaid, increased or extended from time to time (whether in whole or in part);

 

(l)            Each of the Parent, the Issuers and the Guarantors has the requisite power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby and thereby; and this Agreement has been duly authorized, executed and delivered by the Parent and each of the Issuers and the Guarantors;

 

(m)          The Notes to be purchased by the Underwriters from the Issuers will on the Closing Date be in the form contemplated by the Indenture, have been duly authorized for issuance and sale pursuant to this Agreement and the Indenture and, at the Closing Date, will have been duly executed by each of the Issuers and, when authenticated by the Trustee in the manner provided for in the Indenture (assuming the due authorization, execution and delivery of the Indenture by the Trustee) and delivered against payment of the purchase price therefor, will constitute valid and binding obligations of each of the Issuers, enforceable in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles and will be entitled to the benefits of the Indenture.  The Guarantees of the Notes on the Closing Date will be in the form contemplated by the Indenture and have been duly authorized for issuance pursuant to this Agreement and the Indenture; the Guarantees of the Notes, at the Closing Date, will have been duly executed by each of the Guarantors and, when the Notes have been authenticated by the Trustee in the manner provided for in the Indenture (assuming the due authorization, execution and delivery of the Indenture by the Trustee) and issued and delivered against payment of the purchase price therefor, the Guarantees of the Notes will constitute valid and binding agreements of the Guarantors, enforceable in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles and will be entitled to the benefits of the Indenture;

 

(n)           The Indenture has been duly authorized by each of the Issuers and the Guarantors and, at the Closing Date, will have been duly executed and delivered by each of the Issuers and the Guarantors and (assuming the due authorization, execution and delivery by the Trustee) will constitute a valid and binding agreement of each of the Issuers and the Guarantors, enforceable against each of the Issuers and the Guarantors in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles;

 

(o)           The compliance by the Issuers and the Guarantors with the Transaction Documents and the consummation of the transactions therein contemplated will not (i) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which any of the Parent, the Issuers or the Guarantors is a party or by which any of the Parent, the Issuers or the Guarantors is bound or to which any of the property or assets of the Parent, the Issuers or the Guarantors is subject, (ii) violate any provision of the certificate of incorporation or by-laws, or other organizational documents, as applicable, of the Parent, the Issuers or any of

 

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the Guarantors or (iii) violate any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Parent, either of the Issuers or any of the Guarantors or any of their properties; except, in the case of clauses (i) and (iii), as would not reasonably be expected to have a Material Adverse Effect, in the case of each such clause, after giving effect to any consents, approvals, authorizations, orders, registrations, qualifications, waivers and amendments as will have been obtained or made as of the date of this Agreement; no consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the execution, delivery and performance by the Issuers and the Guarantors of their respective obligations under the Transaction Documents, except (v) the registration under the Act of the Securities, which has been effected, (w) such consents, approvals, authorizations, registrations or qualifications as may be required under foreign, state, securities or Blue Sky laws or the rules and regulations of the Financial Industry Regulatory Authority, in connection with the sale of the Securities, (x) such consents, approvals, authorizations, orders, registrations, qualifications, waivers, amendments or terminations as will have been obtained or made as of the Applicable Time, and (y) where the failure to obtain or make any such consent, approval, authorization, order, registration or qualification would not reasonably be expected to have a Material Adverse Effect;

 

(p)           None of the Parent, the Issuers or the Guarantors is (i) in violation of its certificate of incorporation or by-laws (or other organizational document, as applicable) or (ii) in default in the performance or observance of any obligation, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which it is a party or by which it or any of its properties may be bound, except in the case of clause (ii) for any violation or default that would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect;

 

(q)           Other than as set forth in the Pricing Prospectus, there are no legal or governmental proceedings pending to which the Parent, the Issuers or the Guarantors or, to the knowledge of the Parent, either of the Issuers or any of the Guarantors is a party or of which any property of the Parent, either of the Issuers or any of the Guarantors or, to the knowledge of the Parent, either of the Issuers or any of the Guarantors is the subject which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and, to the knowledge of the Parent, either of the Issuers or any of the Guarantors, no such proceedings are threatened by governmental authorities or by others;

 

(r)            The Transaction Documents will conform in all material respects to the respective statements relating thereto contained in the Pricing Prospectus;

 

(s)           Neither the Parent, the Issuers nor any Guarantor nor any of their respective subsidiaries nor any agent thereof acting on their behalf has taken, and none of them will take, any action that might cause this Agreement or the issuance or sale of the Securities to violate Regulation T, Regulation U or Regulation X of the Board of Governors of the Federal Reserve System;

 

(t)            None of the Parent, the Issuers or any of the Guarantors is, or after giving effect to the offering and sale of the Securities will be, an “investment company,” as such term is

 

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defined in the United States Investment Company Act of 1940, as amended (the “Investment Company Act”);

 

(u)           The consolidated historical financial statements of the Company incorporated by reference into the Pricing Prospectus present fairly in all material respects the financial position of the Company and its consolidated subsidiaries, as of the dates indicated, and the results of its and their operations and the changes in its and their shareholders’ equity and cash flows for the periods specified (subject to the omission of footnotes and normal year end audit and other adjustments, as to any unaudited financial statements of the Company); such consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) applied on a consistent basis, subject to the limitations set out in the notes to the respective financial statements of the Company incorporated by reference in the Pricing Prospectus and the Prospectus; the consolidated historical financial statements of the Parent incorporated by reference into the Pricing Prospectus present fairly in all material respects the financial position of the Parent and its consolidated subsidiaries, as of the dates indicated, and the results of its and their operations and the changes in its and their shareholders’ equity and cash flows for the periods specified (subject to the omission of footnotes and normal year end audit and other adjustments, as to any unaudited financial statements of the Parent); such consolidated financial statements have been prepared in accordance with GAAP applied on a consistent basis, subject to the limitations set out in the notes to the financial statements of the Parent; the interactive data in eXtensible Business Reporting Language incorporated by reference in the Pricing Prospectus and the Prospectus fairly presents the information called for in all material respects and has been prepared in all material respects in accordance with the Commission’s rules and guidelines applicable thereto;

 

(v)           Each of the Parent, the Issuers and the Guarantors is, and immediately after the Closing Date will be, Solvent; as used herein, the term “Solvent” means, with respect to any person on a particular date, that on such date (i) the fair market value of the assets of such person is greater than the total amount of liabilities (including contingent liabilities) of such person, (ii) the present fair salable value of the assets of such person is greater than the amount that will be required to pay the probable liabilities of such person on its debts as they become absolute and matured, (iii) such person is able to realize upon its assets and pay its debts and other liabilities, including contingent obligations, as they mature and (iv) such person does not have unreasonably small capital;

 

(w)          At the time of filing the Registration Statement and any post-effective amendment thereto, at the earliest time thereafter that the Parent, the Issuers or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) under the Act) of the Securities and at the date hereof, each of the Parent and the Issuers was not and is not an “ineligible issuer,” as defined under Rule 405 under the Act;

 

(x)            KPMG LLP, who has audited certain consolidated financial statements of the Company and its consolidated subsidiaries incorporated by reference into the Pricing Prospectus, has advised the Company that they are independent public accountants with respect to the Company as required by the Act and the rules and regulations of the Commission thereunder, the Exchange Act and the Public Accounting Oversight Board; KPMG LLP, who has audited certain consolidated financial statements of the Parent and its consolidated subsidiaries

 

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incorporated by reference into the Pricing Prospectus, has advised the Parent that they are independent public accountants with respect to the Parent as required by the Act and the rules and regulations of the Commission thereunder, the Exchange Act and the Public Accounting Oversight Board;

 

(y)           The Parent maintains a system of internal accounting controls sufficient to provide reasonable assurance that transactions are executed in accordance with management’s general or specific authorizations; transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; access to assets is permitted only in accordance with management’s general or specific authorization; and the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences;

 

(z)            Since the date of the latest audited financial statements incorporated by reference into the Pricing Prospectus, to the knowledge of the Issuers and the Guarantors, there has been no change in the Parent’s internal control over financial reporting that has materially adversely affected, or would reasonably be expected to materially adversely affect, the Parent’s internal control over financial reporting;

 

(aa)         The Parent maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act) that comply with the requirements of the Exchange Act; such disclosure controls and procedures have been designed to ensure that material information relating to the Parent and its subsidiaries is made known to the Parent’s principal executive officer and principal financial officer by others within those entities; and such disclosure controls and procedures are effective;

 

(bb)         The Parent and its subsidiaries collectively possess all licenses, permits, certificates, consents, orders, approvals and other authorizations from, and have made all declarations and filings with, all federal, state and other governmental authorities, presently required or necessary to own or lease, as the case may be, and to operate their properties and to carry on the business as set forth in the Pricing Prospectus (“Permits”), except where the failure to possess, make or obtain such Permits (by possession, declaration or filing) would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect;

 

(cc)         There is no strike or labor dispute, slowdown or work stoppage with the employees of the Parent or any of its subsidiaries that is pending or, to the knowledge of the Issuers and the Guarantors, threatened, except as would not reasonably be expected to have a Material Adverse Effect;

 

(dd)         Except as disclosed in the Pricing Prospectus, there is no claim pending or, to the knowledge of the Issuers and the Guarantors, threatened under any Environmental Law (as defined below) against the Parent, the Issuers or their subsidiaries that would reasonably be expected to have a Material Adverse Effect.  The term “Environmental Law” means any federal, local or foreign law, regulation, ordinance, order, judgment decree, permit or rule (including rule of common law) now in effect governing pollution, or actual or alleged exposure to, hazardous or toxic materials, substances or wastes, including but not limited to, asbestos or asbestos-containing materials;

 

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(ee)         The Parent, the Company and their respective subsidiaries collectively carry insurance (including self-insurance, if any) in such amounts and covering such risks as in the Parent’s and the Company’s reasonable determination is adequate for the conduct of the business and the value of its properties, except where the failure to carry such insurance would not reasonably be expected to have a Material Adverse Effect;

 

(ff)           The Parent, the Issuers and their respective subsidiaries collectively own, or have the legal right to use, all United States patents, patent applications, trademarks, trademark applications, trade names, copyrights, technology, know-how and processes necessary for them to conduct the business as currently conducted (the “Intellectual Property”), except for those the failure to own or have such legal right to use would not be reasonably expected to have a Material Adverse Effect.  Except as disclosed in the Pricing Prospectus, no claim has been asserted and is pending by any person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor do the Issuers know of any such claim, and, to the knowledge of the Issuers and the Guarantors, the use of such Intellectual Property by the Parent, the Company and their respective subsidiaries does not infringe on the rights of any person, except for such claims and infringements which in the aggregate, would not be reasonably expected to have a Material Adverse Effect;

 

(gg)         Each of the Parent, the Issuers and the Guarantors has filed or caused to be filed all United States federal income tax returns and all other material tax returns which are required to be filed and has paid (a) all taxes shown to be due and payable on such returns and (b) all taxes shown to be due and payable on any assessments of which it has received notice made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any governmental authority (other than any (i) taxes, fees or other charges with respect to which the failure to pay, in the aggregate, would not reasonably be expected to have a Material Adverse Effect or (ii) taxes, fees or other charges the amount or validity of which are currently being contested in good faith by appropriate proceedings diligently conducted and with respect to which reserves in conformity with GAAP have been provided on the books of the Parent, the Issuers or the Guarantors, as applicable).  No tax lien has been filed, and no claim is being asserted, with respect to any such tax, fee or other charge, against any of the Parent, the Issuers or the Guarantors, or to the knowledge of the Issuers and the Guarantors, any of their subsidiaries, except for liens or charges that would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect;

 

(hh)         Neither the Parent, the Issuers nor, to the knowledge of the Issuers and the Guarantors, any of the Issuers’ subsidiaries or any director, officer or employee acting on behalf of the Parent, the Issuers or any of their respective subsidiaries has (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity, (ii) made any direct or indirect unlawful payment to any government official or employee from corporate funds, (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or the Bribery Act 2010 of the United Kingdom or (iv) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment;

 

(ii)           The operations of the Parent, the Issuers and, to the knowledge of the Issuers and the Guarantors, the operations of the Issuers’ subsidiaries are and have been

 

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conducted at all times in all material respects in compliance with applicable financial record-keeping and reporting requirements of the anti-money laundering laws and regulations of the United States and any related or similar statutes (including, without limitation, the U.S. PATRIOT Act of 2001), rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Parent, the Company or any of their subsidiaries with respect to the Money Laundering Laws is, to the knowledge of the Issuers and the Guarantors, pending or threatened;

 

(jj)           Neither the Parent, the Issuers nor, to the knowledge of the Issuers and the Guarantors, the Issuers’ subsidiaries, or any of their respective directors, officers or employees, is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”); and

 

(kk)         There are no states in the United States in which the Company generated in excess of 7.5% of its consolidated net sales for the year ended September 30, 2011 or the six months ended March 31, 2012 other than California and Texas.  In addition, the Guarantors organized in Wisconsin, New Hampshire, Florida and Arkansas collectively contributed no more than 5% of the Company’s consolidated sales and EBITDA during the six months ended March 31, 2012.

 

2.

 

(a)           Each of the Issuers and the Guarantors agrees to issue and sell to the Underwriters, severally and not jointly, all of the Securities, and subject to the conditions set forth herein, the Underwriters agree, severally and not jointly, to purchase from the Issuers and the Guarantors the aggregate principal amount of Securities set forth opposite their names on Schedule I hereto, at a purchase price of 98.5% of the principal amount thereof payable on the Closing Date, in each case, on the basis of the representations, warranties and agreements herein contained, and upon the terms herein set forth.

 

(b)           Delivery of certificates for the Securities in definitive form to be purchased by the Underwriters and payment therefor shall be made at the offices of Fried, Frank, Harris, Shriver & Jacobson LLP, One New York Plaza, New York, New York 10004 (or such other place as may be agreed to by the Company and the Representative) at 10:00 a.m., New York City time, on May 18, 2012, or such other time and date as the Representative shall designate by notice to the Company (the time and date of such closing is called the “Closing Date”).  The Issuers hereby acknowledge that circumstances under which the Representative may provide notice to postpone the Closing Date as originally scheduled include, but are in no way limited to, any determination by the Issuers or the Underwriters to recirculate to investors copies of an amended or supplemented Prospectus or a delay as contemplated by the provisions of Section 9 hereof.

 

(c)           The Issuers shall deliver, or cause to be delivered, to the Representative for the accounts of the several Underwriters certificates for the Notes at the Closing Date against the irrevocable release of a wire transfer of immediately available funds for the amount of the purchase price therefor.  The certificates for the Notes shall be in such denominations and

 

12

 

registered in the name of Cede & Co., as nominee of the Depository, pursuant to the DTC Agreement, and shall be made available for inspection on the business day preceding the Closing Date at a location in New York City, as the Representative may designate.  Time shall be of the essence, and delivery at the time and place specified in this Agreement is a further condition to the obligations of the Underwriters.

 

3.             Each of the Issuers and the Guarantors, jointly and severally, further covenants and agrees with each Underwriter as follows:

 

(a)           The Issuers will prepare the Prospectus in a form approved by the Representative acting reasonably and to file such Prospectus pursuant to Rule 424(b) not later than the Commission’s close of business on the second business day following the execution and delivery of this Agreement, or, if applicable, such earlier time as may be required by Rule 430B; make no further amendment or any supplement to the Registration Statement or the Prospectus prior to the Closing Date which shall be disapproved by the Representative acting reasonably promptly after reasonable notice thereof; advise the Representative, promptly after it receives notice thereof, of the time when any amendment to the Registration Statement has been filed or any amendment or supplement to the Prospectus has been filed and furnish the Representative with copies thereof; file promptly all material required to be filed by the Issuers with the Commission pursuant to Rule 433(d) under the Act; file promptly all reports and any definitive proxy, or information statements required to be filed by the Parent and the Issuers with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of the Prospectus and for so long as the delivery of a prospectus is required in connection with the offering or sale of the Securities; advise the Representative, promptly after it receives notice thereof, of the issuance by the Commission of any order suspending the effectiveness of the Registration Statement or preventing or suspending the use of any Preliminary Prospectus or the Prospectus or the initiation or threatening of any proceeding for that purpose or pursuant to Section 8A of the Act, or of the receipt of any notice of objection of the Commission to the use of the Registration Statement or any post-effective supplement thereto pursuant to Rule 401(g)(2) under the Act, or of any request by the Commission for the amending or supplementing of the Registration Statement or the Prospectus or for additional information; in the event of the issuance of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or other prospectus or suspending any such qualification, promptly use its best efforts to obtain the withdrawal of such order; and pay the required Commission filing fees relating to the Securities within the time required by Rule 456(b)(1)(i) under the Act without regard to the proviso therein and otherwise in accordance with Rules 456(b) and 457(r) under the Act (including, if applicable, by updating the “Calculation of Registration Fee” table in accordance with Rule 456(b)(1)(ii) under the Act either in a post-effective amendment to the Registration Statement or on the cover page of a prospectus filed pursuant to Rule 424(b));

 

(b)           The Issuers will prepare a final term sheet in a form approved by the Representative and file such term sheet pursuant to Rule 433(d) under the Act within the time required by such rule (such term sheet, the “Final Term Sheet”);

 

(c)           Each of the Issuers and the Guarantors shall promptly from time to time take such action as the Representative may reasonably request to qualify the Securities for offering and sale under the securities laws of such jurisdictions as the Representative may

 

13

 

reasonably request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Securities; provided, however, that in connection therewith the Issuers and the Guarantors shall not be required for any such purpose to (1) qualify as a foreign corporation, limited partnership or limited liability company, as applicable, in any jurisdiction wherein it would not otherwise be required to qualify but for the requirements of this Section 3(c), (2) consent, or take any action that would subject them, to general service of process in any such jurisdiction or (3) make any changes to its certificate of incorporation, by-laws or other organizational document, or any agreement between it and any of its equityholders;

 

(d)           If at any time prior to the Closing Date (i) any event shall occur or condition shall exist as a result of which any of the Pricing Disclosure Package as then amended or supplemented would include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading or (ii) it is necessary to amend or supplement any of the Pricing Disclosure Package to comply with law, the Issuers and the Guarantors will immediately notify the Underwriters thereof and forthwith prepare and furnish to the Underwriters such amendments or supplements to the Pricing Disclosure Package as may be necessary so that the statements in any of the Pricing Disclosure Package as so amended or supplemented will not, in the light of the circumstances under which they were made, be misleading or so that any of the Pricing Disclosure Package will comply with all applicable law.

 

(e)           As soon as practicable, but in no event later than 12:00 p.m., New York City time, on the second New York Business Day next succeeding the Applicable Time and from time to time, the Issuers shall furnish the Underwriters with written and electronic copies of the Prospectus in New York City in such quantities as the Representative may reasonably request, and, if the delivery of a prospectus (or in lieu thereof, the notice referred to in Rule 173(a) under the Act) is required at any time prior to the expiration of nine months after the time of issue of the Prospectus in connection with the offering or sale of the Securities and if at such time any event shall have occurred as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Prospectus (or in lieu thereof, the notice referred to in Rule 173(a) under the Act) is delivered, not misleading, or, if for any other reason it shall be necessary during such same period to amend or supplement the Prospectus in order to comply with the Act, the Issuers shall notify the Representative and upon the Representative’s request prepare and furnish without charge to each Underwriter and to any dealer in securities as many written and electronic copies as any Underwriter may from time to time reasonably request of an amended Prospectus or a supplement to the Prospectus which will correct such statement or omission or effect such compliance; and in case any Underwriter is required to deliver a prospectus (or in lieu thereof, the notice referred to in Rule 173(a) under the Act) in connection with sales of any of the Securities at any time nine months or more after the time of issue of the Prospectus, upon the Representative’s request but at the expense of such Underwriter, the Issuers shall prepare and deliver to such Underwriter as many written and electronic copies as such Underwriter may request of an amended or supplemented Prospectus complying with Section 10(a)(3) of the Act;

 

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(f)            The Issuers shall make generally available to their securityholders as soon as practicable, but in any event not later than eighteen months after the effective date of the Registration Statement (as defined in Rule 158(c) under the Act), an earnings statement of the Parent and its subsidiaries (which need not be audited) complying with Section 11(a) of the Act and the rules and regulations of the Commission thereunder (including, at the option of the Parent, Rule 158 under the Act);

 

(g)           The Issuers shall apply the net proceeds from the sale of the Securities sold by them in the manner described under the caption “Use of Proceeds” in the Pricing Disclosure Package;

 

(h)           The Issuers will use their best efforts to permit the Securities to be eligible for clearance and settlement through the facilities of the Depository;

 

(i)            Prior to the completion of the placement of the Securities by the Underwriters, the Parent shall file, on a timely basis, with the Commission all reports and documents required to be filed under Section 13 or 15 of the Exchange Act;

 

(j)            During the period of 30 days following the date hereof, the Parent, the Issuers and their subsidiaries will not, without the prior written consent of Merrill Lynch (which consent may be withheld at the sole discretion of Merrill Lynch), directly or indirectly, sell, offer, contract or grant any option to sell, pledge, transfer or establish an open “put equivalent position” within the meaning of Rule 16a-1 under the Exchange Act, or otherwise dispose of or transfer, or announce the offering of, or file any registration statement under the Act in respect of, any debt securities of the Parent, either of the Issuers or any of their subsidiaries or securities exchangeable for or convertible into debt securities of the Parent, either of the Issuers or any of their subsidiaries (other than as contemplated by this Agreement); and

 

(k)           During the period of two years hereafter, if the Company is not subject to Section 13 or 15 of the Exchange Act and any Securities remain outstanding, the Company will furnish to the Representative and, upon request, to each of the other Underwriters: (i) as soon as practicable after the end of each fiscal year, copies of the Annual Report of the Company containing the balance sheet of the Company as of the close of such fiscal year and statements of income, stockholders’ equity and cash flows for the year then ended and the opinion thereon of the Company’s independent public or certified public accountants; (ii) as soon as practicable after the filing thereof, copies of each proxy statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other report filed by the Company with the Commission, the Financial Industry Regulatory Authority (“FINRA”) or any securities exchange; and (iii) as soon as available, copies of any report or communication of the Company mailed generally to holders of its capital stock or debt securities (including the holders of the Securities), if, in each case, such documents are not filed with the Commission within the time periods specified by the Commission’s rules and regulations under Section 13 or 15 of the Exchange Act.  Notwithstanding the foregoing, the Company will be deemed to have satisfied the requirements of this Section 3(k) if any parent company of the Company files and provides reports, documents and information of the types otherwise so required, in each case within the applicable time periods, and the Company is not required to file such reports, documents and

 

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information separately under the applicable rules and regulations of the Commission (after giving effect to any exemptive relief) because of the filings of such parent.

 

Merrill Lynch on behalf of the several Underwriters, may, in its sole discretion, waive in writing the performance by any of the Issuers or Guarantors of any one or more of the foregoing covenants or extend the time for their performance.

 

4.

 

(a)           Each of the Issuers and the Guarantors represents and agrees that, without the prior consent of the Representative, it has not made and will not make any offer relating to the Securities that would constitute a “free writing prospectus” as defined in Rule 405 under the Act; each Underwriter represents and agrees that, without the prior consent of the Issuers and the Representative, it has not made and will not make any offer relating to the Securities that would constitute a free writing prospectus; any such free writing prospectus the use of which has been consented to by the Issuers and the Representative is listed on Schedule III(a) hereto;

 

(b)           The Issuers have complied and will comply with the requirements of Rule 433 under the Act applicable to any Issuer Free Writing Prospectus, including timely filing with the Commission or retention where required and legending;

 

(c)           The Issuers agree that if at any time following issuance of an Issuer Free Writing Prospectus any event occurred or occurs as a result of which such Issuer Free Writing Prospectus would conflict with the information in the Registration Statement, the Pricing Prospectus or the Prospectus or would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances then prevailing, not misleading, the Issuers will give notice thereof as soon as reasonably practicable to the Representative and following such notice, if requested by the Representative, will prepare and furnish without charge to each Underwriter an Issuer Free Writing Prospectus or other document which will correct such conflict, statement or omission; provided, however, that this representation and warranty shall not apply to any statements or omissions in an Issuer Free Writing Prospectus made in reliance upon and in conformity with information furnished in writing to the Issuers by an Underwriter through the Representative expressly for use therein.

 

5.             Each of the Issuers and the Guarantors covenants and agrees with the several Underwriters that the Issuers and the Guarantors will, jointly and severally, pay or cause to be paid the following: (i) the fees, disbursements and expenses of the Issuers’ and Guarantors’ counsel and the Issuers’ and Guarantors’ accountants and all other expenses in connection with the preparation, printing, reproduction and filing of the Registration Statement, any Preliminary Prospectus, any Issuer Free Writing Prospectus and the Prospectus and amendments and supplements thereto and the mailing and delivering of copies thereof to the Underwriters and dealers; (ii) the cost of printing this Agreement, the Blue Sky Memorandum, the other Transaction Documents, closing documents (including any compilations thereof) and any other documents in connection with the offering, purchase, sale and delivery of the Securities; (iii) up to $5,000 in connection with the qualification of the Securities for offering and sale under state securities laws as provided in Section 3(c) hereof, including the fees and disbursements of

 

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counsel for the Underwriters in connection with such qualification and in connection with the Blue Sky Memorandum; (iv) all expenses incident to the issuance and delivery of the Securities (including all printing and engraving costs); (v) all necessary issue, transfer and other stamp taxes in connection with the issuance and sale of the Securities to the Underwriters; (vi) the fees and expenses of the Trustee, including the fees and disbursements of counsel for the Trustee in connection with the Indenture and the Securities; (vii) any fees payable in connection with the rating of the Securities with the ratings agencies; (viii) the filing fees incident to, and the fees and disbursements of counsel for the Underwriters in connection with, any required review by the Financial Industry Regulatory Authority of the terms of the sale of the Securities; (ix) all fees and expenses (including reasonable fees and expenses of counsel) of the Issuers and the Guarantors in connection with approval of the Securities by the Depository for “book-entry” transfer; (x) the costs and expenses of the Issuers and the Guarantors relating to investor presentations on any “road show” undertaken in connection with the marketing of the Securities, including without limitation expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged in connection with the road show presentations, travel and lodging expenses of the representatives and officers of the Issuers and the Guarantors and any such consultants, and the cost of aircraft and other transportation chartered in connection with the road show; and (xi) all other costs and expenses incident to the performance of the obligations of the Issuers and the Guarantors hereunder which are not otherwise specifically provided for in this Section.

 

Except as provided in this Section and Sections 7 and 8 hereof, the Underwriters will pay all of their own costs and expenses, including the fees of their counsel, and any advertising expenses connected with any offers they may make.

 

6.             The obligations of the Underwriters to purchase and pay for the Securities as provided herein on the Closing Date shall be subject, in their discretion, to the condition that all representations and warranties and other statements of the Issuers and the Guarantors set forth in Section 1 hereof are as of the date hereof, and as of the Closing Date, true and correct as though then made, the condition that the Issuers and the Guarantors shall have performed all of their respective obligations hereunder theretofore to be performed, and the following additional conditions:

 

(a)           The Prospectus shall have been filed with the Commission pursuant to Rule 424(b) within the applicable time period prescribed for such filing by the rules and regulations under the Act and in accordance with Section 3(a) hereof; all material required to be filed by the Parent or the Issuers pursuant to Rule 433(d) under the Act shall have been filed with the Commission within the applicable time period prescribed for such filing by Rule 433 under the Act; no order suspending the effectiveness of the Registration Statement or any part thereof shall be in effect, and no proceeding for such purpose, pursuant to Rule 401(g)(2) or pursuant to Section 8A under the Act shall be pending before or threatened by the Commission; no stop order suspending or preventing the use of the Prospectus or any Issuer Free Writing Prospectus shall have been initiated or threatened by the Commission; all requests for additional information on the part of the Commission shall have been complied with to the Representative’s reasonable satisfaction; the Commission shall not have notified the Issuers of any objection to the use of the form of the Registration Statement or any post-effective amendment thereto; and the Issuers shall have paid the required Commission filing fees relating to the Securities within the time period

 

17

 

required by Rule 456(1)(i) under the Act without regard to the proviso therein and otherwise in accordance with Rules 456(b) and 457(r) under the Act and, if applicable, shall have updated the “Calculation of Registration Fee” table in accordance with Rule 456(b)(1)(ii) under the Act either in a post-effective amendment to the Registration Statement or on the cover page of a prospectus filed pursuant to Rule 424(b);

 

(b)           Fried, Frank, Harris, Shriver & Jacobson LLP, counsel for the Underwriters, shall have furnished to the Representative such written opinion or opinions, dated as of the Closing Date, in form and substance satisfactory to the Representative, and such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters;

 

(c)           (i) Alston & Bird LLP, counsel for the Issuers, shall have furnished to the Representative its written opinion and negative assurance letter (forms of such opinion and negative assurance letter are attached as Annexes I(a) and I(b) hereto), and (ii) Matthew Haltom, Esq., Deputy General Counsel of the Issuers, shall have furnished to the Representative his written opinion (a form of such opinion is attached as Annex I(c) hereto), each dated as of the Closing Date;

 

(d)           Alston & Bird LLP, counsel for the Guarantors organized in Delaware, California and Texas, shall have furnished to the Representative its written opinion, dated as of the Closing Date, the form of which is attached as Annex I(a) hereto;

 

(e)           On the date hereof and on the Closing Date, KPMG LLP shall have furnished to the Representative a “comfort” letter or “comfort” letters, dated the respective dates of delivery thereof, in form and substance reasonably satisfactory to the Representative and in accordance with professional auditing standards;

 

(f)            (i)  The Parent, the Issuers and their consolidated subsidiaries, taken together as a whole, have not sustained since the date of the latest audited financial statements included or incorporated by reference in the Pricing Prospectus any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Pricing Prospectus, and (ii) since the respective dates as of which information is given in the Pricing Prospectus, there shall not have been any change in the capital stock or long-term debt of the Parent and its subsidiaries, taken as a whole, or any change, or any development involving a prospective change, in or affecting the general affairs, management, financial position, stockholders’ equity or results of operations of the Parent and its subsidiaries, taken as a whole, otherwise than as set forth or contemplated in the Pricing Prospectus, the effect of which, in any such case described in clause (i) or (ii), is in the judgment of the Representative so material and adverse as to make it impracticable or inadvisable to proceed with the public offering, sale or the delivery of the Securities on the terms and in the manner contemplated in the Prospectus;

 

(g)           On or after the Applicable Time, (i) no downgrading shall have occurred in the rating accorded any debt of the Parent or any of its subsidiaries by any “nationally recognized statistical rating organization”, as that term is defined by the Commission for

 

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purposes of Section 3(a)(62) under the Exchange Act, and (ii) no such organization shall publicly announce that it has under surveillance or review, with possible negative implications, its rating of any debt of the Parent or any of its subsidiaries;

 

(h)           From the date hereof and on or prior to the Closing Date, there shall not have occurred any of the following: (i) a suspension or material limitation in trading in securities generally on the New York Stock Exchange (the “Exchange”); (ii) a suspension or material limitation in trading in the Parent’s securities on the Exchange; (iii) a general moratorium on commercial banking activities declared by either Federal or New York State authorities or a material disruption in commercial banking or securities settlement or clearance services in the United States; (iv) the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war; or (v) the occurrence of any other calamity or crisis or any change in financial, political or economic conditions in the United States or elsewhere, if the effect of any such event specified in clause (iv) or (v) in the judgment of the Representative makes it impracticable or inadvisable to proceed with the public offering, sale or the delivery of the Securities on the terms and in the manner contemplated in the Prospectus;

 

(i)            The Company shall have complied with the provisions of Section 3(e) hereof with respect to the furnishing of prospectuses on the second New York Business Day next succeeding the date of this Agreement;

 

(j)            The Issuers and the Guarantors shall have furnished or caused to be furnished to the Representative on the Closing Date certificates of officers of the Issuers and the Guarantors, satisfactory to the Representative as to the accuracy of the representations and warranties of the Issuers and the Guarantors, herein at and as of the Closing Date, as to the performance by the Issuers and the Guarantors of all of their obligations hereunder to be performed at or prior to such Closing Date and as to such other matters as the Representative may reasonably request;

 

(k)           The Issuers and the Guarantors shall have executed and delivered the Indenture, in form and substance reasonably satisfactory to the Representative, and the Underwriters shall have received executed copies thereof; and

 

(l)            On or before the Closing Date, the Underwriters and counsel for the Underwriters shall have received such information, documents and opinions as they may reasonably require for the purposes of enabling them to pass upon the issuance and sale of the Securities as contemplated herein, or in order to evidence the accuracy of any of the representations and warranties, or the satisfaction of any of the conditions or agreements, herein contained.

 

If any condition specified in this Section 6 is not satisfied when and as required to be satisfied, this Agreement may be terminated by the Representative by notice to the Issuers at any time on or prior to the Closing Date, which termination shall be without liability on the part of any party to any other party, except that Sections 5, 7 and 8 hereof shall at all times be effective and shall survive such termination.

 

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7.             If this Agreement shall be terminated pursuant to Section 9 hereof, none of the Issuers shall then be under any liability to any Underwriter except as provided in Sections 5 and 8 hereof, but, if for any other reason any Securities are not delivered by or on behalf of the Issuers and the Guarantors as provided herein, the Issuers and the Guarantors will, jointly and severally, reimburse the Underwriters through the Representative for all out-of-pocket expenses approved in writing by the Representative, including fees and disbursements of counsel, reasonably incurred by the Underwriters in making preparations for the purchase, sale and delivery of the Securities not so delivered, but none of the Issuers and the Guarantors shall then be under any further liability to any Underwriter except as provided in Sections 5 and 8 hereof.

 

8.

 

(a)           Each of the Issuers and Guarantors will, jointly and severally, indemnify and hold harmless each Underwriter and each person, if any, who controls each Underwriter within the meaning of Section 15 of the Act or Section 20 of the Exchange Act and their respective officers, directors, employees, affiliates and selling agents against any losses, claims, damages or liabilities, joint or several, to which such Underwriter, affiliate, director, officer, employee, selling agent or controlling person may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (including any information deemed to be a part thereof pursuant to Rule 430B), any Preliminary Prospectus, the Pricing Prospectus, the Prospectus, or any amendment or supplement thereto, any Issuer Free Writing Prospectus or any “issuer information” filed or required to be filed pursuant to Rule 433(d) under the Act, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of the Preliminary Prospectus, the Pricing Prospectus, or the Prospectus, or any amendment or supplement thereto, or any Issuer Free Writing Prospectus, in the light of the circumstances under which they were made), and will reimburse each Underwriter and each such affiliate, director, officer, employee, selling agent or controlling person for any legal or other expenses reasonably incurred by such Underwriter or such affiliate, director, officer, employee, selling agent or controlling person in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that the Issuers and Guarantors shall not be liable to any Underwriter in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission related to such Underwriter and made in the Registration Statement (including any information deemed to be a part thereof pursuant to Rule 430B), any Preliminary Prospectus, the Pricing Prospectus or the Prospectus or any amendment or supplement thereto, or any Issuer Free Writing Prospectus, in reliance upon and in conformity with written information furnished to the Issuers and the Guarantors by any Underwriter through the Representative expressly for use therein.  For purposes of this Agreement, the only information furnished in writing to the Issuers and the Guarantors by any Underwriter through the Representative shall be the information in the first paragraph under the heading “Underwriting—Commissions and Discounts” and the information in the first, second and third paragraphs under the heading “Underwriting—Short Positions,” in each case contained in the Prospectus.

 

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(b)                                 Each Underwriter will, severally and not jointly, indemnify and hold harmless each of the Issuers, each Guarantor, and each person, if any, who controls any of the Issuers or any Guarantor within the meaning of Section 15 of the Act or Section 20 of the Exchange Act and their respective officers, directors, employees, affiliates and selling agents against any losses, claims, damages or liabilities to which any Issuer, any Guarantor or any such officer, director, employee, affiliate, selling agent or controlling person may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (including any information deemed to be a part thereof pursuant to Rule 430B), any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, or any amendment or supplement thereto, or any Issuer Free Writing Prospectus, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of the Preliminary Prospectus, the Pricing Prospectus, or the Prospectus, or any amendment or supplement thereto, or any Issuer Free Writing Prospectus, in the light of the circumstances under which they were made), in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission related to such Underwriter and was made in the Registration Statement (including any information deemed to be a part thereof pursuant to Rule 430B), any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, or any such amendment or supplement thereto, or any Issuer Free Writing Prospectus, in reliance upon and in conformity with written information furnished to the Issuers by such Underwriter through the Representative expressly for use therein; and will reimburse any Issuer and any Guarantor, and any such officer, director, employee, affiliate, selling agent or controlling person for any legal or other expenses reasonably incurred by any Issuer, any Guarantor, or such officer, director, employee, affiliate, selling agent or controlling person in connection with investigating or defending any such action or claim as such expenses are incurred.

 

(c)                                  Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party hereunder except to the extent the indemnifying party has been materially prejudiced by such failure, and the failure to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party other than under Sections 8(a) and 8(b) hereof.  In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), provided, however, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that a conflict may arise between the positions of the indemnifying party and the indemnified party in conducting the defense of any such action or that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to

 

21

 

select separate counsel to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation.  It is understood that the indemnifying party or parties shall not, in connection with any one action or proceeding or separate but substantially similar actions or proceedings arising out of the same general allegations be liable for the fees and expenses of more than one separate firm of attorneys at any time for all indemnified parties (except to the extent that local counsel (in addition to any regular counsel) is required to effectively defend against any such action or proceeding).  No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to, or an admission of, fault, culpability or a failure to act, by or on behalf of any indemnified party.

 

(d)                                 If the indemnification provided for in this Section 8 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Issuers and the Guarantors on the one hand and the Underwriters on the other from the offering of the Securities.  If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to give the notice required under subsection (c) above, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Issuers and the Guarantors on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations.  The relative benefits received by the Issuers and the Guarantors on the one hand and the Underwriters on the other shall be deemed to be in the same respective proportion as the total net proceeds from the offering (before deducting expenses) received by the Issuers and the total underwriting discounts and commissions received by the Underwriters bear to the aggregate offering price of the Securities, in each case as set forth in the table on the cover page of the Prospectus.  The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuers and the Guarantors on the one hand or the Underwriters on the other and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.  Each of the Issuers, the Guarantors and the Underwriters agree that it would not be just and equitable if contribution pursuant to this subsection (d) were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by

 

22

 

any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (d).  The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim.  Notwithstanding the provisions of this subsection (d), no Underwriter shall be required to contribute any amount in excess of the discounts and commissions received by such Underwriter in connection with the Securities underwritten by it and distributed to the public.  No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.  The Underwriters’ obligations in this subsection (d) to contribute are several in proportion to their respective underwriting obligations set forth in Schedule I hereto and not joint.

 

(e)                                  The obligations of the Issuers and the Guarantors under this Section 8 shall be in addition to any liability which the respective Issuers and Guarantors may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Underwriter within the meaning of the Act and Exchange Act and each broker-dealer affiliate of any Underwriter; and the obligations of the Underwriters under this Section 8 shall be in addition to any liability which the respective Underwriters may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Issuers and the Guarantors and to each person, if any, who controls any of the Issuers or Guarantors within the meaning of the Act or the Exchange Act.

 

9.

 

(a)                                  If any Underwriter shall default in its obligation to purchase the Securities which it has agreed to purchase hereunder on the Closing Date, the Representative may in its discretion arrange for the Representative or another party or other parties to purchase such Securities on the terms contained herein.  If within thirty-six hours after such default by any Underwriter, the Representative does not arrange for the purchase of such Securities, then the Issuers and the Guarantors shall be entitled to a further period of thirty-six hours within which to procure another party or other parties satisfactory to the Representative to purchase such Securities on such terms.  In the event that, within the respective prescribed periods, the Representative notifies the Issuers and the Guarantors that the Representative has so arranged for the purchase of such Securities, or the Issuers notify the Representative that it has so arranged for the purchase of such Securities, the Representative or the Issuers shall have the right to postpone such Closing Date for a period of not more than seven days, in order to effect whatever changes may thereby be made necessary in the Registration Statement or the Prospectus, or in any other documents or arrangements, and the Issuers agree to file promptly any amendments or supplements to the Registration Statement or the Prospectus which in the Representative’s opinion may thereby be made necessary. The term “Underwriter” as used in this Agreement shall include any person substituted under this Section 9(a) with like effect as if such person had originally been a party to this Agreement with respect to such Securities.

 

(b)                                 If, after giving effect to any arrangements for the purchase of the Securities of a defaulting Underwriter or Underwriters by the Representative and the Issuers and

 

23

 

the Guarantors as provided in subsection (a) above, the aggregate principal amount of Securities which remains unpurchased does not exceed one-tenth of the aggregate principal amount of all the Securities to be purchased on the Closing Date, then the Issuers shall have the right to require each non-defaulting Underwriter to purchase the principal amount of Securities which such defaulting Underwriter agreed to purchase hereunder on the Closing Date and, in addition, to require each non-defaulting Underwriter to purchase its pro rata share (based on the number of Securities which such Underwriter agreed to purchase hereunder) of the Securities of such defaulting Underwriter or Underwriters for which such arrangements have not been made; but nothing herein shall relieve a defaulting Underwriter from liability for its default.

 

(c)                                  If, after giving effect to any arrangements for the purchase of the Securities of a defaulting Underwriter or Underwriters by the Representative and the Issuers and Guarantors as provided in subsection (a) above, the aggregate number of such Securities which remains unpurchased exceeds one-tenth of the aggregate number of all the Securities to be purchased on the Closing Date, or if the Issuers shall not exercise the right described in subsection (b) above to require non-defaulting Underwriters to purchase Securities of a defaulting Underwriter or Underwriters, then this Agreement shall thereupon terminate, without liability on the part of any non-defaulting Underwriter or the Issuers and Guarantors, except for the expenses to be borne by the Issuers and the Guarantors and the Underwriters as provided in Section 5 hereof and the indemnity and contribution agreements in Section 8 hereof; but nothing herein shall relieve a defaulting Underwriter from liability for its default.

 

10.                                 This Agreement may not be amended or modified unless in writing by all of the parties hereto, and no condition herein (express or implied) may be waived unless waived in writing by each party whom the condition is meant to benefit.

 

11.                                 The invalidity or unenforceability of any section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other section, paragraph or provision hereof.  If any section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable.

 

12.                                 The respective indemnities, agreements, representations, warranties and other statements of the Issuers, the Guarantors, and the several Underwriters, as set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of any Underwriter or any controlling person of any Underwriter, or the Issuers, or any of the Guarantors, or any officer or director or controlling person of the Issuers or Guarantors, and shall survive delivery of and payment for the Securities.

 

13.                                 Any action by the Underwriters hereunder may be taken by Merrill Lynch on behalf of the Underwriters, and any such action taken by Merrill Lynch shall be binding upon the Underwriters.

 

14.                                       All statements, requests, notices and agreements hereunder shall be in writing, and if to the Underwriters shall be delivered or sent by mail, telex or facsimile transmission to Merrill Lynch, Pierce, Fenner & Smith Incorporated, 50 Rockefeller Plaza, New York, NY

 

24

 

10020, Facsimile: (917) 267-7085, Attention: High Yield Legal with a copy to: Fried, Frank, Harris, Shriver & Jacobson LLP, One New York Plaza, New York, NY 10004, Facsimile: (212) 859-4000, Attention: Valerie Ford Jacob, Esq. and Michael A. Levitt, Esq.; and if to the Issuers or the Guarantors shall be delivered or sent by mail, telex or facsimile transmission to the address of the Issuers set forth in the Registration Statement, Attention: Matthew Haltom, Vice President, Assistant Secretary and Deputy General Counsel, with a copy (which shall not constitute notice) to Alston & Bird LLP, One Atlanta Center, 1201 West Peachtree Street, Atlanta Georgia, 30309-3424, Attn: Scott Ortwein and Kyle Healy; provided, however, that any notice to an Underwriter pursuant to Section 8(d) hereof shall be delivered or sent by mail, telex or facsimile transmission to such Underwriter at its address set forth in its Underwriter’s Questionnaire, or telex constituting such Questionnaire, which address will be supplied to the Issuers or the Guarantors by the Representative upon request.  Any such statements, requests, notices or agreements shall take effect upon receipt thereof.  Any party hereto may change the address or facsimile number for receipt of communications by giving written notice to the others.

 

15.                                 This Agreement shall be binding upon, and inure solely to the benefit of, the Underwriters, the Issuers and the Guarantors and, to the extent provided in Sections 7 and 8 hereof, the officers and directors of the Issuers and the Guarantors and each person who controls any Issuer, any Guarantor or any of the Underwriters, and their respective heirs, executors, administrators, successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement.  No purchaser of any of the Securities from any Underwriter shall be deemed a successor or assign by reason merely of such purchase.

 

16.                                 Time shall be of the essence of this Agreement.  As used herein, the term “business day” shall mean any day when the Commission’s office in Washington, D.C. is open for business.

 

17.                                 Each of the Issuers and the Guarantors acknowledges and agrees that (i) the purchase and sale of the Securities pursuant to this Agreement is an arm’s-length commercial transaction between the Issuers and the Guarantors, on the one hand, and the several Underwriters, on the other, (ii) in connection therewith and with the process leading to such transaction, each Underwriter is acting solely as a principal and not the agent or fiduciary of the Issuers and the Guarantors, (iii) no Underwriter has assumed an advisory or fiduciary responsibility in favor of the Issuers or the Guarantors with respect to the offering contemplated hereby or the process leading thereto (irrespective of whether such Underwriter has advised or is currently advising the Issuers or the Guarantors on other matters) or any other obligation to the Issuers or the Guarantors except the obligations expressly set forth in this Agreement and (iv) the Issuers and the Guarantors have consulted their own legal and financial advisors to the extent they deemed appropriate.  Each of the Issuers and the Guarantors agrees that it will not claim that the Underwriters, or any of them, has rendered advisory services of any nature or respect, or owes a fiduciary or similar duty to the Issuers or the Guarantors, in connection with such transaction or the process leading thereto.

 

18.                                 The Issuers and the Guarantors acknowledge that each Underwriter is a full service securities firm and as such from time to time, subject to applicable securities laws, may effect transactions for its own account or the account of its customers and hold long or short

 

25

 

positions in debt or equity securities of the companies which may be the subject of the transactions contemplated by this Agreement.

 

19.                                 In accordance with the requirements of the USA PATRIOT Act (Title III of Public Law 107-56 (signed into law October 26, 2001)), each Underwriter is required to obtain, verify and record information that identifies its clients, including the Issuers, which information may include the name and address of their respective clients, as well as other information that will allow each Underwriter to properly identify its respective clients.

 

20.                                 This Agreement supersedes all prior agreements and understandings (whether written or oral) between the Issuers, the Guarantors and the Underwriters, or any of them, with respect to the subject matter hereof.

 

21.                                 This Agreement and any claim, controversy or dispute arising under or related to this Agreement shall be governed by and construed in accordance with the laws of the State of New York.

 

22.                                 Each of the Issuers, the Guarantors and the Underwriters hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

 

23.                                 This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument.  Delivery of an executed counterpart of a signature page to this Agreement by telecopier, facsimile or other electronic transmission (i.e., a “pdf” or “tif”) shall be effective as delivery of a manually executed counterpart thereof.  The section headings herein are for the convenience of the parties only and shall not affect the construction or interpretation of this Agreement.

 

[Signature Pages Follow]

 

26

 

If the foregoing is in accordance with your understanding, please sign and return to us four counterparts hereof, and upon the acceptance hereof by the Representative, on behalf of each of the Underwriters, this Agreement and such acceptance hereof shall constitute a binding agreement between each of the Underwriters, each of the Issuers and each of the Guarantors.  It is understood that acceptance of this Agreement by the Representative on behalf of each of the Underwriters is pursuant to the authority set forth in a form of Agreement among Underwriters, the form of which shall be submitted to the Issuers and the Guarantors for examination upon request, but without warranty on the Representative’s part as to the authority of the signers thereof.

 

 

	
 
    	
Very truly yours,
    
	
 
    	
 
    
	
 
    	
SALLY HOLDINGS LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Mark J. Flaherty
    
	
 
    	
 
    	
Name: Mark J. Flaherty
    
	
 
    	
 
    	
Title: Senior Vice President and CFO
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
SALLY CAPITAL INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Mark J. Flaherty
    
	
 
    	
 
    	
Name: Mark J. Flaherty
    
	
 
    	
 
    	
Title: Senior Vice President and CFO
    

 

27

 

	
 
    	
SALLY BEAUTY   HOLDINGS, INC.
    
	
 
    	
SALLY INVESTMENT HOLDINGS   LLC
    
	
 
    	
BEAUTY SYSTEMS GROUP LLC
    
	
 
    	
ARMSTRONG McCALL   HOLDINGS, INC.
    
	
 
    	
ARNOLDS, INC.
    
	
 
    	
ARMSTRONG McCALL HOLDINGS,   L.L.C.
    
	
 
    	
ARMSTRONG McCALL   MANAGEMENT, L.C.
    
	
 
    	
ARMSTRONG McCALL, L.P.
    
	
 
    	
INNOVATIONS — SUCCESSFUL   SALON SERVICES
    
	
 
    	
PROCARE   LABORATORIES, INC.
    
	
 
    	
NEKA SALON   SUPPLY, INC.
    
	
 
    	
SALON SUCCESS   INTERNATIONAL, LLC
    
	
 
    	
AERIAL COMPANY, INC.
    
	
 
    	
SALLY BEAUTY SUPPLY LLC
    
	
 
    	
DIORAMA SERVICES COMPANY,   LLC
    
	
 
    	
SALLY BEAUTY DISTRIBUTION   LLC
    
	
 
    	
SALLY BEAUTY INTERNATIONAL   FINANCE LLC
    
	
 
    	
BEAUTY HOLDING LLC
    
	
 
    	
BEYOND THE ZONE, INC.
    
	
 
    	
SILK ELEMENTS, INC.
    
	
 
    	
HIGH INTENSITY   PRODUCTS, INC.
    
	
 
    	
NAIL LIFE, INC.
    
	
 
    	
SEXY U PRODUCTS, INC.
    
	
 
    	
FOR PERMS ONLY, INC.
    
	
 
    	
ENERGY OF   BEAUTY, INC.
    
	
 
    	
MIRACLE LANE, INC.
    
	
 
    	
TANWISE, INC.
    
	
 
    	
SATIN STRANDS, INC.
    
	
 
    	
BRENTWOOD BEAUTY   LABORATORIES INTERNATIONAL, INC.
    
	
 
    	
ION PROFESSIONAL   PRODUCTS, INC.
    
	
 
    	
NEW IMAGE PROFESSIONAL   PRODUCTS, INC.
    
	
 
    	
ESTHETICIAN SERVICES INC.
    
	
 
    	
FEMME COUTURE   INTERNATIONAL, INC.
    
	
 
    	
GENERIC VALUE   PRODUCTS, INC.
    
	
 
    	
VENIQUE, INC.
    
	
 
    	
LAND OF DREAMS, INC.
    
	
 
    	
COLORESSE, INC.
    
	
 
    	
DESIGN LENGTHS, INC.
    
	
 
    	
POWER IQ, INC.
    
	
 
    	
SOREN   ENTERPRISES, INC.
    
	
 
    	
SALLY BEAUTY DISTRIBUTION   OF OHIO, INC.
    
	
 
    	
 
    
	
 
    	
As Guarantors
    
	
 
    	
By:
    	
/s/ Mark J. Flaherty
    
	
 
    	
 
    	
Name: Mark J. Flaherty
    
	
 
    	
 
    	
Title:   Senior Vice President and CFO
    

 

28

 

The foregoing Underwriting Agreement is hereby confirmed and accepted by the Underwriters as of the date first above written:

 

	
Merrill   Lynch, Pierce, Fenner & Smith
    	
 
    
	
Incorporated
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Adam S. Cady
    	
 
    
	
 
    	
 
    
	
Credit Suisse   Securities (USA) LLC
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/   Carrie Barber
    	
 
    
	
 
    	
 
    
	
Wells Fargo   Securities, LLC
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Authorized Signatory
    	
 
    
	
 
    	
 
    
	
Deutsche Bank   Securities Inc.
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   William Frauen
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Edwin E. Roland
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Goldman, Sachs &   Co.
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Goldman, Sachs & Co.
    	
 
    
	
 
    	
 
    
	
J.P. Morgan   Securities LLC
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Uri Birkenfeld
    	
 
    
	
 
    	
 
    
	
RBC Capital Markets,   LLC
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   James S. Wolfe
    	
 
    

 

29

 

SCHEDULE I

 

	
Name of Underwriter
    	
 
    	
Aggregate Principal 
   Amount of Securities to be
   Purchased
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Merrill Lynch, Pierce, Fenner & Smith
   Incorporated
    	
 
    	
$
    	
140,000,000
    	
 
    
	
Credit Suisse Securities (USA) LLC
    	
 
    	
140,000,000
    	
 
    
	
Wells Fargo Securities, LLC
    	
 
    	
140,000,000
    	
 
    
	
Deutsche Bank Securities Inc.
    	
 
    	
70,000,000
    	
 
    
	
Goldman, Sachs & Co.
    	
 
    	
70,000,000
    	
 
    
	
J.P. Morgan Securities LLC
    	
 
    	
70,000,000
    	
 
    
	
RBC Capital Markets, LLC
    	
 
    	
70,000,000
    	
 
    
	
Total:
    	
 
    	
$
    	
700,000,000
    	
 
    

 

I-1

 

SCHEDULE II

 

	
Name of Subsidiary
    	
 
    	
Jurisdiction
    
	
Beauty   Systems Group LLC 
    	
 
    	
Delaware
    
	
Armstrong   McCall Holdings, Inc. 
    	
 
    	
Texas
    
	
Arnolds, Inc.   
    	
 
    	
Arkansas
    
	
Armstrong   McCall Holdings, L.L.C. 
    	
 
    	
Delaware
    
	
Armstrong   McCall Management, L.C. 
    	
 
    	
Texas
    
	
Armstrong   McCall, L.P. 
    	
 
    	
Texas
    
	
Innovations-Successful   Salon Services 
    	
 
    	
California
    
	
Procare   Laboratories, Inc. 
    	
 
    	
Delaware
    
	
Neka Salon   Supply, Inc. 
    	
 
    	
New   Hampshire
    
	
Salon   Success International, LLC 
    	
 
    	
Florida
    
	
Aerial   Company, Inc. 
    	
 
    	
Wisconsin
    
	
Sally Beauty   Supply LLC 
    	
 
    	
Delaware
    
	
Diorama   Services Company, LLC 
    	
 
    	
Delaware
    
	
Sally   Capital Inc. 
    	
 
    	
Delaware
    
	
Sally Beauty   Distribution LLC 
    	
 
    	
Delaware
    
	
Sally Beauty   International Finance LLC 
    	
 
    	
Delaware
    
	
Beauty   Holding LLC 
    	
 
    	
Delaware
    
	
Beyond the   Zone, Inc. 
    	
 
    	
Delaware
    
	
Silk   Elements, Inc. 
    	
 
    	
Delaware
    
	
High   Intensity Products, Inc. 
    	
 
    	
Delaware
    
	
Nail Life,    Inc. 
    	
 
    	
Delaware
    
	
Sexy U   Products, Inc. 
    	
 
    	
Delaware
    
	
For Perms   Only, Inc. 
    	
 
    	
Delaware
    
	
Energy of   Beauty, Inc. 
    	
 
    	
Delaware
    
	
Miracle   Lane, Inc. 
    	
 
    	
Delaware
    
	
Tanwise,    Inc. 
    	
 
    	
Delaware
    
	
Satin   Strands, Inc. 
    	
 
    	
Delaware
    
	
Brentwood   Beauty Laboratories International, Inc. 
    	
 
    	
Texas
    
	
Ion Professional   Products, Inc. 
    	
 
    	
Delaware
    
	
New Image   Professional Products, Inc. 
    	
 
    	
Delaware
    
	
Esthetician   Services Inc. 
    	
 
    	
Delaware
    
	
Femme   Couture International, Inc. 
    	
 
    	
Delaware
    
	
Generic   Value Products, Inc. 
    	
 
    	
Delaware
    
	
Venique, Inc.   
    	
 
    	
Delaware
    
	
Land of   Dreams, Inc. 
    	
 
    	
Delaware
    
	
Coloresse,    Inc. 
    	
 
    	
Delaware
    
	
Design   Lengths, Inc. 
    	
 
    	
Delaware
    
	
Power IQ,    Inc. 
    	
 
    	
Delaware
    
	
Soren   Enterprises, Inc. 
    	
 
    	
Delaware
    
	
Sally Beauty   Distribution of Ohio, Inc. 
    	
 
    	
Delaware
    

 

II-1

 

	
Sally Beauty   International, Inc. 
    	
 
    	
Delaware
    
	
Sally Beauty   Supply BV 
    	
 
    	
Netherlands
    
	
Pro-Duo   Deutschland GmbH 
    	
 
    	
Germany
    
	
Sally Beauty   Canada Holdings LLC 
    	
 
    	
Delaware
    
	
SBCBSG   Company de Mexico, s. de R.I. de C.V. 
    	
 
    	
Mexico
    
	
SBIFCO   Company de Mexico, S.A. de C.V. 
    	
 
    	
Mexico
    
	
Sally Beauty   International Holdings, C.V. 
    	
 
    	
Netherlands
    
	
Sally   International Holdings LLC 
    	
 
    	
Delaware
    
	
Sally Beauty   Holdings LP 
    	
 
    	
Bermuda
    
	
Sally EURO   Holdings LLC 
    	
 
    	
Delaware
    
	
Sally CAD   Holdings LLC 
    	
 
    	
Delaware
    
	
Sally GBP   Holdings LLC 
    	
 
    	
Delaware
    
	
Gen X Beauty   LLC
    	
 
    	
Delaware
    
	
Sally Beauty   Worldwide Holdings BV 
    	
 
    	
Netherlands
    
	
SBH   Finance B.V. 
    	
 
    	
Netherlands
    
	
Sally Beauty   de Puerto Rico, Inc.
    	
 
    	
Puerto Rico
    
	
Sally Beauty   Colombia S.A.S.
    	
 
    	
Colombia
    
	
BSG Canada   Holdings Company
    	
 
    	
Nova Scotia
    
	
Beauty   Systems Group (Canada), Inc. 
    	
 
    	
New   Brunswick
    
	
Salon   Success BV 
    	
 
    	
Netherlands
    
	
Sally Salon   Services (Ireland) Ltd 
    	
 
    	
Ireland
    
	
Pro-Duo   Spain SL 
    	
 
    	
Spain
    
	
Salon del   Exito, S.L. 
    	
 
    	
Spain
    
	
Sally UK   Holdings Limited 
    	
 
    	
England
    
	
Sally Salon   Services Ltd 
    	
 
    	
England
    
	
MHR Limited 
    	
 
    	
England
    
	
Sally Chile   Holding SpA 
    	
 
    	
Chile
    
	
Sinelco   Group BVBA 
    	
 
    	
Belgium
    
	
Sinelco   International BVBA 
    	
 
    	
Belgium
    
	
Sinelco   Italiana SRL 
    	
 
    	
Italy
    
	
Sinelco   France SAS 
    	
 
    	
France
    
	
Salon   Services (Hair and Beauty Supplies) Ltd
    	
 
    	
Scotland
    
	
Salon   Services Franchising Ltd
    	
 
    	
Scotland
    
	
Salon   Success Limited
    	
 
    	
England
    
	
Ogee Limited   
    	
 
    	
England
    
	
Pro-Duo NV   
    	
 
    	
Belgium
    
	
Pro-Duo   France SAS 
    	
 
    	
France
    
	
Vigox BVBA
    	
 
    	
Belgium
    
	
Montane   Importaciones, S.L. 
    	
 
    	
Spain
    
	
Pro-Duo   Nederland BV 
    	
 
    	
Netherlands
    
	
Wacos NV   
    	
 
    	
Belgium
    
	
Ainat   Lilibeth, S.L. 
    	
 
    	
Spain
    
	
HUSH BVBA 
    	
 
    	
Belgium
    

 

II-2

 

	
Kapperscentrale   Bauwens N.V. 
    	
 
    	
Belgium
    
	
Kapersservice   Floral B.V.
    	
 
    	
Netherlands
    
	
Exphair B.V.
    	
 
    	
Netherlands
    
	
Hair Zone   B.V.
    	
 
    	
Netherlands
    

 

II-3

 

SCHEDULE III(a)

 

Issuer Free Writing Prospectuses Included in the Pricing Disclosure Package: Final Term Sheet

 

Other Information Included in the Pricing Disclosure Package: None.

 

III(a)-1

 

SCHEDULE III(b)

 

Issuer Free Writing Prospectuses not included in the Pricing Disclosure Package:

 

1.               The electronic road show made available in connection with the offering.

 

A-II(c)-1

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