INTERCREDITOR AGREEMENT

EXECUTION VERSION

Exhibit 4.7

INTERCREDITOR AGREEMENT

by and between

MERRILL LYNCH CAPITAL, a division of Merrill Lynch Business Financial Services Inc.,

as ABL Agent,

and

MERRILL LYNCH CAPITAL CORPORATION,

as Term Agent

Dated as of November 16, 2006

TABLE OF CONTENTS

 

 

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EXHIBITS:

 

 

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INTERCREDITOR AGREEMENT

THIS INTERCREDITOR AGREEMENT (as amended, supplemented, waived or otherwise modified from time to time pursuant to the terms hereof, this “ Agreement ”) is entered into as of November 16, 2006 between MERRILL LYNCH CAPITAL, a division of Merrill Lynch Business Financial Services Inc., in its capacities as administrative agent and collateral agent (together with its successors and assigns in such capacities, the “ ABL Agent ”) for the financial institutions party from time to time to the ABL Credit Agreement referred to below (such financial institutions, together with their successors, assigns and transferees, the “ ABL Credit Agreement Lenders ” and, together with affiliates thereof in their capacity as ABL Bank Products Affiliates or ABL Hedging Affiliates (in each case, as hereinafter defined), the “ ABL Lenders ”) and MERRILL LYNCH CAPITAL CORPORATION, in its capacities as administrative agent and collateral agent (together with its successors and assigns in such capacities, the “ Term Agent ”) for the financial institutions party from time to time to the Term Credit Agreement referred to below (such financial institutions, together with their successors, assigns and transferees, the “ Term Credit Agreement Lenders ” and, together with affiliates thereof and certain other specified hedging parties, in their capacity as Term Bank Products Affiliates or Term Hedging Affiliates (in each case, as hereinafter defined), the “ Term Lenders ”).

RECITALS

A. Pursuant to that certain Credit Agreement dated as of the date hereof by and among SALLY HOLDINGS LLC, a Delaware limited liability company (together with its successors and assigns, the “ Parent Borrower ”), BEAUTY SYSTEMS GROUP LLC, a Delaware limited liability company (“ Beauty Systems ”), SALLY BEAUTY SUPPLY LLC, a Delaware limited liability company (together with the Parent Borrower, Beauty Systems and its and their respective successors and assigns, the “U.S. Borrowers”), the Canadian Borrowers (as hereinafter defined) (the Canadian Borrowers together with U.S. Borrowers, the “ ABL Borrowers ”), the ABL Credit Agreement Lenders, the ABL Agent, and MERRILL LYNCH CAPITAL CANADA, INC., as Canadian agent and Canadian collateral agent for the Lenders thereunder (as such agreement may be amended, supplemented, restated or otherwise modified from time to time, the “ ABL Credit Agreement ”), the ABL Lenders have agreed to make certain loans and other financial accommodations to or for the benefit of the ABL Borrowers.

B. Pursuant to certain guaranty agreements and security agreements dated as of the date hereof (the “ ABL Guaranties ”) by the ABL Guarantors (as hereinafter defined) in favor of the ABL Agent, the ABL Guarantors have agreed to guarantee the payment and performance of the ABL Borrowers’ obligations under the ABL Documents.

C. As a condition to the effectiveness of the ABL Credit Agreement and to secure the obligations of the ABL Borrowers and the ABL Guarantors (the ABL Borrowers, the ABL Guarantors and each other direct or indirect subsidiary of the Parent Borrower or any of its affiliates that is now or hereafter becomes a party to any ABL Document (as hereinafter defined), collectively, the “ ABL Credit Parties ”) under and in connection with the ABL Documents, the ABL Credit Parties have granted to the ABL Agent (for the benefit of the ABL Lenders, including the ABL Bank Products Affiliates and ABL Hedging Affiliates) Liens on the Collateral (as hereinafter defined).

D. Pursuant to that certain Credit Agreement dated as of the date hereof by and among the Parent Borrower (in such capacity under this Agreement, the “ Term Borrower ”), the Term Credit Agreement Lenders, and the Term Agent (as such agreement may be amended, supplemented, restated or otherwise modified from time to time, the “ Term Credit Agreement ”), the Term Credit Agreement Lenders have agreed to make certain loans and other financial accommodations to or for the benefit of the Term Borrower.

E. Pursuant to certain guaranty agreements and security agreements dated as of the date hereof (the “ Term Guaranties ”) by the Term Guarantors (as hereinafter defined) in favor of the Term Agent, the Term Guarantors have agreed to guarantee the payment and performance of the Term Borrower’s obligations under the Term Documents (as hereinafter defined).

F. As a condition to the effectiveness of the Term Credit Agreement and to secure the obligations of the Term Borrower and the Term Guarantors (the Term Borrower, the Term Guarantors and each other direct or indirect subsidiary of the Parent Borrower or any of its affiliates that is now or hereafter becomes a party to any Term Document (as hereinafter defined), collectively, the “ Term Credit Parties ”) under and in connection with the Term Documents, the Term Credit Parties have granted to the Term Agent (for the benefit of the Term Lenders including the Term Bank Products Affiliates and Term Hedging Affiliates) Liens on the Collateral.

G. Pursuant to this Agreement, the Parent Borrower may, from time to time, designate certain additional Indebtedness as “Additional Indebtedness” by executing and delivering the Additional Indebtedness Designation and by complying with the procedures set forth in Section 7.11 hereof, and the holders of such Additional Indebtedness and any other applicable Additional Creditor shall thereupon be treated as Additional Creditors, and any Additional Agent (as hereinafter defined) for any such Additional Creditors shall thereupon be treated as an Additional Agent, for all purposes under this Agreement.

H. Each of the ABL Agent (on behalf of the ABL Lenders) and the Term Agent (on behalf of the Term Lenders) and, by their acknowledgment hereof, the ABL Credit Parties and the Term Credit Parties, desire to agree to the relative priority of Liens on the Collateral and certain other rights, priorities and interests as provided herein.

NOW THEREFORE , in consideration of the foregoing and for other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree as follows:

 

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ARTICLE 1

DEFINITIONS

Section 1.1 UCC Definitions . The following terms which are defined in the Uniform Commercial Code are used herein as so defined: Accounts, Chattel Paper, Deposit Accounts, Documents, Electronic Chattel Paper, Equipment, Financial Assets, Instruments, Inventory, Investment Property, Letter-of-Credit Rights, Money, Payment Intangibles, Promissory Notes, Records, Security, Securities Accounts, Security Entitlements, Supporting Obligations, and Tangible Chattel Paper.

Section 1.2 Other Definitions . As used in this Agreement, the following terms shall have the meanings set forth below:

“ ABL Agent ” shall have the meaning assigned thereto in the Preamble hereto and shall include any successor thereto as well as any Person designated as the “Agent” or “Administrative Agent” under any ABL Credit Agreement.

“ ABL Bank Products Affiliate ” shall mean any ABL Credit Agreement Lender or any Affiliate of any ABL Credit Agreement Lender (in each case that is not also a Term Credit Agreement Lender) that has entered into a Bank Products Agreement with a Credit Party with the obligations of such Credit Party thereunder being secured by one or more ABL Collateral Documents.

“ ABL Borrowers ” shall have the meaning assigned thereto in the Recitals hereto.

“ ABL Canadian Collateral ” shall mean Collateral owned by any Canadian subsidiary of the Parent Borrower and pledged to any ABL Secured Party under any ABL Credit Document.

“ ABL Collateral Documents ” shall mean all “Security Documents” as defined in the ABL Credit Agreement, and all other security agreements, mortgages, deeds of trust and other collateral documents executed and delivered in connection with any ABL Credit Agreement, in each case as the same may be amended, modified or supplemented from time to time.

“ ABL Credit Agreement ” shall have the meaning assigned thereto in the Recitals hereto, together with any other agreement extending the maturity of, consolidating, restructuring, refunding, replacing or refinancing all or any portion of the ABL Obligations, whether by the same or any other agent, lender or group of lenders and whether or not increasing the amount of any Indebtedness that may be incurred thereunder.

“ ABL Credit Agreement Lenders ” shall have the meaning assigned thereto in the Preamble hereto.

“ ABL Credit Parties ” shall have the meaning assigned thereto in the Recitals hereto.

“ ABL Documents ” shall mean the ABL Credit Agreement, the ABL Guaranties, the ABL Collateral Documents, any Bank Product Agreements between any ABL Credit Party and any ABL Bank Products Affiliate, any Hedging Agreements between any ABL Credit Party and any ABL Lender, those other ancillary agreements as to which the ABL Agent or any ABL Lender is

 

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a party or a beneficiary and all other agreements, instruments, documents and certificates, now or hereafter executed by or on behalf of any ABL Credit Party or any of its respective Subsidiaries or Affiliates, and delivered to the ABL Agent, in connection with any of the foregoing or any ABL Credit Agreement, in each case as the same may be amended, modified or supplemented from time to time.

“ ABL Guaranties ” shall have the meaning assigned thereto in the Recitals hereto.

“ ABL Guarantors ” shall mean the collective reference to Holdings, the U.S. Borrowers (including with respect to the obligations of the Canadian Borrowers under each Loan Document as such term is defined in the ABL Credit Agreement) and each Subsidiary of the Parent Borrower (other than (a) any Foreign Subsidiary (excluding any Canadian Subsidiary Guarantor as such term is defined in the ABL Credit Agreement) and (b) any Subsidiary of a Foreign Subsidiary (excluding any Canadian Subsidiary Guarantor as such term is defined in the ABL Credit Agreement) and any other Person who becomes a guarantor under any of the ABL Guaranties.

“ ABL Hedging Affiliate ” shall mean any ABL Credit Agreement Lender or any Affiliate of any ABL Credit Agreement Lender (in each case that is not also a Term Credit Agreement Lender) that has entered into a Hedging Agreement with a Credit Party with the obligations of such Credit Party thereunder being secured by one or more ABL Collateral Documents.

“ ABL Joint Collateral ” shall have the meaning set forth in Section 3.7(a) hereof.

“ ABL Lenders ” shall have the meaning assigned thereto in the Preamble hereto and shall include all ABL Bank Product Affiliates and ABL Hedging Affiliates and all successors, assigns, transferees and replacements thereof, as well as any Person designated as a “Lender” under any ABL Credit Agreement.

“ ABL Obligations ” shall mean all obligations of every nature of each ABL Credit Party from time to time owed to the ABL Agent, the ABL Credit Agreement Lenders or any of them, any ABL Bank Products Affiliates or any ABL Hedging Affiliates, under any ABL Document, whether for principal, interest (including interest which, but for the filing of a petition in bankruptcy with respect to such ABL Credit Party, would have accrued on any ABL Obligation, whether or not a claim is allowed against such ABL Credit Party for such interest in the related bankruptcy proceeding), reimbursement of amounts drawn under letters of credit, payments for early termination of Hedging Agreements, fees, expenses, indemnification or otherwise, and all other amounts owing or due under the terms of the ABL Documents, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time.

“ ABL Permitted Access Right ” shall have the meaning set forth in Section 3.7(a).

“ ABL Priority Collateral ” shall mean all Collateral consisting of the following:

(1) all Accounts;

(2) all Chattel Paper (including Tangible Chattel Paper and Electronic Chattel Paper);

 

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(3)(x) all Deposit Accounts and Money and all cash, checks, other negotiable instruments, funds and other evidences of payments held therein and (y) all Securities, Security Entitlements, and Securities Accounts, in each case, to the extent constituting cash or Cash Equivalents or representing a claim to Cash Equivalents, other than the Asset Sales Proceeds Account and all cash, checks and other property held therein or credited thereto, but in any event and regardless of the foregoing clauses, but excluding the Asset Sales Proceeds Account;

(4) all Inventory;

(5) to the extent involving or governing any of the items referred to in the preceding clauses (1) through (4), all Documents, General Intangibles (other than any Intellectual Property), Instruments (including, without limitation, Promissory Notes), and Letter of Credit Rights, provided that to the extent any of the foregoing also relates to Term Priority Collateral, only that portion related to the items referred to in the preceding clauses (1) through (4) shall be included in the ABL Priority Collateral;

(6) to the extent evidencing or governing any of the items referred to in the preceding clauses (1) through (5), all Supporting Obligations; provided that to the extent any of the foregoing also relates to Term Priority Collateral only that portion related to the items referred to in the preceding clauses (1) through (5) shall be included in the ABL Priority Collateral;

(7) all books and Records relating to the foregoing (including without limitation all books, databases, customer lists, engineer drawings, and Records, whether tangible or electronic, which contain any information relating to any of the foregoing);

(8) all collateral security and guarantees with respect to any of the foregoing and all cash, Money, Instruments, Securities, Financial Assets and Deposit Accounts directly received as proceeds of any ABL Priority Collateral (such proceeds, “ ABL Priority Proceeds ”); provided , however , that no proceeds of ABL Priority Proceeds will constitute ABL Priority Collateral unless such proceeds of ABL Priority Proceeds would otherwise constitute ABL Priority Collateral.

For the avoidance of doubt, under no circumstances shall Excluded Assets be ABL Priority Collateral.

“ ABL Recovery ” shall have the meaning set forth in Section 5.3(a).

“ ABL Secured Parties ” shall mean the ABL Agent and the ABL Lenders.

“ Additional Agent ” shall mean any one or more agents, trustees or other representatives for or of any one or more Additional Credit Facility Creditors, and shall include any successor thereto, as well as any Person designated as an “Agent” under any Additional Credit Facility.

“ Additional Bank Products Affiliate ” shall mean any Additional Credit Facility Creditor or any Affiliate of any Additional Credit Facility Creditor (in each case that is not also an ABL Credit Agreement Lender or a Term Credit Agreement Lender) that has entered into a Bank Products Agreement with a Credit Party with the obligations of such Credit Party thereunder being secured by one or more Additional Collateral Documents.

 

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“ Additional Borrower ” shall mean any Additional Credit Party that incurs or issues Additional Indebtedness.

“ Additional Collateral Documents ” shall mean all “Security Documents” as defined in any Additional Credit Facility, and in any event shall include all security agreements, mortgages, deeds of trust, pledges and other collateral documents executed and delivered in connection with any Additional Credit Facility, in each case as the same may be amended, modified or supplemented from time to time.

“ Additional Credit Facilities ” shall mean any one or more agreements, instruments and documents under which any Additional Indebtedness is or may be incurred, including without limitation any credit agreements, loan agreements, indentures or other financing agreements, in each case as the same may be amended, modified or supplemented from time to time, together with any other agreement extending the maturity of, consolidating, restructuring, refunding, replacing or refinancing all or any portion of the Additional Obligations, whether by the same or any other lender, debtholder or group of lenders or debtholders, or the same or any other agent, trustee or representative therefor, and whether or not increasing the amount of any Indebtedness that may be incurred thereunder.

“ Additional Credit Facility Creditors ” shall mean one or more holders of Additional Indebtedness (or commitments therefore) that is or may be incurred under one or more Additional Credit Facilities.

“ Additional Credit Party ” shall mean each of Holdings and each subsidiary of the Parent Borrower or any of its affiliates that is or becomes a party to any Additional Document.

“ Additional Creditors ” shall mean one or more Additional Credit Facility Creditors and shall include all Additional Bank Product Affiliates and Additional Hedging Affiliates and all successors, assigns, transferees and replacements thereof, as well as any Person designated as an “Additional Creditor” under any Additional Credit Facility; and with respect to any Additional Agent, means the Additional Creditors represented by such Additional Agent.

“ Additional Documents ” shall mean any Additional Credit Facilities, any Additional Guaranties, any Additional Collateral Documents, any Bank Product Agreements between any Credit Party and any Additional Bank Products Affiliate, any Hedging Agreements between any Credit Party and any Additional Hedging Affiliate, those other ancillary agreements as to which any Additional Secured Party is a party or a beneficiary and all other agreements, instruments, documents and certificates, now or hereafter executed by or on behalf of any Credit Party or any of its respective Subsidiaries or Affiliates, and delivered to any Additional Agent, in connection with any of the foregoing or any Additional Credit Facility, in each case as the same may be amended, modified or supplemented from time to time.

“ Additional Effective Date ” shall have the meaning set forth in Section 7.11(b).

“ Additional Guaranties ” shall mean any one or more guarantees of any Additional Obligations of any Additional Credit Party by any other Additional Credit Party in favor of any Additional Secured Party.

 

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“ Additional Guarantor ” shall mean any Additional Credit Party that at any time has provided an Additional Guaranty.

“ Additional Hedging Affiliate ” shall mean any Additional Credit Facility Creditor or any Affiliate of any Additional Credit Facility Creditor (in each case that is not also an ABL Credit Agreement Lender or a Term Credit Agreement Lender) that has entered into a Hedging Agreement with any Credit Party with the obligations of such Credit Party thereunder being secured by one or more Additional Collateral Documents.

“ Additional Indebtedness ” shall mean any Additional Specified Indebtedness that (x) is permitted to be secured by a Lien on any Collateral by subsection 7.3 of the Term Credit Agreement and (y) is designated as “Additional Indebtedness” by the Parent Borrower pursuant to an Additional Indebtedness Designation and in compliance with the procedures set forth in Section 7.11.

“ Additional Indebtedness Designation ” shall mean a certificate of the Parent Borrower with respect to Additional Indebtedness substantially in the form of Exhibit A attached hereto

“ Additional Indebtedness Joinder ” shall mean a joinder agreement executed by one or more Additional Agents in respect of the Additional Indebtedness subject to an Additional Indebtedness Designation, on behalf of one or more Additional Creditors in respect of such Additional Indebtedness, substantially in the form of Exhibit B attached hereto

“ Additional Obligations ” shall mean all obligations of every nature of each Credit Party from time to time owed to any Additional Agent, any Additional Creditors or any of them, including any Additional Bank Products Affiliates or Additional Hedging Affiliates, under any Additional Document, whether for principal, interest (including interest which, but for the filing of a petition in bankruptcy with respect to such Credit Party, would have accrued on any Additional Obligation, whether or not a claim is allowed against such Credit Party for such interest in the related bankruptcy proceeding), reimbursement of amounts drawn under letters of credit, payments for early termination of Hedging Agreements, fees, expenses, indemnification or otherwise, and all other amounts owing or due under the terms of the Additional Documents, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time.

“ Additional Recovery ” shall have the meaning set forth in Section 5.3(a).

“ Additional Secured Parties ” shall mean any Additional Agents and any Additional Creditors.

“ Additional Specified Indebtedness ” shall mean any Indebtedness (as defined in the Term Credit Agreement) that is or may from time to time be incurred by any Credit Party in compliance with subsection 7.2 of the Term Credit Agreement, other than any such Indebtedness so incurred pursuant to clause (b)(ii), (b)(iii) (but only any such Indebtedness consisting of Senior Subordinated Notes or Refinancing Indebtedness in respect thereof), (b)(vii) or (b)(ix) (other than Indebtedness consisting of Special Purpose Financing Undertakings, as defined in the Term Credit Agreement) of such subsection 7.2.

 

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“ Affiliate ” shall mean with respect to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, “control” of a Person means the power, directly or indirectly, either to (a) vote 20% or more of the securities having ordinary voting power for the election of directors of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise.

“ Agreement ” shall mean this Intercreditor Agreement.

“ Asset Sales Proceeds Account ” shall mean one or more Deposit Accounts or Securities Accounts holding only the proceeds of any sale or disposition of any Term Priority Collateral and the proceeds or investment thereof.

“ Bank Products Agreement ” shall mean any agreement pursuant to which a bank or other financial institution agrees to provide treasury or cash management services (including, without limitation, controlled disbursement, automated clearinghouse transactions, return items, netting, overdrafts and interstate depository network services).

“ Bankruptcy Code ” shall mean title 11 of the United States Code.

“ Board of Directors ”: 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.

“ Borrower ” shall mean any of the ABL Borrowers, the Term Borrower and any Additional Borrower.

“Canadian Borrowers ” shall have the meaning assigned thereto in the ABL Credit Agreement.

“ Capital Stock ” shall mean any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants or options to purchase any of the foregoing.

“ Cash Collateral ” shall mean any Collateral consisting of Money or Cash Equivalents, any Security Entitlement and any Financial Assets.

“ Cash Equivalents ” shall mean (a) securities issued or fully guaranteed or insured by the United States government or Canadian government or any agency or instrumentality thereof, (b) time deposits, certificates of deposit or bankers’ acceptances of (i) any ABL Lender or Term Lender 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-2 or the equivalent thereof by Standard & Poor’s Ratings Group (a division of The McGraw Hill Companies Inc.) or any successor rating agency (“ S&P ”) or at least P-2 or the equivalent thereof by Moody’s Investors Service, Inc. or any successor rating agency (“ Moody’s ”) (or if at such time neither is issuing ratings, then a comparable rating of such other nationally recognized

 

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rating agency as shall be approved by the ABL Agent or the Term Agent, in each case, in its reasonable judgment), (c) commercial paper rated at least A-2 or the equivalent thereof by S&P or at least P-2 or the equivalent thereof by Moody’s (or if at such time neither is issuing ratings, then a comparable rating of such other nationally recognized rating agency as shall be approved by the ABL Agent or Term Agent, in each case, in its reasonable judgment), (d) investments in money market funds complying with the risk limiting conditions of Rule 2a-7 or any successor rule of the Securities and Exchange Commission under the Investment Company Act of 1940, and (e) investments similar to any of the foregoing denominated in foreign currencies approved by the Board of Directors of the Parent Borrower, in each case provided in clauses (a), (b), (c) and (e) above only, maturing within twelve months after the date of acquisition.

“ Collateral ” shall mean all Property now owned or hereafter acquired by any Borrower or any Guarantor in or upon which a Lien is granted or purported to be granted to the ABL Agent, the Term Agent or any Additional Agent under any of the ABL Collateral Documents, the Term Collateral Documents or the Additional Collateral Documents, together with all rents, issues, profits, products, and Proceeds thereof.

“ Common Mortgaged Collateral ” shall mean any Collateral consisting of real estate in which a security interest is created pursuant to a mortgage in favor of (x) the Term Agent for the benefit of the Term Secured Parties and the ABL Secured Parties, or for the benefit of the Term Secured Parties, any Additional Secured Parties and the ABL Secured Parties, or (y) any Additional Agent for the benefit of the Term Secured Parties, any Additional Secured Parties and the ABL Secured Parties, or for the benefit of any Additional Secured Parties and the ABL Secured Parties, in each case as such mortgage may be amended, supplemented or replaced from time to time in connection with the grant of any Lien in such Collateral for the benefit of any Additional Secured Parties.

“ Control Collateral ” shall mean any Collateral consisting of any certificated Security, Investment Property, Deposit Account, Instruments and any other Collateral as to which a Lien may be perfected through possession or control by the secured party, or any agent therefor.

“ Copyright Licenses ” shall mean with respect to any Credit Party, all written license agreements of such Credit Party providing for the grant by or to such Credit Party of any right to use any Copyright of such Credit Party, other than agreements with any Person who is an Affiliate or a Subsidiary of such Credit Party, subject, in each case, to the terms of such license agreements, and the right to prepare for sale, sell and advertise for sale, all Inventory now or hereafter covered by such licenses.

“ Copyrights ” shall mean with respect to any Credit Party, all of such Credit Party’s right, title and interest in and to all United States and foreign copyrights, whether or not the underlying works of authorship have been published or registered, United States and foreign copyright registrations and copyright applications, and (i) all renewals thereof, (ii) all income, royalties, damages and payments now and hereafter due and/or payable with respect thereto, including, without limitation, payments under all licenses entered into in connection therewith, and damages and payments for past or future infringements thereof and (iii) the right to sue or otherwise recover for past, present and future infringements and misappropriations thereof.

 

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“ Credit Documents ” shall mean the ABL Documents, the Term Documents and any Additional Documents.

“ Credit Parties ” shall mean the ABL Credit Parties, the Term Credit Parties and any Additional Credit Parties.

“ DIP Financing ” shall have the meaning set forth in Section 6.1(a).

“ Discharge of ABL Obligations ” shall mean (a) the payment in full in cash of the applicable ABL Obligations that are outstanding and unpaid at the time all Indebtedness under the applicable ABL Credit Agreement is paid in full in cash including, with respect to amounts available to be draw under outstanding letters of credit issued thereunder (or indemnities or other undertakings issued pursuant thereto in respect of outstanding letters of credit) delivery or provision of Money or backstop letters of credit in respect thereof in compliance with the terms of any ABL Credit Agreement (which shall not exceed an amount equal to 105% of the aggregate undrawn amount of such letters of credit) and (b) the termination of all commitments to extend credit under the ABL Documents.

“ Discharge of Additional Obligations ” shall mean, if any Indebtedness shall at any time have been incurred under any Additional Credit Facility, the payment in full in cash of the applicable Additional Obligations that are outstanding and unpaid at the time all Additional Indebtedness under such Additional Credit Facility is paid in full in cash.

“ Discharge of Term Obligations ” shall mean the payment in full in cash of the applicable Term Obligations that are outstanding and unpaid at the time all Indebtedness under the applicable Term Credit Agreement is paid in full in cash.

“ Event of Default ” shall mean an Event of Default under any ABL Credit Agreement, any Term Credit Agreement or any Additional Credit Facility.

“ Excluded Assets ” shall have the meaning set forth (i) in the case of the ABL Priority Collateral, in the applicable ABL Collateral Documents, and (ii) in the case of the Term Priority Collateral, (x) prior to the Discharge of Term Obligations, in the applicable Term Collateral Documents, and (y) from and after the Discharge of Term Obligations, in any applicable Additional Collateral Documents.

“ Exercise Any Secured Creditor Remedies ” or “ Exercise of Secured Creditor Remedies ” shall mean:

(a) the taking of any action to enforce or realize upon any Lien, including the institution of any foreclosure proceedings or the noticing of any public or private sale pursuant to Article 9 of the Uniform Commercial Code;

(b) the exercise of any right or remedy provided to a secured creditor on account of a Lien under any of the Credit Documents, under applicable law, in an Insolvency Proceeding or otherwise, including the election to retain any of the Collateral in satisfaction of a Lien;

 

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(c) the taking of any action or the exercise of any right or remedy in respect of the collection on, set off against, marshaling of, injunction respecting or foreclosure on the Collateral or the Proceeds thereof;

(d) the appointment of a receiver, receiver and manager or interim receiver of all or part of the Collateral;

(e) the sale, lease, license, or other disposition of all or any portion of the Collateral by private or public sale or any other means permissible under applicable law;

(f) the exercise of any other right of a secured creditor under Part 6 of Article 9 of the Uniform Commercial Code;

(g) the exercise of any voting rights relating to any Capital Stock included in the Collateral; and

(h) the delivery of any notice, claim or demand relating to the Collateral to any Person (including any securities intermediary, depository bank or landlord) in possession or control of any Collateral.

For the avoidance of doubt, filing a proof of claim in bankruptcy court or seeking adequate protection shall not be deemed to be an Exercise of Secured Creditor Remedies.

“ Financing Lease ” shall mean any lease of property, real or personal, the obligations of the lessee in respect of which are required in accordance with GAAP to be capitalized on a balance sheet of the lessee.

“ Foreign Subsidiary ” shall have the meaning provided in the ABL Credit Agreement or the Term Credit Agreement, respectively, as in effect on the date hereof.

“ General Intangibles ” shall mean all “general intangibles” as such term is defined in the Uniform Commercial Code including, without limitation, with respect to any Credit Party, all contracts, agreements, instruments and indentures in any form, and portions thereof, to which such Credit Party is a party or under which such Credit Party has any right, title or interest or to which such Credit Party or any property of such Credit Party is subject, as the same may from time to time be amended, supplemented or otherwise modified.

“ Governmental Authority ” shall mean any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including the European Union.

“ Guarantor ” shall mean any of the ABL Guarantors, Term Guarantors and any Additional Guarantors.

“ Hedging Agreement ” shall mean any interest rate, foreign currency, commodity or equity swap, collar, cap, floor or forward rate agreement, or other agreement or arrangement designed to protect against fluctuations in interest rates or currency, commodity or equity values (including, without limitation, any option with respect to any of the foregoing and any combination of the foregoing agreements or arrangements), and any confirmation executed in connection with any such agreement or arrangement.

 

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“ Holdings ” shall mean Sally Investment Holdings LLC, a Delaware limited liability company, and its successors and assigns.

“ Indebtedness ” shall have the meaning assigned thereto in the ABL Credit Agreement or the Term Credit Agreement or any Additional Credit Facility respectively, as applicable.

“ Insolvency Proceeding ” shall mean (a) any case, action or proceeding before any court or other governmental authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshalling of assets for creditors or other similar arrangement in respect of its creditors generally or any substantial portion of its creditors; in each case covered by clauses (a) and (b) undertaken under United States Federal, State or foreign law, including the Bankruptcy Code, the Bankruptcy and Insolvency Act (Canada) and the Companies’ Creditors Arrangement Act (Canada).

“ Intellectual Property ” shall mean, with respect to any grantor, the collective reference to such grantor’s Copyrights, Copyright Licenses, Patents, Patent Licenses, Trade Secrets, Trademarks and Trademark Licenses.

“ Inventory ” shall mean inventory (as defined in Article 9 of the Uniform Commercial Code as of the date hereof).

“ Lien ” shall mean any mortgage, pledge, hypothecation, assignment, security deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any Financing Lease having substantially the same economic effect as any of the foregoing).

“ Lien Priority ” shall mean with respect to any Lien of the ABL Agent, the ABL Lenders, the Term Agent, the Term Lenders, any Additional Agent or any Additional Creditors in the Collateral, the order of priority of such Lien as specified in Section 2.1.

“ Party ” shall mean the ABL Agent, the Term Agent or any Additional Agent, and “ Parties ” shall mean all of the ABL Agent, the Term Agent and any Additional Agent.

“ Patent License ” shall mean with respect to any Credit Party, all written license agreements of such Credit Party with any other Person that is not an Affiliate or a Subsidiary of such Credit Party, in connection with any of the Patents of such Credit Party or such other Person’s patents, whether such Credit Party is a licensor or a licensee under any such agreement, subject, in each case, to the terms of such license agreements, and the right to prepare for sale, sell and advertise for sale, all Inventory now or hereafter covered by such licenses.

“ Patents ” shall mean with respect to any Credit Party, all of such Credit Party’s right, title and interest in and to all United States and foreign patents, patent applications and patentable inventions and all reissues and extensions thereof, including, without limitation, (i) all inventions

 

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and improvements described and claimed therein, (ii) the right to sue or otherwise recover for any and all past, present and future infringements and misappropriations thereof, (iii) all income, royalties, damages and other payments now and hereafter due and/or payable with respect thereto (including, without limitation, payments under all licenses entered into in connection therewith, and damages and payments for past, present or future infringements thereof), and (iv) all other rights corresponding thereto in the United States and all reissues, divisions, continuations, continuations-in-part, substitutes, renewals, and extensions thereof, all improvements thereon, and all other rights of any kind whatsoever of such Credit Party accruing thereunder or pertaining thereto.

“ Payment Collateral ” shall mean all Accounts, Instruments, Chattel Paper, Letter-Of-Credit Rights, Deposit Accounts (other than the Asset Sales Proceeds Account), Securities Accounts, and Payment Intangibles, together with all Supporting Obligations, in each case composing a portion of the Collateral.

“ Person ” shall mean an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature.

“ Priority Collateral ” shall mean the ABL Priority Collateral or the Term Priority Collateral.

“ Proceeds ” shall mean (a) all “proceeds,” as defined in Article 9 of the Uniform Commercial Code, with respect to the Collateral, and (b) whatever is recoverable or recovered when any Collateral is sold, exchanged, collected, or disposed of, whether voluntarily or involuntarily.

“ Property ” shall mean any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.

“ Secured Parties ” shall mean the ABL Secured Parties, the Term Secured Parties and the Additional Secured Parties.

“ Subsidiary ” of any Person shall mean a corporation, limited liability company, partnership or other entity of which a majority of the outstanding shares of stock of each class having ordinary voting power or other equity interests is owned by such Person, by one or more Subsidiaries of such Person, or by such Person and one or more of its Subsidiaries.

“ Term Agent ” shall have the meaning assigned thereto in the Preamble hereto and shall include any successor thereto as well as any Person designated as the “Agent” or “Administrative Agent” under any Term Credit Agreement.

“ Term Bank Products Affiliate ” shall mean any Term Credit Agreement Lender or any Affiliate of any Term Credit Agreement Lender that has entered into a Bank Products Agreement with a Credit Party with the obligations of such Credit Party thereunder being secured by one or more Term Collateral Documents.

“ Term Borrower ” shall have the meaning assigned thereto in the Recitals hereto.

 

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“ Term Collateral Documents ” shall mean all “Security Documents” as defined in the Term Credit Agreement, and all other security agreements, mortgages, deeds of trust and other collateral documents executed and delivered in connection with any Term Credit Agreement, in each case as the same may be amended, modified or supplemented from time to time.

“ Term Credit Agreement ” shall have the meaning assigned thereto in the Recitals hereto, together with the any other agreement extending the maturity of, consolidating, restructuring, refunding, replacing or refinancing all or any portion of the Term Obligations, whether by the same or any other agent, lender or group of lenders and whether or not increasing the amount of any Indebtedness that may be incurred thereunder.

“ Term Credit Agreement Lenders ” shall have the meaning assigned thereto in the Preamble hereto.

“ Term Credit Parties ” shall have the meaning assigned thereto in the Recitals hereto.

“ Term Documents ” shall mean the Term Credit Agreement, the Term Guaranties, the Term Collateral Documents, any Bank Product Agreements between any Term Credit Party and any Term Lender, any Hedging Agreements between any Term Credit Party and any Term Lender, those other ancillary agreements as to which the Term Agent or any Term Lender is a party or a beneficiary and all other agreements, instruments, documents and certificates, now or hereafter executed by or on behalf of any Term Credit Party or any of its respective Subsidiaries or Affiliates, and delivered to the Term Agent, in connection with any of the foregoing or any Term Credit Agreement, in each case as the same may be amended, modified or supplemented from time to time.

“ Term Guaranties ” shall have the meaning assigned thereto in the Recitals hereto.

“ Term Guarantors ” shall mean each of the Parent Borrower’s U.S. subsidiaries (other than (i) any Foreign Subsidiary and (ii) any Subsidiary of a Foreign Subsidiary), and any other Person who becomes a guarantor under any of the Term Guaranties.

“ Term Hedging Affiliate ” shall mean any Term Credit Agreement Lender or any Affiliate of any Term Credit Agreement Lender that has entered into a Hedging Agreement with a Credit Party, with the obligations of such Credit Party thereunder being secured by one or more Term Collateral Documents.

“ Term Lenders ” shall have the meaning assigned thereto in the Preamble hereto and shall include all Term Bank Product Affiliates and Term Hedging Affiliates and all successors, assigns, transferees and replacements thereof, as well as any Person designated as a “Lender” under any Term Credit Agreement.

“ Term Obligations ” shall mean all obligations of every nature of each Term Credit Party from time to time owed to the Term Agent, the Term Credit Agreement Lenders or any of them, any Term Bank Products Affiliates or any Term Hedging Affiliates, under any Term Document, whether for principal, interest (including interest which, but for the filing of a petition in bankruptcy with respect to such Term Credit Party, would have accrued on any Term Obligation, whether or not a claim is allowed against such Term Credit Party for such interest in the related

 

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bankruptcy proceeding), reimbursement of amounts drawn under letters of credit, payments for early termination of Hedging Agreements, fees, expenses, indemnification or otherwise, and all other amounts owing or due under the terms of the Term Documents, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time.

“ Term Priority Collateral ” shall mean all Collateral, other than the ABL Priority Collateral, and all collateral security and guarantees with respect to any Term Priority Collateral and all cash, Money, Instruments, Securities, Financial Assets and Deposit Accounts directly received as proceeds of any Term Priority Collateral; provided , however , no proceeds of proceeds will constitute Term Priority Collateral unless such proceeds of proceeds would otherwise constitute Term Priority Collateral or are credited to the Asset Sales Proceeds Account. For the avoidance of doubt, (x) ABL Canadian Collateral shall not, in any way, constitute Collateral with respect to the Term Obligations or Additional Obligations, and the Term Secured Parties and any Additional Secured Parties shall have no security interest therein and (y) under no circumstance shall Excluded Assets be Term Priority Collateral.

“ Term Recovery ” shall have the meaning set forth in Section 5.3(b).

“ Term Secured Parties ” shall mean the Term Agent and the Term Lenders.

“ Trade Secrets ” shall mean with respect to any Credit Party, all of such Credit Party’s right, title and interest in and to all United States and foreign trade secrets, including, without limitation, know how, processes, formulae, compositions, designs, and confidential business and technical information, and all rights of any kind whatsoever accruing thereunder or pertaining thereto, including, without limitation, (i) all income, royalties, damages and payments now and hereafter due and/or payable with respect thereto, including, without limitation, payments under all licenses, non disclosure agreements and memoranda of understanding entered into in connection therewith, and damages and payments for past or future misappropriations thereof, and (ii) the right to sue or otherwise recover for past, present or future misappropriations thereof.

“ Trademark License ” shall mean, with respect to any Credit Party, all written license agreements of such Credit Party with any other Person who is not an Affiliate or a Subsidiary of such Credit Party in connection with any of the Trademarks of such Credit Party or such other Person’s names or trademarks, whether such Credit Party is a licensor or a licensee under any such agreement, subject, in each case, to the terms of such license agreements, and the right to prepare for sale, sell and advertise for sale, all Inventory now or hereafter covered by such licenses.

“ Trademarks ” shall mean with respect to any Credit Party, all of such Credit Party’s right, title and interest in and to all United States and foreign trademarks, service marks, trade names, trade dress or other indicia of trade origin or business identifiers, trademark and service mark registrations, and applications for trademark or service mark registrations (except for “intent to use” applications for trademark or service mark registrations filed pursuant to Section 1(b) of the Lanham Act, 15 U.S.C. § 1051, unless and until an Amendment to Allege Use or a Statement of Use under Sections 1(c) and 1(d) of said Act has been filed, it being understood and agreed that the carve out in this parenthetical shall be applicable only if and for so long as a grant of a security interest in such intent to use application would invalidate or otherwise jeopardize

 

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grantor’s rights therein), and any renewals thereof, including, without limitation, (i) the right to sue or otherwise recover for any and all past, present and future infringements or dilutions thereof, (ii) all income, royalties, damages and other payments now and hereafter due and/or payable with respect thereto (including, without limitation, payments under all licenses entered into in connection therewith, and damages and payments for past or future infringements thereof), and (iii) all other rights corresponding thereto and all other rights of any kind whatsoever of such Credit Party accruing thereunder or pertaining thereto in the United States, together in each case with the goodwill of the business connected with the use of, and symbolized by, each such trademark, service mark, trade name, trade dress or other indicia of trade origin or business identifiers.

“ Uniform Commercial Code ” shall mean the Uniform Commercial Code as the same may, from time to time, be in effect in the State of New York; provided that to the extent that the Uniform Commercial Code is used to define any term in any security document and such term is defined differently in differing Articles of the Uniform Commercial Code, the definition of such term contained in Article 9 shall govern; provided , further , that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, publication or priority of, or remedies with respect to, Liens of any Party is governed by the Uniform Commercial Code or foreign personal property security laws as enacted and in effect in a jurisdiction other than the State of New York, the term “Uniform Commercial Code” will mean the Uniform Commercial Code or such foreign personal property security laws as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions.

Section 1.3 Rules of Construction Unless the context of this Agreement clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the term “including” is not limiting, and the term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase “and/or.” The words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. Article, section, subsection, clause, schedule, and exhibit references herein are to this Agreement unless otherwise specified. Any reference in this Agreement to any agreement, instrument, or document shall include all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements thereto and thereof, as applicable (subject to any restrictions on such alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements set forth herein). Any reference herein to any Person shall be construed to include such Person’s successors and assigns. Any reference herein to the repayment in full of an obligation shall mean the payment in full in cash of such obligation, or in such other manner as may be approved in writing by the requisite holders or representatives in respect of such obligation, or in such other manner as may be approved by the requisite holders or representatives in respect of such obligation.

 

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ARTICLE 2

LIEN PRIORITY

Section 2.1 Agreement to Subordinate.

(a) Notwithstanding (i) the date, time, method, manner, or order of grant, attachment, or perfection (including any defect or deficiency or alleged defect or deficiency in any of the foregoing) of any Liens granted to the ABL Agent or the ABL Lenders in respect of all or any portion of the Collateral, or of any Liens granted to the Term Agent or the Term Lenders in respect of all or any portion of the Collateral, or of any Liens granted to any Additional Agent or any Additional Creditors in respect of all or any portion of the Collateral, and regardless of how any such Lien was acquired (whether by grant, statute, operation of law, subrogation or otherwise), (ii) the order or time of filing or recordation of any document or instrument for perfecting the Liens in favor of the ABL Agent, the Term Agent or any Additional Agent (or the ABL Lenders, the Term Lenders or any Additional Creditors) in any Collateral, (iii) any provision of the Uniform Commercial Code, the Bankruptcy Code or any other applicable law, or of the ABL Documents, the Term Documents or any Additional Documents, (iv) whether the ABL Agent, the Term Agent or any Additional Agent, in each case, either directly or through agents, holds possession of, or has control over, all or any part of the Collateral, (v) the fact that any such Liens in favor of the ABL Agent or the ABL Lenders, the Term Agent or the Term Lenders or any Additional Agent or any Additional Creditors securing any of the ABL Obligations, the Term Obligations or any Additional Obligations, respectively, are (x) subordinated to any Lien securing any obligation of any Credit Party other than the Term Obligations or any Additional Obligations (in the case of the ABL Obligations) or the ABL Obligations (in the case of the Term Obligations or any Additional Obligations), respectively, or (y) otherwise subordinated, voided, avoided, invalidated or lapsed or (vi) any other circumstance of any kind or nature whatsoever, the ABL Agent, on behalf of itself and the ABL Lenders, the Term Agent, on behalf of itself and the Term Lenders, and any Additional Agent, on behalf of itself and any Additional Creditors represented thereby, hereby agree that:

(1) any Lien in respect of all or any portion of the ABL Priority Collateral now or hereafter held by or on behalf of the Term Agent or any Term Lender that secures all or any portion of the Term Obligations, and any Lien in respect of all or any portion of the ABL Priority Collateral now or hereafter held by or on behalf of any Additional Agent or any Additional Creditor that secures all or any portion of the Additional Obligations, shall in all respects be junior and subordinate to all Liens granted to the ABL Agent and the ABL Lenders in the ABL Priority Collateral to secure all or any portion of the ABL Obligations;

(2) any Lien in respect of all or any portion of the ABL Priority Collateral now or hereafter held by or on behalf of the ABL Agent or any ABL Lender that secures all or any portion of the ABL Obligations shall in all respects be senior and prior to all Liens granted to the Term Agent or any Term Lender in the ABL Priority Collateral to secure all or any portion of the Term Obligations, and all Liens granted to any Additional Agent or any Additional Creditors in the ABL Priority Collateral to secure all or any portion of the Additional Obligations;

(3) any Lien in respect of all or any portion of the Term Priority Collateral now or hereafter held by or on behalf of the ABL Agent or any ABL Lender that secures all or any portion of the ABL Obligations shall in all

 

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respects be junior and subordinate to all Liens granted to the Term Agent and the Term Lenders in the Term Priority Collateral to secure all or any portion of the Term Obligations, and all Liens granted to any Additional Agent or any Additional Creditors in the Term Priority Collateral to secure all or any portion of any Additional Obligations;

(4) any Lien in respect of all or any portion of the Term Priority Collateral now or hereafter held by or on behalf of the Term Agent or any Term Lender that secures all or any portion of the Term Obligations, and any Lien in respect of all or any portion of the Term Priority Collateral now or hereafter held by or on behalf of any Additional Agent or any Additional Creditor that secures all or any portion of the Additional Obligations, shall in all respects be senior and prior to all Liens granted to the ABL Agent or any ABL Lender in the Term Priority Collateral to secure all or any portion of the ABL Obligations;

(5) any Lien in respect of all or any portion of the Term Priority Collateral now or hereafter held by or on behalf of any Additional Agent or any Additional Creditor that secures all or any portion of the Additional Obligations shall in all respects be pari passu and equal in priority with (x) any Lien in respect of all or any portion of the Term Priority Collateral now or hereafter held by or on behalf of the Term Agent or any Term Lender that secures all or any portion of the Term Obligations and (y) except as may be separately otherwise agreed by and between or among any applicable Additional Agents, any Lien in respect of all or any portion of the Term Priority Collateral now or hereafter held by or on behalf of any other Additional Agent or any Additional Creditor represented by such other Additional Agent that secures all or any portion of the Additional Obligations.

(b) Notwithstanding any failure by any ABL Secured Party, Term Secured Party or Additional Secured Party to perfect its security interests in the Collateral or any avoidance, invalidation, priming or subordination by any third party or court of competent jurisdiction of the security interests in the Collateral granted to the ABL Secured Parties, the Term Secured Parties or any Additional Secured Parties, (x) the priority and rights as between the ABL Secured Parties, on the one hand, and each of the Term Secured Parties and any Additional Secured Parties, on the other hand, with respect to the Collateral shall be as set forth herein and (y) the priority and rights as between the Term Secured Parties, on the one hand, and any Additional Secured Parties, on the other hand, with respect to the Collateral shall be as set forth herein.

(c) The Term Agent, for and on behalf of itself and the Term Lenders, acknowledges and agrees that (x) concurrently herewith, the ABL Agent, for the benefit of itself and the ABL Lenders, has been granted Liens upon all of the Collateral in which the Term Agent has been granted Liens and the Term Agent hereby consents thereto and (y) any Additional Agent, on behalf of itself and any Additional Creditors, may be granted Liens upon all of the Collateral in which the Term Agent has been granted Liens and the Term Agent hereby consents thereto. The ABL Agent, for and on behalf of itself and the ABL Lenders, acknowledges and agrees that (x) concurrently herewith, the Term Agent, for the benefit of itself and the Term

 

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Lenders, has been granted Liens upon all of the Collateral in which the ABL Agent has been granted Liens (other than the ABL Canadian Collateral) and the ABL Agent hereby consents thereto and (y) any Additional Agent, on behalf of itself and any Additional Creditors, may be granted Liens upon all of the Collateral in which the ABL Agent has been granted Liens (other than the ABL Canadian Collateral) and the ABL Agent hereby consents thereto. Any Additional Agent, for and on behalf of itself and any Additional Creditors represented thereby, acknowledges and agrees that, concurrently herewith, (x) the ABL Agent, for the benefit of itself and the ABL Lenders, has been granted Liens upon all of the Collateral in which such Additional Agent is being granted Liens and such Additional Agent hereby consents thereto and (y) the Term Agent, for the benefit of itself and the Term Lenders, has been granted Liens upon all of the Collateral in which such Additional Agent is being granted Liens and such Additional Agent hereby consents thereto. The subordination of Liens by the Term Agent in favor of the ABL Agent, by the ABL Agent in favor of the Term Agent and any Additional Agent, and by any Additional Agent in favor of the ABL Agent, in each case as set forth herein, shall not be deemed to subordinate the Liens of the Term Agent, the ABL Agent or any Additional Agent to the Liens of any other Person. The provision of pari passu and equal priority as between Liens of the Term Agent and Liens of any Additional Agent, or as between Liens of any Additional Agent and Liens of any other Additional Agent, in each case as set forth herein, shall not be deemed to subordinate the Liens of the Term Agent or any Additional Agent to the Liens of any Person other than the ABL Agent as and to the extent set forth herein, or to provide that the Liens of the Term Agent or any Additional Agent will be pari passu or of equal priority with the Liens of any other Person.

Section 2.2 Waiver of Right to Contest Liens.

(a) The Term Agent, for and on behalf of itself and the Term Lenders, agrees that it and they shall not (and hereby waives any right to) take any action to contest or challenge (or assist or support any other Person in contesting or challenging), directly or indirectly, whether or not in any proceeding (including in any Insolvency Proceeding), the validity, priority, enforceability, or perfection of the Liens of the ABL Agent and the ABL Lenders in respect of the Collateral (including the ABL Canadian Collateral), the Liens of any Additional Agent and any Additional Creditors in respect of the Collateral, or the provisions of this Agreement. Except to the extent expressly set forth in this Agreement, the Term Agent, for itself and on behalf of the Term Lenders, agrees that none of the Term Agent or the Term Lenders will take any action that would interfere with any Exercise of Secured Creditor Remedies undertaken by the ABL Agent or any ABL Lender under the ABL Documents with respect to the ABL Priority Collateral (including the ABL Canadian Collateral), or any Exercise of Secured Creditor Remedies undertaken by any Additional Agent or any Additional Creditor under any Additional Documents with respect to the Term Priority Collateral. Except to the extent expressly set forth in this Agreement, the Term Agent, for itself and on behalf of the Term Lenders, hereby waives any and all rights it or the Term Lenders may have (x) as a junior lien creditor or otherwise to contest, protest, object to, or interfere with the manner in which the ABL Agent or any ABL Lender seeks to enforce its Liens in any ABL Priority Collateral (including the ABL Canadian Collateral) or (y) as a pari passu lien creditor or otherwise to contest, protest, object to, or interfere with the manner in which any Additional Agent or any Additional Creditor seeks to enforce its Liens in any Term Priority Collateral.

 

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(b) The ABL Agent, for and on behalf of itself and the ABL Lenders, agrees that it and they shall not (and hereby waives any right to) take any action to contest or challenge (or assist or support any other Person in contesting or challenging), directly or indirectly, whether or not in any proceeding (including in any Insolvency Proceeding), the validity, priority, enforceability, or perfection of the Liens of the Term Agent or the Term Lenders in respect of the Collateral, the Liens of any Additional Agent and any Additional Creditors in respect of the Collateral, or the provisions of this Agreement. Except to the extent expressly set forth in this Agreement, the ABL Agent, for itself and on behalf of the ABL Lenders, agrees that none of the ABL Agent or the ABL Lenders will take any action that would interfere with any Exercise of Secured Creditor Remedies undertaken by the Term Agent or any Term Lender under the Term Documents, or by any Additional Agent or any Additional Creditor under any Additional Documents, with respect to the Term Priority Collateral. Except to the extent expressly set forth in this Agreement, the ABL Agent, for itself and on behalf of the ABL Lenders, hereby waives any and all rights it or the ABL Lenders may have as a junior lien creditor or otherwise to contest, protest, object to, or interfere with the manner in which the Term Agent or any Term Lender, or any Additional Agent or any Additional Creditor, seeks to enforce its Liens in any Term Priority Collateral.

(c) Any Additional Agent, on behalf of itself and any Additional Creditors represented thereby, agrees that it and they shall not (and hereby waives any right to) take any action to contest or challenge (or assist or support any other Person in contesting or challenging), directly or indirectly, whether or not in any proceeding (including in any Insolvency Proceeding), the validity, priority, enforceability, or perfection of the Liens of the ABL Agent and the ABL Lenders in respect of the Collateral (including the ABL Canadian Collateral), the Liens of the Term Agent or the Term Lenders in respect of the Collateral, or the provisions of this Agreement. Except to the extent expressly set forth in this Agreement, any Additional Agent, on behalf of itself and any Additional Creditors represented thereby, agrees that none of such Additional Agent and Additional Creditors will take any action that would interfere with any Exercise of Secured Creditor Remedies undertaken by the ABL Agent or any ABL Lender under the ABL Documents with respect to the ABL Priority Collateral (including the ABL Canadian Collateral), or any Exercise of Secured Creditor Remedies undertaken by the Term Agent or any Term Lender under the Term Documents with respect to the Term Priority Collateral. Except to the extent expressly set forth in this Agreement, any Additional Agent, on behalf of itself and any Additional Creditors represented thereby, hereby waives any and all rights it or such Additional Creditors may have (x) as a junior lien creditor or otherwise to contest, protest, object to, or interfere with the manner in which the ABL Agent or any ABL Lender seeks to enforce its Liens in any ABL Priority Collateral (including the ABL Canadian Collateral) or (y) as a pari passu lien creditor or otherwise to contest, protest, object to, or interfere with the manner in which the Term Agent or any Term Lender seeks to enforce its Liens in any Term Priority Collateral.

(d) Except as may be separately otherwise agreed by and between or among any applicable Additional Agents, any Additional Agent, on behalf of itself and any Additional Creditors represented thereby, agrees that it and they shall not (and hereby waives any right to) take any action to contest or challenge (or assist or support any other Person in contesting or challenging), directly or indirectly, whether or not in any proceeding (including in any Insolvency Proceeding), the validity, priority, enforceability, or perfection of the Liens of

 

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any other Additional Agent or any Additional Creditors represented by such other Additional Agent or the provisions of this Agreement. Except to the extent expressly set forth in this Agreement, or as may be separately otherwise agreed by and between or among any applicable Additional Agents, any Additional Agent, on behalf of itself and any Additional Creditors represented thereby, agrees that none of such Additional Agent and Additional Creditors will take any action that would interfere with any Exercise of Secured Creditor Remedies undertaken by any other Additional Agent or any Additional Creditor represented by such other Additional Agent under any applicable Additional Documents with respect to the Term Priority Collateral. Except to the extent expressly set forth in this Agreement, or as may be separately otherwise agreed by and between or among any applicable Additional Agents, any Additional Agent, on behalf of itself and any Additional Creditors represented thereby, hereby waives any and all rights it or such Additional Creditors may have as a pari passu lien creditor or otherwise to contest, protest, object to, or interfere with the manner in which any other Additional Agent or any Additional Creditor represented by such other Additional Agent seeks to enforce its Liens in any Term Priority Collateral.

Section 2.3 Remedies Standstill.

(a) The Term Agent, on behalf of itself and the Term Lenders, agrees that, until the date upon which the Discharge of ABL Obligations shall have occurred, neither the Term Agent nor any Term Lender will Exercise Any Secured Creditor Remedies with respect to any of the ABL Priority Collateral without the written consent of the ABL Agent, and will not take, receive or accept any Proceeds of ABL Priority Collateral, it being understood and agreed that the temporary deposit of Proceeds of ABL Priority Collateral in a Deposit Account controlled by the Term Agent shall not constitute a breach of this Agreement so long as such Proceeds are promptly remitted to the ABL Agent. From and after the date upon which the Discharge of ABL Obligations shall have occurred (or prior thereto upon obtaining the written consent of the ABL Agent), the Term Agent or any Term Lender may Exercise Any Secured Creditor Remedies under the Term Documents or applicable law as to any ABL Priority Collateral; provided , however , that any Exercise of Secured Creditor Remedies with respect to any Collateral by the Term Agent or any Term Lender is at all times subject to the provisions of this Agreement, including Section 4.1 hereof.

(b) The ABL Agent, on behalf of itself and the ABL Lenders, agrees that, until the date upon which the Discharge of Term Obligations and the Discharge of Additional Obligations shall have occurred, neither the ABL Agent nor any ABL Lender will Exercise Any Secured Creditor Remedies with respect to the Term Priority Collateral without the written consent of the Term Agent and any Additional Agent, and will not take, receive or accept any Proceeds of the Term Priority Collateral, it being understood and agreed that the temporary deposit of Proceeds of Term Priority Collateral in a Deposit Account controlled by the ABL Agent shall not constitute a breach of this Agreement so long as such Proceeds are promptly remitted to the Term Agent or any Additional Agent. From and after the date upon which the Discharge of Term Obligations shall have occurred (or prior thereto upon obtaining the written consent of the Term Agent) and the Discharge of Additional Obligations shall have occurred (or prior thereto upon obtaining the written consent of each Additional Agent), the ABL Agent or any ABL Lender may Exercise Any Secured Creditor Remedies under the ABL Documents or applicable law as to any Term Priority Collateral; provided , however , that any Exercise of Secured Creditor Remedies with respect to any Collateral by the ABL Agent or any ABL Lender is at all times subject to the provisions of this Agreement, including Section 4.1 hereof.

 

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(c) Any Additional Agent, on behalf of itself and any Additional Creditors represented thereby, agrees that, until the date upon which the Discharge of ABL Obligations shall have occurred, neither such Additional Agent nor any such Additional Creditor will Exercise Any Secured Creditor Remedies with respect to any of the ABL Priority Collateral without the written consent of the ABL Agent, and will not take, receive or accept any Proceeds of ABL Priority Collateral, it being understood and agreed that the temporary deposit of Proceeds of ABL Priority Collateral in a Deposit Account controlled by such Additional Agent shall not constitute a breach of this Agreement so long as such Proceeds are promptly remitted to the ABL Agent. From and after the date upon which the Discharge of ABL Obligations shall have occurred (or prior thereto upon obtaining the written consent of the ABL Agent), any Additional Agent or any Additional Creditor may Exercise Any Secured Creditor Remedies under any Additional Documents or applicable law as to any ABL Priority Collateral; provided , however , that any Exercise of Secured Creditor Remedies with respect to any Collateral by any Additional Agent or Additional Creditor is at all times subject to the provisions of this Agreement, including Section 4.1 hereof.

(d) Notwithstanding any other provision of this Agreement, nothing contained herein shall be construed to prevent (i) the ABL Agent or any ABL Lender, or any Additional Agent or any Additional Creditor, from objecting to any proposed retention of collateral by the Term Agent or any Term Lender in full or partial satisfaction of any Term Obligations, (ii) the Term Agent or any Term Lender, or any Additional Agent or any Additional Creditor, from objecting to any proposed retention of collateral by the ABL Agent or any ABL Lender in full or partial satisfaction of any ABL Obligations, (iii) the ABL Agent or any ABL Lender, or the Term Agent or any Term Lender, from objecting to any proposed retention of collateral by any Additional Agent or any Additional Creditor in full or partial satisfaction of any Additional Obligations, or (iv) any Additional Agent or any Additional Creditor represented thereby from objecting to any proposed retention of collateral by any other Additional Agent or any Additional Creditor represented by such other Additional Agent in full or partial satisfaction of any Additional Obligations.

Section 2.4 Exercise of Rights.

(a) Notice of ABL Agent’s Lien .

(i) Without limiting Section 2.3 hereof, the Term Agent, for and on behalf of itself and the Term Lenders, hereby agrees that, until the date upon which the Discharge of ABL Obligations shall have occurred, in connection with any Exercise of Secured Creditor Remedies by the Term Agent or any Term Lender with respect to any ABL Priority Collateral, the Term Agent or such Term Lender, as applicable, shall advise any purchaser or transferee of any ABL Priority Collateral in writing that the sale (whether public, private, by foreclosure, or otherwise) or other transfer is subject to the Liens of the ABL Agent and the ABL Lenders. In addition, the Term Agent agrees, for and on behalf of itself and the Term Lenders, that, until the date upon which the Discharge of ABL Obligations shall have occurred, any notice of any proposed

 

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foreclosure or sale of any ABL Priority Collateral and any other notice in connection with the Exercise of Secured Creditor Remedies with respect thereto shall state prominently and clearly that the sale is subject to the ABL Agent’s and the ABL Lenders’ prior Liens and that such Liens shall continue as against the ABL Priority Collateral to be sold.

(ii) Without limiting Section 2.3 hereof, any Additional Agent, for and on behalf of itself and any Additional Creditors represented thereby, hereby agrees that, until the date upon which the Discharge of ABL Obligations shall have occurred, in connection with any Exercise of Secured Creditor Remedies by such Additional Agent or any such Additional Creditor with respect to any ABL Priority Collateral, such Additional Agent or Additional Creditor, as applicable, shall advise any purchaser or transferee of any ABL Priority Collateral in writing that the sale (whether public, private, by foreclosure, or otherwise) or other transfer is subject to the Liens of the ABL Agent and the ABL Lenders. In addition, any Additional Agent agrees, for and on behalf of itself and any Additional Creditors represented thereby, that, until the date upon which the Discharge of ABL Obligations shall have occurred, any notice of any proposed foreclosure or sale of any ABL Priority Collateral and any other notice in connection with the Exercise of Secured Creditor Remedies with respect thereto shall state prominently and clearly that the sale is subject to the ABL Agent’s and the ABL Lenders’ prior Liens and that such Liens shall continue as against the ABL Priority Collateral to be sold.

(b) Notice of Term Agent’s Lien .

(i) Without limiting Section 2.3 hereof, the ABL Agent, for and on behalf of itself and the ABL Lenders, hereby agrees that, until the date upon which the Discharge of Term Obligations shall have occurred, in connection with any Exercise of Secured Creditor Remedies by the ABL Agent or any ABL Lender with respect to the Term Priority Collateral, the ABL Agent or such ABL Lender, as applicable, shall advise any purchaser or transferee of any Term Priority Collateral in writing that the sale (whether public, private, by foreclosure, or otherwise) or othe